What is meant by reconstitution of partnership?

Saloni and Shrishti were partners in a firm sharing profits in the ratio of 7:3. Their capitals were Rs 2,00,000 and Rs 1,50,000 respectively. They admitted Aditi on 1stApril, 2013

What is meant by reconstitution of partnership?

Saloni and Shrishti were partners in a firm sharing profits in the ratio of 7:3. Their capitals were Rs 2,00,000 and Rs 1,50,000 respectively. They admitted Aditi on 1stApril, 2013 as a new partner for1/6 share in future profits. Aditi brought Rs 1,00,000 as her capital. Calculate the value of goodwill of the firm and record necessary journal entries for the above transaction on Aditi's admission.

Aditi is admitted for 1/6thshare of profit, for capital amounting to Rs 100000.
Capitalized value of firm on the basis of Aditis capital = 100000*6/1=600000.
Actual capital = 200000+150000+100000=450000.
Value of goodwill = 600000-450000= 150000.
Aditis share in goodwill = 1/6thof 1,50,000 = Rs 25,000
The journal entries are as follows:

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