All Exams Test series for 1 year @ ₹349 only
Question

A, B, C invest Rs. 20000, Rs. 30000, Rs. 40000 in a business. After one year, A withdrew his money but B and C continued for one more year. If the net profit after 2 years be Rs. 32000, then A’s share in the profit is:

The correct answer is

Rs. 4000

Understanding Profit Sharing in Business Partnerships

In a business partnership, profits are typically shared among partners based on their investment and the duration for which their investment remained in the business. The basic principle is that the profit share of a partner is proportional to the product of their invested capital and the time period for which the capital was invested.

Let's analyze the investments made by A, B, and C in this business:

  • A's Investment: Rs. 20000 for 1 year.
  • B's Investment: Rs. 30000 for 2 years.
  • C's Investment: Rs. 40000 for 2 years.

To find the ratio in which the profit will be shared, we calculate the 'equivalent investment units' for each partner by multiplying the amount invested by the time period (in years).

Calculating Equivalent Investment Units

  • Equivalent investment unit for A = Amount invested by A × Time for which A invested
  • Equivalent investment unit for B = Amount invested by B × Time for which B invested
  • Equivalent investment unit for C = Amount invested by C × Time for which C invested

Let's calculate these values:

  • A's equivalent investment unit = $\text{Rs. } 20000 \times 1 \text{ year} = 20000$
  • B's equivalent investment unit = $\text{Rs. } 30000 \times 2 \text{ years} = 60000$
  • C's equivalent investment unit = $\text{Rs. } 40000 \times 2 \text{ years} = 80000$

Determining the Profit Sharing Ratio

The ratio of the profit shares of A, B, and C will be the ratio of their equivalent investment units.

Ratio A : B : C = A's equivalent unit : B's equivalent unit : C's equivalent unit

Ratio A : B : C = $20000 : 60000 : 80000$

We can simplify this ratio by dividing each number by the greatest common divisor, which is 20000.

Ratio A : B : C = $\frac{20000}{20000} : \frac{60000}{20000} : \frac{80000}{20000}$

Ratio A : B : C = $1 : 3 : 4$

This ratio $1:3:4$ represents how the total profit of Rs. 32000 will be divided among A, B, and C.

Calculating A's Share of the Profit

The total number of ratio parts is the sum of the individual parts: $1 + 3 + 4 = 8$.

A's share of the profit is A's ratio part divided by the total ratio parts, multiplied by the total profit.

A's share = $\left( \frac{\text{A's ratio part}}{\text{Total ratio parts}} \right) \times \text{Total Profit}$

A's share = $\left( \frac{1}{8} \right) \times \text{Rs. } 32000$

A's share = $\frac{32000}{8}$

A's share = $\text{Rs. } 4000$

Therefore, A's share in the net profit of Rs. 32000 is Rs. 4000.

To verify, we could also calculate B's and C's shares:

  • B's share = $\left( \frac{3}{8} \right) \times \text{Rs. } 32000 = 3 \times 4000 = \text{Rs. } 12000$
  • C's share = $\left( \frac{4}{8} \right) \times \text{Rs. } 32000 = 4 \times 4000 = \text{Rs. } 16000$

Total profit = A's share + B's share + C's share = $4000 + 12000 + 16000 = 32000$. This matches the given total profit.

Was this answer helpful?

Important Questions from Partnership

  1. Adesh and Bhadresh are partners sharing profits and losses in the ratio of 3 ∶ 2. Chandresh is admitted for 20% of share in profits out of which half of the share was gifted by Adesh and remaining was acquired by Chandresh from Adesh and Bhadresh in equal proportion. What would be new profit-sharing ratio?

  2. Mathur started a business by investing R6,76,000 as capital. After 4 months, Goyal joined the business by investing a capital of Rs. 5,07,000. A total of Rs. 2,60,000 including 25% of the total profit was given to Goyal for conducting business at the end of the year. How much profit Mathur will get?

  3. Mannu and Bhanu are partners. Bhanu wants to admit his son Channu into business. Can Channu become the partner of the firm?

  4. L, S and D are partners sharing profits in the ratio of \(\frac{2}{5},\frac{3}{7}\) and \(\frac{3}{10}\). If S retires from the firm, what will be the gain ratio of L

  5. Arjun, Bansi and Chelsi are partners in a firm. On June 30, 2023, Chelsi died, the sales for the year 2022–23 was Rs. 30,00,000 and profits were Rs. 6,00,000. The sales for the period from April 1, 2023 to June 30, 2023 were Rs. 7,50,000. What would be the share of deceased partner in the current year’s profits?

Need Expert Advice?

Start Your Preparation with Prepp Mobile App

Download the app from Google Play & App Store
Download the app from Google Play & App Store
Prepp Mobile App