When a new partner is admitted or old partner retires or dies the, firm undergoes _______.

Reconstitution

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Amalgamation

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Internal reconstruction

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None.

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Solution

The correct option is A Reconstitution
Any change in the existing partnership agreement amounts to the reconstitution of the partnership firm. It happens in the event of the admission of a partner, retirement, or death of a partner where the profit-sharing ratio changes, revaluation of assets and liabilities is done, and goodwill is valued & distributed.

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Why it is necessary to ascertain new profit sharing ratio even for old partners when a new partner is admitted ?

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