Question : At the time of reconstitution of the firm by way of change in profit sharing ratio/ admission of a partner/retirement of a partner/death of a partner, Gaining partners compensates the sacrificing partner by paying a proportionate amount of
Option 1: Goodwill
Option 2: Capital
Option 3: Both 1 and 2
Option 4: Either 1 and 2
Correct Answer: Goodwill
Solution : Answer = Goodwill
During the reconstitution of a firm, such as changes in profit-sharing ratios or admission/retirement/death of partners, the gaining partners compensate the sacrificing partner by paying a proportionate amount of goodwill. This payment helps maintain equity among partners and ensures a fair distribution of assets and liabilities.
Hence, the correct option is 1.
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