Question

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?

Options

• Both (A) and (R) are correct, and (R) is the correct reason for (A).

• Both (A) and (R) are correct, but (R) is not the correct reason for (A).

• Only (R) is correct.

• Both (A) and (R) are wrong.

Answer 1

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.