At the time of Reconstitution, Goodwill already appearing in books of accounts is distributed among partners in....

Old profit sharing ratio

The correct answer is option 1- Old profit sharing ratio.

At the time of Reconstitution, Goodwill already appearing in books of accounts is distributed among partners in Old profit sharing ratio.

When a new partner is admitted, goodwill of the business is valued afresh. For this, the goodwill that already appears in the books of accounts is written off and is transferred to the old partner's capitals accounts in their old profit-sharing ratio. The old partner's capital accounts are debited with their share of goodwill. To ensure fairness and that no partner is unfairly disadvantaged or benefitted by the change, the existing goodwill is written off or adjusted in their old ratio. The journal entry for this- Partner's Capital A/c Dr. To Goodwill A/c.