Question

Q.10 Explain any three occasions when a partnership firm is reconstituted.​

Answer 1

Reconstitution of a partnership firm takes place whenever there is a change in the profit sharing ratio among the partners, admission of a new partner, retirement of a partner and death or insolvency of a partner.

Answer 2

A partnership firm can be reconstituted when a new partner is admitted to the firm, when a partner leaves the firm, or when there is the death of a partner.

Explanation:

• Reconstitution of a partnership is required whenever there is an addition of a new person to the firm or an existing person leaves the firm.
• Admission, retirement, as well as the death of a partner, results in a change in the profit-sharing ratios of the partners. Such an act also changes the other factors that affect the functioning of a firm.
• These changes have to be mentioned in the financial statements of the firm. All the terms have to be decided by the partners again.