Partnership Business forms an integral part of the Quantitative Aptitude section in the Staff Selection Commission's Combined Graduate Level (SSC CGL) Tier-I exam. With numerous concepts like profit/loss distribution and change in partnerships, it becomes essential for aspirants to have thorough clarity on this topic.
Understanding Partnership Businesses
A partnership business involves two or more individuals collaborating to run a commercial venture. As per the SSC CGL syllabus, candidates need to learn specific methods of dividing profits and losses among the partners based on their respective investments, time commitments, work contributions, etc.
| Key Area | Details |
|---|---|
| Definition | Two or more persons running a business together |
| Profit/Loss Distribution | Based on fixed ratios, capital ratios, time ratios etc. |
| Average Profit Calculation | Using simple average, weighted average, turnovers method |
Distribution of Profits and Losses
This forms the crux of Partnership Business. Aspirants need to have a strong grasp on the various methods used for allocating profits and losses amongst partners:
- Fixed Ratio: Based on predefined percentages assigned to each partner. Does not account for investment differences.
- Capital Ratio: Directly proportional to the capital invested by each partner.
- Time Ratio: Divided based on the time devoted by each partner.
There are also combinations possible, such as 50:30:20 for Fixed ratio and Capital ratio applied on residual profit/loss.
Calculation of Average Profits
Questions often involve scenarios where average profit earned over certain years needs to be determined. Key techniques for this are:
| Method | Formula |
|---|---|
| Simple Average | Sum of profits ÷ No. of years |
| Weighted Average | (Profit year 1 x Weight year 1) + (Profit year 2 x Weight year 2) ÷ Total weights |
Weights allocated can be based on turnovers, assets, etc. as suitable.
Situations Involving Change of Partners
The syllabus encompasses cases where existing partners leave the firm, new ones join midway, goodwill needs valuation, etc. Key concepts include:
- Sacrificing ratio
- Gaining ratio
- Accounting of goodwill
- Adjustments in profit/loss sharing
Preparing for the resultant calculations on dissolved partnerships and new joining members is a must.
Other Crucial Areas
Additionally, aspirants should focus on acing concepts like:
| Concept | Description |
|---|---|
| Bonus Distribution | Based on set policies for encouraging top performers |
| Goodwill Valuation | Using appropriate methods during partner addition/subtraction |
Having a good understanding of such areas is imperative for maximizing score.
Conclusion:
By dedicating time towards comprehending Partnership Business concepts and solving previous year questions, SSC CGL aspirants can confidently tackle all associated problems in their Tier-I attempt. Regular practice, time management and use of reliable prep materials is key to success.
FAQ:
Q1: How are time ratios used in profit/loss distribution?
A1: Time ratios allocate profits and losses based on the amount of time devoted by each partner to the business in lieu of or in addition to capital ratios.
Q2: What is a sacrificing ratio?
A2: Sacrificing ratio refers to the loss in share of a continuing old partner when a new partner joins the existing partnership firm.
Q3: Why is weighted average method used?
A3: Weighted average method allows allocating weights to individual years as per suitable parameters like turnovers. It helps accurately evaluate average profits.
Q4: How to distribute bonus among partners?
A4: Bonuses are distributed as per set policies based on factors like work volume, years of service, designation, or even fixed ratios.
Q5: What comprises goodwill valuation?
A5: Goodwill valuation during partnerships includes measuring brand reputation, customer relations, location advantage and other intangible attributes.
Q6: Why practice previous year questions?
A6: Practicing previous SSC CGL papers helps grasp the Partnership Business question patterns and improves speed and accuracy in solving them.
