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NCERT Textbook: Reconstitution of a Partnership Firm – Retirement/Death of a Partner | Accountancy Class 12 - Commerce PDF Download

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FAQs on NCERT Textbook: Reconstitution of a Partnership Firm – Retirement/Death of a Partner - Accountancy Class 12 - Commerce

1. What is reconstitution in the context of retirement or death of a partner?
Ans. Reconstitution refers to the process of making changes in a partnership firm due to retirement or death of a partner. It involves settling the accounts of the outgoing partner and making necessary adjustments in the partnership agreement.
2. How is the retiring partner's share settled in reconstitution?
Ans. The retiring partner's share is settled by calculating the value of their share in the firm. This is usually done based on the agreed terms in the partnership agreement, which may include factors like the book value of the partnership assets or the goodwill of the firm.
3. What happens to the remaining partners' capital after the retirement or death of a partner?
Ans. After the retirement or death of a partner, the remaining partners' capital may need to be adjusted. This can be done by transferring the retiring partner's capital to the remaining partners or by redistributing the capital among the remaining partners in a mutually agreed proportion.
4. What are the implications of reconstitution on the firm's goodwill?
Ans. Reconstitution can have implications on the firm's goodwill. If the partnership agreement specifies that the retiring partner is entitled to a share of the firm's goodwill, then the value of goodwill needs to be determined and settled accordingly. The remaining partners may have to compensate the retiring partner for their share of goodwill.
5. How does reconstitution affect the rights and liabilities of the partners?
Ans. Reconstitution can lead to changes in the rights and liabilities of the partners. The retiring partner's rights and liabilities are settled, and the remaining partners may need to take on additional responsibilities and liabilities. The partnership agreement should be revised to reflect the new arrangement and ensure clarity regarding the rights and liabilities of each partner.
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