Shortcut Trick
Effective contribution of A = Rs. 1,50,000 (Capital) + Rs. 50,000 (Labor) = Rs. 2,00,000
Effective contribution of B = Rs. 2,00,000 (Capital)
Profit sharing ratio = A : B = 2,00,000 : 2,00,000 = 1 : 1
A's share = (1 ÷ 2) × Total Profit = (1 ÷ 2) × Rs. 1,20,000 = Rs. 60,000
∴ The correct answer is Rs. 60,000.
Alternate Method
Given:
Capital brought by A = Rs. 1,50,000
Equivalent labor value contributed by A = Rs. 50,000
Capital brought by B = Rs. 2,00,000
Total profit earned = Rs. 1,20,000
Formula Used:
Total Effective Contribution = Capital Contribution + Equivalent Labor Value
Profit Share Ratio = Ratio of Total Effective Contributions
Capital: 1.5L Labor: 0.5L Partner A (2.0L) Capital: 2.0L Partner B (2.0L) Effective Contribution Ratio = 1 : 1 Total Profit = Rs. 1,20,000
Calculations:
⇒ Total effective contribution of A = Rs. 1,50,000 + Rs. 50,000 = Rs. 2,00,000
⇒ Total effective contribution of B = Rs. 2,00,000
⇒ Ratio of effective contributions (A : B) = 2,00,000 : 2,00,000 = 1 : 1
⇒ Sum of the ratio parts = 1 + 1 = 2
⇒ A's share in the profit = (1 ÷ 2) × Rs. 1,20,000
⇒ A's share = Rs. 60,000
∴ The correct answer is Rs. 60,000.
Additional Information
Simple Partnership
When investments of all partners are for the same time period, the profit or loss is distributed in the exact ratio of their original initial investments.
Compound Partnership
When investments are for different durations, the profit ratio is calculated as: Profit Ratio = (C1 × T1) : (C2 × T2), where C is capital and T is time.
Working/Active Partner
A partner who acts as the manager of a business usually receives a certain percentage of the profit as salary for their labor, after which the remaining profit is distributed in proportion to capital. In this question, the labor value was directly capitalized.