Download the free PDF of Partnership MCQs with answers and an explanation
In arithmetic math, partnership refers to a business arrangement between two or more people who agree to share the profits and losses of the business. The partners can contribute different amounts of money, time, or skills to the business, and their shares of the profits and losses are determined according to their contributions.
Types of Partnership
There are two main types of partnerships:
simple partnerships
compound partnerships
In a simple partnership, all the partners contribute their capital for the same period of time. In a compound partnership, the partners contribute their capital for different periods of time.
The formula for calculating the share of profit or loss for a partner in a simple partnership is:
share of profit or loss = (partner's capital) / (total capital of all partners)
For example, if two partners contribute $1000 and $2000 respectively to a simple partnership, then their shares of the profit or loss would be 50% and 25% respectively.
The formula for calculating the share of profit or loss for a partner in a compound partnership is:
share of profit or loss = (partner's capital * time period) / (total capital of all partners * total time period)
For example, if two partners contribute $1000 and $2000 respectively to a compound partnership, and one partner invests their capital for 1 year while the other partner invests their capital for 2 years, then their shares of the profit or loss would be 33.33% and 66.67% respectively.
Partnership is an important concept in business. It allows businesses to pool together resources and expertise, which can lead to increased profits and growth. However, partnerships can also be complex and require careful management.
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