A, B and C are partners in a firm. If D is admitted as a new partner, what will be its affect?

The correct option is Old partnership is reconstituted.

Step-by-step Explanation:

1. Understanding Partnership vs. Firm:
In partnership law, a "partnership" refers to the relationship between the persons who have agreed to share the profits of a business carried on by all or any of them acting for all. The collective name under which their business is carried on is called the "firm". Therefore, a partnership is the legal agreement/relationship between the partners, while the firm is the business entity itself.

2. Effect of Admission of a New Partner:
When a new partner (D) is admitted into an existing partnership firm (consisting of A, B, and C):
- The old agreement or relationship among A, B, and C comes to an end.
- A new agreement comes into existence among all the partners, i.e., A, B, C, and D.
- This process of terminating the old partnership agreement and starting a new partnership agreement without terminating the business of the firm is known as the reconstitution of the partnership firm.

3. Why the other options are incorrect:
- "Old firm is dissolved" and "Old firm and old partnership is dissolved": Dissolution of a firm means the business of the firm is completely closed down, assets are sold, and liabilities are paid off. Admission of a partner does not close the business; hence, the firm is not dissolved.
- "Firm will lose its existence": The business entity (firm) continues to exist and carry on its operations under the new partnership agreement. It does not lose its existence.

Therefore, the admission of a new partner leads to the reconstitution of the old partnership, where the relationship between the existing partners changes and a new partner is integrated into the business agreement.