Losses and profits are to be shared in PROFIT SHARING RATIO by partners.

In a partnership, the sharing of profits and losses is determined by the profit-sharing ratio, which is the agreed-upon ratio in which the partners will distribute profits and bear losses. This ratio is usually decided upon at the time of the formation of the partnership or through mutual agreement at any later stage. The profit-sharing ratio might not necessarily be based solely on the capital contributions of the partners; it can also depend on other factors, such as the efforts, skills, experience, or responsibilities shouldered by each partner in the business.

For example, if the profit-sharing ratio is 3:2, it implies that out of the total profits, 3 parts will be allocated to one partner, and 2 parts will be allocated to the other partner. Similarly, if there is a loss, it will also be distributed in the same ratio.