P, Q and R are partners in a firm. If S is admitted as a new partner then:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → The old partnership is reconstituted
When a new partner (S) is admitted to an existing partnership (P, Q, and R), the relationship between the old partners changes, and a new agreement comes into force. This change in the relationship among the partners is termed as reconstitution of the partnership firm. The firm itself continues to exist, but the partnership (the agreement/relationship) changes.