Question

State two circumstances of a firm reconstitution.

Hint:

Reconstitution = the old partnership agreement ends and a new one takes over, firm continues.

Answer 1

Step 1: Recall what ‘reconstitution’ means:
Reconstitution of a firm happens when the existing agreement among partners ends and a new one takes its place, while the firm itself continues to exist.

Step 2: List two situations that cause this:
(i) Admission of a new partner into the firm, and (ii) Retirement or death of an existing partner — both events change who the partners are and require a fresh agreement.

Final Answer:
Two circumstances of reconstitution are: admission of a new partner, and retirement/death of an existing partner.