Question

Assertion (A): Deceased partner will get share in firm’s goodwill on death from the Gaining Partners.

Reason (R): Deceased partners is entitled to share in firm’s goodwill since his profit share is taken by all or some of the Continuing partners.

In the context of the above two statements, which option is correct?

Options

• Assertion (A) and Reason (R) are correct, and Reason (R) is the correct explanation of Assertion (A).

• Assertion (A) and Reason (R) are correct, but Reason (R) is not the correct explanation of Assertion (A).

• Assertion (A) is correct, but Reason (R) is not correct.

• Assertion (A) is not correct, but Reason (R) is correct.

Answer 1

Assertion (A) and Reason (R) are correct, and Reason (R) is the correct explanation of Assertion (A).

Explanation:

Both the Assertion and the Reason are correct, and the Reason correctly explains the Assertion. On the death of a partner, the continuing partners take over the deceased partner’s profit share (unless otherwise agreed), and therefore the deceased partner’s legal representatives are entitled to the deceased partner’s share of the firm’s goodwill; the gaining partners compensate the estate in the gaining ratio.