Practicing Success
Which of the following profit existing partners are entitled to share with new partner, when he is admitted in the partnership firm? |
Average Profits of last 5 years Past profits Reserve appearing in the Balance Sheet Future profits |
Future profits |
The correct answer is option 4- Future profits. When firm requires additional capital or managerial help or both for the expansion of its business a new partner may be admitted supplementing its existing resources. According to the Partnership Act 1932, a new partner can be admitted into the firm only with the consent of all the existing partners unless otherwise agreed upon. With the admission of a new partner, the partnership firm is reconstituted and a new agreement is entered into to carry on the business of the firm. |