reconstitution

1. RECONSTITUTION OF A
PARTNERSHIP FIRM
RECONSTITUTION OF A
PARTNERSHIP FIRM
MEANS A CHANGE IN THE
NATURE OF RELATIONSHIP
AMONGST MEMBERS,
EFFECTED THROUGH A
FRESH AGREEMENT UNDER
WHICH THE EXISTING
BUSINESS CONTINUES.

2. MODES OF RECONSTITUTION
CHANGE IN THE PROFIT SHARING RATION OF THE
EXISTING PARTNERS.
ADMISSION OF A PARTNER.
RETIREMENT OF A PARTNER.
DEATH OF A PARTNER.
AMALGAMATION OF TWO PARTNERSHIP FIRMS.

3. CHANGE IN PROFIT SHARING
RATION OF TH EXISTING
PARTNERS
THE EXISTING PARTNERS MAY DECIDE TO
CHANGE THEIR PROFIT SHARING RATIO. THERE
ARISES SACRIFICE ON THE PART OF SOME, WHILE
GAIN TO OTHERS. THOSE WHO GAIN MUST
COMPENSATE THE OTHERS WHO HAVE MADE THE
SACRIFICE. THE COMPENSATION IS IN THE FORM
OF PROPORTIONATE SHARE OF GOODWILL.

4. SACRIFICING RATIO
THE RATIO IN WHICH THE
OLD PARTNERS HAVE AGREED
TO SACRIFICE THEIR SHARE
IN PROFIT IN FAVOUR OF
ANOTHER EXISTING PARTNER
IS CALLED THE SACRIFICING
RATIO.
SACRIFICING RATIO = OLD
RATIO - NEW RATIO

5. GAINING RATIO
THE RATIO IN WHICH THE CONTINUING
PARTNERS DECIDE TO SHARE THE OUTGOING
P A R T N E R ’ S PROFIT IS CALLED GAINING
RATIO.
GAINING RATIO = NEW RATIO – OLD RATIO