It on firm

No, 2 P&L A/c. Only the information of admitted and retiring of partner is required, and the simple P&L of earning and expenses of the firm is required.

The profit is to be finalised on the date of admission / retirement for the reason:

• The new partner will not be entitled to share the profits earned during the year
• The retiring partner to be given his profit share till the date of retirement.

So the profit to be finalised on the date of admission / retirement and it should be divided among the old partner and the further profits are to be divided by the new partners.

For Income Tax, the total profit of the firm is taxable, no need for seperate P & L. The revised list of partners to be disclosed in ITR.

For convenience, it is better to plan the constitution change at the year end.