Question

Assertion (A): In case of admission of a partner old firm is dissolved and a new firm comes into existence.

Reason (R): After admission of a new partner, old partners, along with the new partner, constitute the new firm. As such, the old firm is dissolved, and a new firm comes into existence.

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 wrong.

Explanation:

In case of admission of a partner, the firm is not dissolved; it is only reconstituted. The existing partnership agreement ends, but the firm continues with a new agreement. According to the Indian Partnership Act, 1932, dissolution means the complete closure of the firm’s business, which does not happen on admission. Therefore, both the Assertion and Reason are incorrect. Only the partnership structure changes, not the firm itself.