Reconstitution of Partnership Firm: Admission of a Partner

Introduction:
A partnership firm is an association of two or more persons who come together to carry on a business with a view to making a profit. The reconstitution of a partnership firm refers to the change in the existing agreement among the partners. Admission of a new partner is one of the modes of reconstitution.

Steps to be taken in case of admission of a new partner:
The following steps need to be taken in case of admission of a new partner:
1. Valuation of the firm's assets and liabilities
2. Calculation of the new profit-sharing ratio
3. Adjustment of goodwill
4. Revaluation of assets and liabilities

Changes in the profit-sharing ratio:
In the given scenario, A, B and C are partners in the ratio of 3:7:5. A gives 1/15 of his share to C, which means the new ratio becomes 2:7:6. B gives 2/15 of his share to A and 1/15 to C. So, the new ratio becomes 17:35:28.

Adjustment of goodwill:
Goodwill is an intangible asset that represents the reputation of the firm. When a new partner is admitted, the goodwill of the firm needs to be adjusted. The new partner is required to bring in his share of goodwill in the form of cash or kind. The existing partners may also have to sacrifice a portion of their share of goodwill.

Revaluation of assets and liabilities:
When a new partner is admitted, the assets and liabilities of the firm need to be revalued. The values of the assets and liabilities may have changed since the last valuation. The new values are used to calculate the new profit-sharing ratio.

Conclusion:
Admission of a new partner requires careful consideration and planning. The existing partners need to ensure that the new partner is financially sound and has the necessary skills to contribute to the growth of the firm. The reconstitution of a partnership firm may involve complex calculations, and it is advisable to seek the help of a professional accountant or lawyer.