Assertion (A): Admission of a partner is one of the modes of reconstitution of the partnership whereby the old partnership ceases to exist and a new partnership comes into existence. Reason (R): In the case of admission of a partner, the number of partners increases, and as a result, the profit-sharing ratio also changes. But the firm continues. As such, it is reconstitution of partnership. In the context of the above two statements, which of the following is correct?

Question

KollegeApply · Accepted Answer

Both (A) and (R) are correct, and (R) is the correct reason for (A). Explanation: Assertion (A) is correct because admitting a partner is a “reconstitution” event: the old partnership agreement ends, and a new one begins. Reason (R) is also correct and provides the exact justification for (A): the firm continues in business, but changes in the number of partners and the profit-sharing ratio fundamentally alter the structure, which defines a reconstitution.

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