Multiple choice

Ram, Mohan and Sohan are partners in a firm sharing profits in the ratio 3:2:1. With effect from April 1, 2007 they decided to share profits equally as Sohan brings in additional capital. This is an example of ______________.

  1. Retirement of an existing partner

  2. Death of a partner

  3. Change in the profit sharing ratio among the existing partner

  4. Admission of a new partner
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When partners change their profit sharing ratio without adding or removing a partner, it is a reconstitution of the firm through a change in the profit sharing ratio.

AI explanation

The partners Ram, Mohan and Sohan remain in the firm while modifying their existing profit sharing arrangement from 3:2:1 to equal shares. This scenario represents a change in the profit sharing ratio among the existing partners rather than the admission, retirement, or death of a partner.

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