Question

What do you understand by Reconstitution of a Partnership Firm?

Answer 1

Whenever a partner is admitted to a firm, a partner retires from a partnership firm or there is any change in the profit sharing ratio of the partners, the reconstitution of the Partnership Firm takes place. In all the above cases, the partnership among the partners is dissolved and a new partnership is formed. Also, in all these cases some partners gain while some of them sacrifice the profit sharing ratio.