Accountancy Part AAdmission of a Partner

Which of the following facts are related to modes of reconstitution o…

Which of the following facts are related to modes of reconstitution of a partnership firm?

(A) Admission of a new partner

(B) Dissolution of a partnership firm

(D) Change in the profit sharing ratio among the existing partners

(E) Retirement of a partner

Choose the correct answer from the options given below :

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → (A), (C), (D) and (E) only

Reconstitution means the partnership agreement changes but the firm continues. Dissolution of the firm ends the business itself, so it is not a mode of reconstitution.

(A) Admission of a new partner — True. A new agreement is made among the old and new partners.

(B) Dissolution of a partnership firm — False. The firm is closed and its accounts are settled, so nothing is reconstituted.

(C) Death of a partner — True. The remaining partners carry on the firm under a new agreement.

(D) Change in the profit sharing ratio among the existing partners — True. The same partners agree to new shares of profit.

(E) Retirement of a partner — True. The continuing partners carry on the firm.

NCERT (2026-27 edition):
Reconstitution of a Partnership Firm – “… Any change in the existing agreement amounts to reconstitution of the partnership firm. This results in an end of the existing agreement and a new agreement comes into being with a changed relationship among the members of the partnership firm and/or their composition. However, the firm continues. The partners often resort to reconstitution of the firm in various ways such as admission of a new partner, change in profit sharing ratio, retirement of a partner, death or insolvence of a partner.”