Partnership and Profit Sharing

Partnership is a business structure where two or more people come together to start a business. In a partnership, the partners share profits and losses as per the agreed-upon ratio. The ratio is decided based on the amount of investment made by each partner in the business.

Ram and Rahim's Partnership

Ram and Rahim have entered into a partnership where they share profits and losses equally. This means that both partners will receive an equal share of the profits, and both will have to bear an equal share of losses incurred by the business.

Calculation of Profits and Losses

To calculate profits and losses, the partnership firm will prepare a profit and loss account. The account will list all the revenues earned and expenses incurred by the business during a particular period. The difference between the revenues and expenses is the profit or loss for that period.

Sharing of Profits and Losses

Once the profit or loss for a particular period is calculated, the profits or losses will be shared between Ram and Rahim as per the agreed-upon ratio. Since Ram and Rahim share profits equally, they will receive an equal share of the profits. Similarly, since they share losses equally, they will have to bear an equal share of losses incurred by the business.

Conclusion

In conclusion, Ram and Rahim's partnership is based on the principle of sharing profits and losses equally. This means that both partners will receive an equal share of profits and losses incurred by the business. To calculate profits and losses, the partnership firm will prepare a profit and loss account, and the profits or losses will be shared between the partners as per the agreed-upon ratio.