'A' and 'B' entered a joint venture. 'A' brought Rs. 1,50,000 and 'B' Rs. 2,00,000. 'A' also contributed skilled labor equivalent to Rs. 50,000. At the end of the year, they earned Rs. 1,20,000 in profit. If they agreed to divide the profit in proportion to their effective contributions, what was A’s share?
- (a)Rs. 55,000
- (b)Rs. 60,000
- (c)Rs. 62,500
- (d)Rs. 65,000
Answer
Why
Correct — B. Turn each partner's inputs into one effective contribution, then split the profit in that ratio.
A's effective contribution = 1,50,000 + 50,000 (skilled labor) = Rs. 2,00,000
B's effective contribution = Rs. 2,00,000
Ratio A : B = 2,00,000 : 2,00,000 = 1 : 1
A's share = 1,20,000 × 1⁄2 = Rs. 60,000 → option (b)
Why the others are wrong
- (a)Rs. 55,000 — Rs. 55,000 is less than half of Rs. 1,20,000, yet A's effective Rs. 2,00,000 matches B's exactly, so A must take half.
- (c)Rs. 62,500 — Rs. 62,500 is more than half, which would need A's effective contribution to exceed B's. With the labor counted, both stand at Rs. 2,00,000.
- (d)Rs. 65,000 — Rs. 65,000 is also more than half. Counting the labor only brings A level with B at Rs. 2,00,000; it never puts A ahead.
Concept
In a partnership, profit is shared in the ratio of what each partner put in. When a partner contributes something other than cash, here skilled labor valued at Rs. 50,000, that agreed value is added to the partner's capital to give the effective contribution.
The stem gives no different time periods, so time cancels and the ratio is simply the effective amounts: 2,00,000 : 2,00,000.
B's share is also Rs. 60,000, and the two shares add back to the Rs. 1,20,000 profit, a quick check that the split is complete.
Key facts
- Profit share = total profit × (partner's contribution ÷ sum of all contributions).
- Equal effective contributions mean an equal split: Rs. 1,20,000 ÷ 2 = Rs. 60,000 each.
- Capital × time is needed only when partners invest for different periods.
Study next
Common traps
- Ignoring the skilled labor: 1,50,000 : 2,00,000 = 3 : 4 gives A about Rs. 51,429, which matches no choice, a sign the labor must count.
Here the non-cash input carries a rupee value, so it joins the ratio. At 20 Sep 2025, 09:00, Quant Q.9 the non-cash inputs (time and strategy, a supplier network) carry no rupee value and the ratio 3:2:2 is given outright, so the strategist gets 2⁄7 of Rs. 1,40,000 = Rs. 40,000.
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