Fractions in business is part of the NUMERACY SKILLS FOR BUSINESS: FREE COURSE and Accounting Trainees and Bookkeepers need to understand fractions.
We normally express money in its decimal form e.g. £12.50 or $698,388.32, but sometimes we express money in its fraction form e.g. three quarters (3/4) of a million pounds or half (1/2) a million US dollars.
A fraction represents a portion of something and it is merely the relationship between two numbers e.g. 1/4, 2/5, 12/8, etc.
The bottom half of a fraction is called the denominator and the top half the numerator, i.e., in 3/4, 3 is the numerator and 4 is the denominator.
As Accounting Trainees you have to be comfortable with both fractions and decimals and you often need to convert one into the other.
To get the decimal form you have to divide the top figure by the bottom figure.
Consider these fractions: 1/4, 2/5, 12/8 and,
the corresponding decimal form is 0.25, 0.4, 1.5.
Now you try – what is the decimal of these fractions:
Addition of fractions in business
Calculate the sum of 2/3 plus 1/4. The first step is to represent each fraction as the ratio of a pair of numbers with the same denominator. For this example, we multiply the top and bottom of 2/3 by 4, and the top and bottom of 1/4 by 3. The fractions now look like 8/12 and 3/12 and both have the same denominator, which is 12. In this new form we just add the two numerators.
(2/3) + (1/4) = (8/12) + (3/12)
= (8 + 3) / 12
Now you try – calculate the sum of these fractions:
4/5 + 1/8
1/3 + 3/7
Multiplication of fractions in business.
If we wish to multiply 3/4 by 2/9 then what we are trying to do is to take 3/4 of 2/9, so we form the new fraction: 3/4 x 2/9 = (3 x 2) / (4 x 9) = 6/36 or 1/6 in its simplest form.
In general, we multiply two fractions by forming a new fraction where the new numerator is the result of multiplying together the two numerators, and the new denominator is the result of multiplying together the two denominators.
Now you try – what is the product of these fractions:
1/3 x 1/4
3/8 x 1/7
1/4 x 5/7