At the time of reconstitution of partnership firm, recording of an unrecorded asset will lead to __________.

Gain to existing partners

The correct answer is Option (2) - Gain to existing partners.

When a partnership firm undergoes reconstitution, it implies there are changes in the existing partnership agreement, such as the admission of new partners, retirement of existing partners, or changes in profit-sharing ratios. During this process, if an unrecorded asset is identified and recorded in the books of accounts, it results in an increase in the total assets of the partnership firm. Now, when an unrecorded asset is recognized then it is credited to revaluation account which increase the revaluation profit that will be distributed in partners. So, It will be gain to the partners.