Partnership

Accounting

Medium

common

Which of the following statements results in the reconstitution of a partnership firm :-

(A) Change in profit sharing ratio among partners.

(B) Admission of a new partner.

(C) Dissolution of a partnership firm.

(D) Dissolution of a partnership.

Choose the correct answer from the options given below:

(A), (B) and (C) only

(A), (B) and (D) only

(A), (B), (C) and (D)

(B), (C) and (D) only

(A), (B) and (C) only

(A), (B) and (D) only

(A), (B), (C) and (D)

(B), (C) and (D) only

✅ Correct Option: 2

Reconstitution of a partnership firm means a change in the existing agreement that alters the relationship among partners, but the firm continues its business operations.

Let's examine each statement:

(A) Change in profit sharing ratio among partners → This results in reconstitution. When existing partners agree to share profits in a different ratio, the partnership agreement changes and the firm is reconstituted.

(B) Admission of a new partner → This results in reconstitution. A new partner joining the firm changes its constitution and a new agreement is formed.

(C) Dissolution of a partnership firm → This does NOT result in reconstitution. Dissolution of the firm means complete closure of business and winding up of affairs. The firm ceases to exist entirely, so there's no question of reconstitution.

(D) Dissolution of a partnership → This results in reconstitution. When the partnership is dissolved (due to retirement, death, or insolvency of a partner), the existing partnership agreement ends, but the firm can continue with remaining or new partners under a reconstituted agreement.

The key distinction to understand is:

Dissolution of Partnership ≠ Dissolution of Firm

Dissolution of partnership means the partnership agreement ends, but business may continue → Reconstitution occurs

Dissolution of firm means complete closure of business → No reconstitution, firm ends

Therefore, statements (A), (B), and (D) result in reconstitution.

Correct Answer: Option 2

2026: 21 May Shift 1

Under fluctuating capital method,

(A) Only one account, i.e., a capital account is maintained for each partner

(B) All the adjustments such as share of profit and loss, interest on capital, drawings, interest on drawings, salary or commission to partners, etc. are recorded directly in the current accounts of the partners.

(C) All the adjustments such as share of profit and loss, interest on capital, drawings, interest on drawings, salary or commission to partners, etc. are recorded directly in the capital accounts of the partners.

(D) This makes the balance in the capital account fluctuate from time to time.

Choose the correct answer from the options given below:

2023: 29 May Shift 2

Complete the sequence where interest on capital has to be provided as per partnership deed, but available profits are not sufficient to provide full amount of Interest on capital.

A. If it is appropriation, calculate interest on capital for all partners at given rate

B. Divide the available amount in the capital ratio among the partners

C. Calculate ratio between capital of partners

D. Consider the partnership deed and decide whether interest on capital is a charge or an appropriation

E. Consider the available profit

Choose the correct answer from the options given below:

2025: 26 May Shift 2

Which among the following is NOT true?

2026: 21 May Shift 1

Partnership deed should be properly drafted and prepared as per the provisions of:

2025: 16 May Shift 1

X and Y are partners sharing profits in the ratio 3:2. Capital introduced by X and Y is ₹ 1,00,000 and ₹ 5,00,000 respectively. Interest on capital is allowed to partners @ 10%p.a. Profit of the firm for the year ending March 31st, 2025 is ₹ 30,000. Calculate Interest on Capital to be allowed to the partners.

2026: 13 May Shift 2

Average profits of a firm during the last few years are Rs. 2,50,000 and the normal rate of return in a similar business is 5%. If the goodwill of the firm is 5,00,000 at 5 years' purchases of super profit, find the amount of capital employed by the firm.

Solution

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