---
type: "Chapter"
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entity_type: "chapter"
id: "66def4f33f8b4e9e69bd6f6f"
title: "Reconstitution of a Partnership Firm – Retirement/Death of a Partner"
board: "CBSE"
curriculum: "CBSE"
class: "Class 12"
subject: "Accountancy"
book: "Accountancy Part - I"
chapter: "Reconstitution of a Partnership Firm – Retirement/Death of a Partner"
chapter_slug: "reconstitution-of-a-partnership-firm-retirementdeath-of-a-partner"
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source: "Edzy"
version: 1
last_updated: "2026-06-20"
---

# Reconstitution of a Partnership Firm – Retirement/Death of a Partner

The chapter discusses the processes involved when a partner retires or passes away, leading to the reconstitution of a partnership firm. It explains the need to establish a new partnership deed, the accounting treatments required for both circumstances, and the adjustments needed related to goodwill, assets, liabilities, and accumulated profits and losses.

## Knowledge Snapshot

| Field | Details |
| :--- | :--- |
| Class | Class 12 |
| Subject | Accountancy |
| Book | Accountancy Part - I |
| Chapter | Reconstitution of a Partnership Firm – Retirement/Death of a Partner |
| Pages | 107-157 |

## Chapter Summary

### Short Summary
The chapter elaborates on the reconstitution process of a partnership due to the retirement or death of a partner, highlighting key accounting adjustments necessary to determine amounts due and distribute future profits.

### Detailed Summary
When a partner retires or dies, the existing partnership deed terminates, necessitating the creation of a new deed. The accounting treatment remains largely similar for both scenarios, focusing on determining sums owed to retiring partners or their legal heirs, and making adjustments concerning goodwill, asset valuation, and the distribution of profits and losses. The chapter systematically covers the ascertainment of amounts due, the formation of new profit-sharing ratios, and the gaining ratios, alongside case studies demonstrating various applicable situations.

## Topic-Wise Explanation

### Introduction to Partnership Reconstitution
Defines the importance of adjusting partnership agreements and creating new deeds following a partner's retirement or death.

### Ascertaining the Amount Due to Retiring/Deceased Partner
Details the components included in the final settlement with the retiring partner or their legal representatives, outlining additions like capital account balances, goodwill, and deductions for losses.

### New Profit Sharing Ratio
Describes methods to determine profit-sharing ratios post-retirement or death, including retention of previous ratios or the establishment of new ones through partner agreements.

### Gaining Ratio
Explains the gaining ratio as the measure of how much share the remaining partners acquire from the retiring or deceased partner, often aligning with existing shares unless otherwise stipulated.

### Treatment of Goodwill
Discusses how to account for goodwill in the event of reconstitution, including the decision-making process regarding its retention or write-off.

### Adjustment for Revaluation of Assets and Liabilities
Highlights the necessity of revaluating assets and liabilities to reflect current values before finalizing partner settlements.

### Adjustment of Accumulated Profits and Losses
Explains the treatment of unrecorded profits and losses in partner calculations during reconstitution.

### Disposal of Amount Due to Retiring Partner
Details the steps for finalizing settlements owed to the retiring partner based on computed figures post-adjustments.

### Adjustment of Partners’ Capitals
Covers necessary capital adjustments among partners to ensure equitable distribution of ownership post-retirement or death.

### Death of a Partner
Discusses specific considerations and accounting treatments that apply in cases where a partner dies, closely mirroring cases of retirement but with noted adjustments.

## Core Ideas

| Idea | Explanation |
| :--- | :--- |
| Reconstitution Necessity | The process must be initiated post-retirement or death of a partner to ensure continued operations. |
| Accounting Treatment | Consistent approaches apply for calculating dues, profit-sharing, and capital adjustments. |

## Key Concepts

| Concept | Meaning |
| :--- | :--- |
| New Profit Sharing Ratio | The proportion in which remaining partners will share profits after a partner's exit. |
| Gaining Ratio | The ratio reflecting how shares of the retired or deceased partner are redistributed among remaining partners. |

## Important Points for Revision

* Reconstitution occurs upon retirement or death of a partner.
* New partnership deeds must be established.
* Amount due includes several components like capital and goodwill.
* Profit-sharing ratios may remain unchanged or can be recalculated.
* Gaining ratios reflect how shares are redistributed among continuing partners.
* Necessary adjustments must be made for goodwill, revaluations, and accumulated profits/losses.
* Deductions from dues may include current account deficits and losses.
* Specific calculations vary based on the nature of the partner's exit.

## Practice Questions

### Short Answer Questions
1. What is the significance of creating a new partnership deed?
2. How do you calculate the amount due to a retiring partner?
3. What factors can affect the new profit-sharing ratio?
4. Explain the concept of gaining ratio briefly.
5. What are the adjustments necessary during revaluation of assets and liabilities?

### Long Answer Questions
1. Discuss the steps involved in the reconstitution of a partnership following the retirement of a partner.
2. Explain the differences and similarities in accounting treatments for retirement and death of a partner.
3. Provide an example calculation for determining the new profit-sharing ratio using a real scenario from the text.

## Source Attribution

| Field | Value |
| :--- | :--- |
| Source | Edzy |
| Reference Type | examSubjectBookChapter |
| Reference ID | 66def4f33f8b4e9e69bd6f6f |
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