Partnership and Share of Profit
How a business profit is split between partners: in the ratio of capital when the time is equal, in the ratio of capital times months when it is not, and after taking a working partner's salary or commission off the top.
What you will be able to do
- Split a profit in the ratio of the partners' capitals when investment periods are equal.
- Weight each partner's capital by the number of months it was invested when periods differ.
- Handle a working partner's salary or commission taken before the ratio split.
- Combine mid-year changes in investment into a single capital-months figure per partner.
What is inside this lesson
- 1How a partnership profit is split
- 2Equal periods: ratio of capitals
- 3Unequal periods: capital times months
- 4Working partners and mid-year changes
- 5Worked example
- 6Common mistakes
- 7Quick revision
- 8Practice
Get Pro for full access. This is section 1 of 8; the rest of the lesson opens with Pro at onelystop.in/upgrade.
How a partnership profit is split
When two or more people run a business together, the profit is shared in proportion to how much each partner's money worked, and for how long. The core idea is one line:
Each partner's share is proportional to (capital invested) x (months invested).
If everyone invests for the same length of time, the months cancel and the split is simply in the ratio of the capitals. If the periods differ, or someone joins late or withdraws early, weight each capital by its months first. Any fixed salary or commission for a working partner is taken out before the rest is split by ratio.
Reading the 8 sections above is free. A free account opens the first 2 topics of every subject in full, along with flashcards and private notes.