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Important Formulas - Partnerships

1. Two or more people can get together to do business by pooling resources. The deal is known as partnership. All the people who have invested money in the partnership are called partners.

A partner who manages the business is a working partner. A partner who simply invests the money is a sleeping partner.

2. If investments of all the partners are for the same time period, the gain or loss is distributed among the partners in the ratio of their investments.

Assume P and Q invest Rs. a and Rs. b respectively for a year in a partnership, then at the end of the year,
(P's share of profit) : (Q's share of profit) = a : b

3. If investments are for different time periods, then equivalent capitals are calculated for a unit of time.

Assume A invests Rs. a for x months and B invests Rs. b for y months then,
(A's share of profit) : (B's share of profit)= ax : by.

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