Meaning of Reconstitution of Partnership

Reconstitution of partnership means change in the partnership agreement due to any reason.

 

Different Cases of Reconstitution

(1) Change in profit sharing ratio.

(2) Admission of a partner.

(3) Retirement of a partner.

(4) Death of a partner.

(5) Amalgamation of partnership.

 

Adjustments to be made on Reconstitution of Firm

(1)Calculation of Sacrifice/gaining ratio.

(2)Treatment of Goodwill.

(3)Treatment of Accumulated profits/losses.

(4)Revaluation of assets /liabilities.

(5)Adjustment of Capitals.

It is very important to know that basic problems encountered in all these cases are same and should be treated with some modifications for each case separately. First of all, all the above mentioned adjustments are being taken with respect to the first case i.e. Change in Profit Sharing Ratio

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