Does the change in profit-sharing ratio result into dissolution of partnership firm? Give reason in support of your answer.

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Solution

No, a change in the profit sharing ratio does not result in the dissolution of a partnership firm. Dissolution of partnership firm means that the business is wound up and the firm is dissolved.
However, a change in the profit sharing ratio only results in the dissolution of the partnership and not dissolution of the partnership firm. Dissolution of partnership refers to a change in the agreement between the partners, it does not affect the continuation of the business. A change in the profit sharing ratio requires a reconstitution of the firm and a new agreement is drafted among the partners which signifies that the old partnership has been dissolved.

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