Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): On retirement, the old partnership agreement comes to an end and a new partnership agreement comes into existence between the remaining partners.
Reason(R): Retirement of a partner leads to the dissolution of the firm.

Assertion (A) is correct but Reason (R) is not correct.

The correct answer is option 3- Assertion (A) is correct but Reason (R) is not correct.

Assertion (A): On retirement, the old partnership agreement comes to an end and a new partnership agreement comes into existence between the remaining partners. This is correct. Retirement of an existing partner means withdrawal by a partner from the business of the firm which may be due to his bad health, old age or change in business interests. In fact a partner can retire any time if the partnership is at will. This results in reconstitution of the firm now having only remaining partners.

Reason(R): Retirement of a partner leads to the dissolution of the firm. This is incorrect. Retirement of a partner leads to the reconstitution of the partnership not dissolution of firm, which leads to ending of the old agreement and the beginning of a new agreement.