Accountancy Part ADissolution of Partnership Firm

Select out of the following that is not considered as one of the mode…

Select out of the following that is not considered as one of the modes of reconstitution of a partnership firm.

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Dissolution of a partnership firm

Reconstitution is a change in the agreement among the partners while the firm continues. Dissolution of the firm ends the business itself, so it is not a mode of reconstitution.

Option (1) Change in the profit sharing ratio among the existing partners — A mode of reconstitution. The same partners agree to share profits in a new ratio.

Option (2) Admission of a new partner — A mode of reconstitution. A new agreement is made with the incoming partner.

Option (3) Retirement of an existing partner — A mode of reconstitution. The remaining partners carry on the business.

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.”

NCERT (2026-27 edition):
Distinction between Dissolution of Partnership and Dissolution of Firm

Extract from the NCERT textbook