Partnership Basics is an important topic to be covered in competitive exams preparation be it for IBPS Clerk, PO, RRB, SO, or SBI Clerk or PO Exams. The number of questions and the complexity of questions vary from exam to exam every year.
Partnership is complex in nature and requires an understanding of Percentage Calculation, Ratio and Proportion, and Math Tables. Example questions on Partnership Basics and practice questions on Partnership Basics are given in this article.
Nowadays, questions in exams are mixed with multiple concepts and it requires practice and a deep understanding of basic concepts along with quickly identifying numbers.
Table of Contents
What is Partnership?
When a business is started an initial setup needs more investment and effort to start, for which it becomes difficult to be started by one person. Here comes the role of Partnership, in which 2 or more persons shows interest in setting up a business by contributing their shares, and accordingly profit or loss is distributed among them.
Let’s understand partnership by an example:
Partnership Basics Explained
Suppose A wants to start a business that he thinks to be profitable in the coming years. But it requires a 1.5 Lakh investment to start, for this big amount of initial investment A was not able to start this business. A was having 50K capital to invest. Now he has to arrange an additional 1 Lakh.
A has two friends B and C and they can be ready to start a business in partnership. So, this is how the partnership started between A, B, and C by investing in business by 50K each. The total amount required was also met through this partnership and as everyone has the same contribution then profit or loss sharing will also be the same.
Suppose this business earns a total of 60K profit in its first year and now this 60K needs to be divided between all of the partners that are A, B, and C. Upon dividing 60K in three equal parts each partner will get 20K profit.
The above example is ideal for building a basic understanding of partnership. However, in competitive exams questions are tricky and mostly use Ratio Proportion and Percentage. Hence learning Ratio and Proportion and Percentage in partnership will make problem-solving quicker.
Ratio and Proportion in Partnership Basics
Ratio and Proportion are used to define how much ratio each partner has contributed and how profit or loss sharing will be done between them. For example, if the investment for a business is done by A, B, and C in the ratio of 3:2:5. Then A has invested a 3x amount, B has invested a 2x amount and C has invested a 5x amount. Total investment is 10x amount.
To find out the amount that individual partners have invested in this business then the total invested amount can be divided by 10. 10 is the sum of all ratios.
Likewise, at the time of profit-sharing, the amount shared will be in the same ratio. For the above example, A will get 3x in profit sharing, B will get 2x and C will get 5x. Hence C will receive maximum profit and is also a maximum contributor to the business.
Percentage in Partnership Basics
The percentage is used to define how much part each partner has contributed and how profit or loss sharing will be done between them. For example, if the investment for a business is done by A, B, and C in the percentage of 30%, 20%, and 50% respectively. Then A has invested a 3x amount, B has invested 2x amount and C has invested a 5x amount. Total investment is 10x amount.
To find out the amount that individual partners have invested in this business then the total invested amount can be divided by 100. 100 is the sum of all percentages.
Likewise, at the time of profit-sharing, the amount shared will be in the same ratio. For the above example, A will get 30% in profit sharing, B will get 20% and C will get 50%. Hence C will receive maximum profit and is also a maximum contributor to the business.
Duration in Partnership
When a business is started at a given point in time and partners may come and go in the lifetime of that business. This duration also affects the profit and loss sharing with all the partners.
Solved Examples of Partnership Basics
Below are a few solved examples of Partnership Basics:
Example 1: A Business is started with the help of 3 friends A, B, and C, and each has invested 50,000/- initially. And after one year a profit of 30,000/- is generated. Find the amount of profit that individually got?
Solution 1: As the business is started by 3 friends with the same amount so it’s clear that profit sharing will be equal among them. As the total profit is 30,000/- then every partner will get:
=> 30000 / 3 = 10000/-
Example 2: A Business is started with the help of 3 friends A, B, and C, and each has invested in the ratio of 3:2:5. And after one year a profit of 30,000/- is generated. Find the amount of profit that individually got?
Solution 2: As business is started by 3 friends in ratio of 3:2:5, so the total parts in investment is the sum of all ratio i.e.: 3+2+5 = 10.
Now profit sharing will be done in the same ratio. For each Part profit will be => 30000 / 10 = 3000.
A’s profit will be 3x = 3 x 3000 = 9000/-
B’s profit will be 2x = 2 x 3000 = 6000/-
C’s profit will be 5x = 5 x 3000 = 15000/-
Example 3: A Business is started with the help of 3 friends A, B, and C, and each has invested in the percentage of 30%, 20%, and 50% respectively. And after one year a profit of 30,000/- is generated. Find the amount of profit that individually got?
Solution 3: A business is started by 3 friends with different percentages of investment. So to find profit sharing we’ve to calculate the percentage of the total amount.
A’s profit will be 30% of 30000 = 9000/-
B’s profit will be 20% of 30000 = 6000/-
C’s profit will be 50% of 30000 = 15000/-
Example 4: A and B invested the same capital for business for 6 months and 2 years respectively. Find the ratio of profit sharing?
Solution 4: As the capital invested for the different duration in business among the two partners. We need to calculate the duration ratio.
A duration : B duration => 4 months : 2 years {Note make same duration before calculation.}
A duration : B duration => 4 months : 24 months
A duration : B duration => 1:4
Practice Questions on Partnership Basics
Below are a few practice questions on Partnership Basics:
- A and B have started a business with an investment amount of 20000 and 30000. Find the ratio in which they’ve invested?
- A and B invested in a business for a time duration of 1 year and 2 years respectively. Find the ratio of profit sharing?
- A Business is started with the help of 3 friends A, B, and C, and in equal amounts. And after one year a profit of 21,000/- is generated. Find the amount of profit that individually got?
- A Business is started with the help of 3 friends A, B, and C, and each has invested in the ratio of 3:4:5. And after one year a profit of 1,44,000/- is generated. Find the amount of profit that individually got?
- A Business is started with the help of 3 friends A, B, C, and D each has invested in the percentage of 30%, 20%, 35%, and 15% respectively. And after one year a profit of 80,000/- is generated. Find the amount of profit that individually got?
Final Words
Practicing the above questions for Partnership Basics is not the end of your practice, but it’s the start of a new journey to apply logic on Partnership Basics with multiple approaches in a right and faster way.
For cracking competitive exams one must practice a Partnership Basics without a calculator is a must. At last, during the exam, if a solution for the Partnership Basics question cannot be found easily then mark that question to revisit and move ahead instead of wasting time and energy.