Joint Venture
By Asok Nadhani
18.1 Joint Venture
When two or more persons join together for a specific
business, it is called Joint Venture.
It is a temporary partnership for some specific purpose. The partners in this
case are called ‘Co-venturers’. The relationship between co-venturers interse
is similar to partners or joint owners. Such partnership business comes to an
end when the venture is completed.
18.2 Characteristics of Joint
Venture
The main features of a Joint Venture
business are-
(i)
Two or
more persons join together for a single venture.
(ii)
They
share profits and losses in the agreed proportion (in absence of any agreement,
profit or loss issued equally).
(iii)
Interest on capital, salary to co-venturers
may be paid as per agreement (in absence of any agreement, no interest or
salary is payable).
(iv)
Going
concern concept may not be applicable in some cases.
(v)
The Joint
Venture business dissolves in completion of venture.
18.3 Distinction between
Joint Venture and Partnership
|
Basis
of Distinction
|
Joint
Venture
|
Partnership
|
|
|
1
|
Scope
|
It is a terminable venture.
|
It is a gong concern.
|
|
2
|
Persons
involved
|
The persons carrying on business are called
co-venturers.
|
The persons carrying on business are called partners.
|
|
3
|
Ascertainment
of profit or
loss
|
The profits or losses are ascertained at the end of
specific venture or on interim annual basis.
|
The profits or losses are ascertained on an annual
basis.
|
|
4
|
Legal Status
|
No specific act is applicable.
|
Governed by Indian Partnership Act, 1932.
|
|
5
|
Separate set of Books
|
No need for a separate set of books. Co-venturer’s own
books only maintained.
|
Separate set of books have to be maintained.
|
|
6
|
Name
|
It may not use any firm or organization name.
|
It has always a name.
|
18.4 Distinction between
Joint venture and Consignment
|
Basis of Distinction
|
Joint Venture
|
Consignment
|
|
|
1
|
Persons involved
|
The persons carrying on
business are called co-venturers.
|
The persons carrying on business are called Consignor (or Principal)
and Consignee (or Agent).
|
|
2
|
Share
of profit or loss
|
Co- venturers share profit and losses.
|
Consignor bears profit and losses and consignee is entitled to
commission only.
|
|
3
|
Ownership
|
Co- venturers are equal owners.
|
Consignor is principal and consignee is his agent.
|
18.5 Accounting Methods or Joint
Venture
Generally there are two ways to keep records of joint
venture:
- When
separate set of books are maintained.
- When no
separate set of books are maintained.
18.5.1 When Separate Set
Books are Maintained
Under this method following accounts are
opened.
-
Joint
Bank Account.
-
Joint Venture
Account.
-
Personal
Accounts of the Co-venturers or Co-venturers’ Accounts.
(i)
Joint Bank Account: The Co-venturers open a separate Bank
Account called Joint Bank Account. All receipts and payments, like capital
contribution, expenses and sales or collections from transactions are done
through this account.
(ii)
Joint Venture Account: This account is a type of Trading and
Profit & Loss Account prepared for computation of joint venture profit.
This account is debited for all venture expenses and is credited for all sales
or collections.
(iii) Co-venturers’
Account: Venturers
contributions of cash, goods or venture expenditure and direct payment received
are entered here.
18.5.1.1 When Separate Book Maintained
Journal entries of joint venture when
separate book maintained:
Journal
Entries
|
(1)
|
For initial contribution by
the co-venturers to open Joint Bank Account.
|
|
|
|
Joint Bank A/c
|
Dr.
|
|
|
To Co-venturers’ A/c
|
|
|
(2)
|
For expenses paid out of
Joint Bank Account.
|
|
|
|
Joint Venture A/c
|
Dr.
|
|
|
To Joint Bank A/c
|
|
|
(3)
|
For goods supplied by
venturers or direct payment made by venturers
|
|
|
|
Joint Venture A/c.
|
Dr.
|
|
|
To Co-ventures’ A/c’s
|
|
|
(4)
|
For cash purchase of goods
|
|
|
|
Joint Venture A/c
|
Dr.
|
|
|
To Joint Bank A/c
|
|
|
(5)
|
For purchase of goods on
credit
|
|
|
|
Joint Venture A/c
|
Dr.
|
|
|
To Suppliers A/c
|
|
|
(6)
|
For goods returned to
supplier
|
|
|
|
Suppliers A/c
|
Dr.
|
|
|
To Joint Venture A/c
|
|
|
(7)
|
For amount paid to suppliers
or creditors
|
|
|
|
Supplier A/c
|
Dr.
|
|
|
To Joint Bank A/c
|
|
|
(8)
|
For cash sale or payment
received
|
|
|
|
Joint Bank A/c
|
Dr.
|
|
|
To Joint Venture A/c
|
|
|
(9)
|
For credit sale
|
|
|
|
Debtors Account
|
Dr.
|
|
|
To Joint Venture A/c
|
|
|
(10)
|
For goods returned by
debtors
|
|
|
|
Joint Venture A/c
|
Dr.
|
|
|
To Debtors A/c
|
|
|
(11)
|
For collection from debtors
|
|
|
|
Joint Bank A/c
|
Dr.
|
|
|
To Debtors A/c
|
|
|
(12)
|
For sale or payment
received directly by the venturers and retained by them
|
|
|
|
Co-ventures’ A/c’s
|
Dr.
|
|
|
To Joint Venture A/c
|
|
|
(13)
|
For commission, interest
payable to co-venturers
|
|
|
|
Joint Venture A/c
|
Dr.
|
|
|
To Co-ventures’ A/c’s
|
|
|
(14)
|
For unsold goods taken over
by co-venturers
|
|
|
|
Co-ventures’ A/c’s
|
Dr.
|
|
|
To Joint Venture A/c
|
|
|
(15)
|
If any loan is taken
|
|
|
|
Joint Bank A/c
|
Dr.
|
|
|
To Loan A/c
|
|
|
|
In case of repayment of the loan, the above entry
will be reversed.
|
|
|
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For profit on joint venture
|
|
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(16)
|
Joint Venture A/c’s
|
Dr.
|
|
|
To Co-ventures’ A/c’s
|
|
|
(17)
|
For Loss on Joint Venture
|
|
|
|
Co-ventures’ A/c’s
|
Dr.
|
|
|
To Joint Venture A/c.
|
|
|
(18)
|
For closing the Joint Bank
A/c
|
|
|
Closing of books: If there are any balances in loan, supplier, debtor account
in joint venture, they will be closed at first and the balance will be
transferred to Joint Venture Account. The Joint Venture Account is closed at first.
Then Co-venturers’ Accounts and Joint Bank Account are closed simultaneously.
It established the accuracy of books of Account.
|
||
|
|
Co-ventures’ A/c’s
|
Dr.
|
|
|
To Joint Bank A/c.
|
|
If any Co-venturers’ Accounts shows the debit
balance, he will bring the money in venture.
|
|
Joint Bank A/c
|
Dr.
|
|
|
To Co-venture A/c.
|
|
Example:
(Unsold goods taken by Co-venturers)
Mr. X and Mr. Y both decided to undertake joint venture
and share profits and losses in the ratio of 5:3. Mr. X and Mr. Y deposited Rs.25,000
and Rs.28,000 respectively in the Bank Account, to be utilized only for purchase of goods.
Expenses will be paid by partners personally. Mr. X purchased 8 pieces of DVD
Player @ Rs.2,000 per player and spent Rs.300 as expenses. Mr. Y sold 6 pieces of
DVD Player @ Rs.3,000 per player and paid Rs.150 as sales expenses. Mr. Y
purchased 5 pieces of Home Theatre System @ Rs.3,000 and spent Rs.300 for
bringing it to godown. Mr. X sold 4 pieces of Home Theatre System for Rs.16,000
and spent Rs.200 as sales expenses. The unsold DVD Player and Home Theatre were
taken by Mr. X and Mr. Y respectively at cost.
Prepare Joint Venture Account, Joint Bank
Account and Venturers’ Accounts.
Solution:
Joint Venture A/c
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|
Date
|
Particulars
|
JF
|
Amount
Rs.
|
Date
|
Particulars
|
JF
|
Amount
Rs.
|
|
|
To Joint Bank A/c
|
|
|
|
By Joint Bank A/c
|
|
|
|
|
- (Purchased 8 pieces of DVD Player @ Rs.2,000 per player)
|
|
16,000
|
|
(Sold 6 pieces of DVD Player @ Rs.3,000 per player)
|
|
18,000
|
|
|
|
|
|
|
|
|
|
|
|
- (Purchased 5 pieces of Home Theatre System @ Rs.3,000)
|
|
15,000
|
|
(Sold 4 pieces of Home Theatre System @ Rs.4,000)
|
|
16,000
|
|
|
|
|
|
|
|
|
|
|
|
To Co-venturers’ A/c
|
|
|
|
By Co-venturers A/c
|
|
|
|
|
- (Expenses made by Mr. X for purchase)
|
|
300
|
|
Mr. X – 2 pcs DVD @
Rs.2,000 = 4,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (Expenses made by Mr. Y for purchase)
|
|
300
|
|
Proportioned Purchase Expenses
(Rs.300 x 2/8) =
75
|
|
4,075
|
|
|
|
|
|
|
|
|
|
|
|
- (Expenses made by Mr. Y for sales)
|
|
150
|
|
Mr. Y – 1 pc’s Home Theatre@ Rs.3,000
= 3,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (Expenses made by Mr. X for sales)
|
|
200
|
|
Proportioned Purchase Expenses
(Rs.300 x 1/5) = 60
|
|
3,060
|
|
|
|
|
|
|
|
|
|
|
|
To Co-venturers’ A/c (Balancing figure Rs.9,185
Profit)
|
|
|
|
|
|
|
|
|
Apportioned to:-
|
|
|
|
|
|
|
|
|
Mr. X (Rs.9,185 x 5/8)
|
|
5,741
|
|
|
|
|
|
|
Mr. Y (Rs.9,185 x 3/8)
|
|
3,444
|
|
|
|
|
|
|
|
|
41,135
|
|
|
|
41,135
|
Joint Bank A/c
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|
|
Date
|
Particulars
|
JF
|
Amount
Rs.
|
Date
|
Particulars
|
JF
|
Amount
Rs.
|
|
|
|
To Co-venturers’ A/c
|
|
|
|
By Joint venture A/c
|
|
|
|
|
|
(Mr. X capital)
|
|
25,000
|
|
(Purchased 8 pieces of DVD Player @ Rs.2,000 per player)
|
|
16,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Mr. Y capital)
|
|
28,000
|
|
(Purchased 5 pieces of Home Theatre System @ Rs.3,000)
|
|
15,000
|
|
|
|
To Joint venture A/c
|
|
|
|
By Co-venturers’ A/c
|
|
|
|
|
|
(Sold 6 pieces of DVD Player @ Rs.3,000 per player)
|
|
18,000
|
|
X
Y
(Amt.withdrawn)
|
27,166
28,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Sold 4 pieces of Home Theatre System @ Rs.4,000)
|
|
16,000
|
|
|
|
56,000
|
|
|
|
|
|
87,000
|
|
|
|
87,000
|
|
Co-venturers’ Account
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|||
|
Particulars
|
Mr. X
|
Mr. Y
|
Particulars
|
Mr. X
|
Mr. Y
|
|||||
|
To Joint Venture A/c (unsold stock taken
over)
|
4,075
|
3,060
|
By Joint Bank A/c
|
|
|
|||||
|
To Joint Bank A/c
|
27,166
|
28,834
|
(Capital introduced)
|
25,000
|
28,000
|
|||||
|
(Balancing figure, amount withdrawn)
|
|
|
|
|
|
|||||
|
|
|
|
By Joint Venture A/c
|
|
|
|||||
|
|
|
|
(Expenses made by Mr. X and Mr. Y for purchase)
|
300
|
300
|
|||||
|
|
|
|
(Expenses made by Mr. X and Mr. Y for sale)
|
200
|
150
|
|||||
|
|
|
|
By Joint Venture A/c
|
|
|
|||||
|
|
|
|
Profit:-
|
|
|
|||||
|
|
|
|
Mr. X (Rs.9,185 x 5/8)
|
5,741
|
|
|||||
|
|
|
|
Mr. Y (Rs.9,185 x 3/8)
|
|
3,444
|
|||||
|
|
31,241
|
31,894
|
|
31,241
|
31,894
|
|||||
NOTE:
- It is assumed that entire
sales proceeds have been deposited in the Bank.
Illustration
4: (unsold goods in Joint Venture)
A and B entered into a joint
venture on 1.10.1993 for sale of specified goods paying Rs.60,000 and Rs.40,000
respectively in a Joint Bank Account- sharing profits and losses in the ratio
of 3:5. It was agreed that Joint Bank Account is to be used for purchases and
sales and each venturer is to meet his joint venture expenses out of private
funds. Each venturer is to charge a commission @ 5% on sales made by him. The
transactions for the period ended 31.3.1994 were as follows:
A purchased goods
costing Rs.40,000 and expenses in connection thereof amounted to Rs.6,000. He
sold 90% of these goods at 30% over the cost price and selling expenses
amounted to Rs.2,500. B purchased goods costing Rs.50,000 and expenses in
connection thereof amounted to Rs.6,500. He sold 80% of these goods at 25% over
the cost price and selling expenses amounted Rs.3,000. 1/5th of the
remaining goods purchased by A were destroyed by fire on 28th February, 1994 and the
insurance company paid a claim for Rs.2,000. Write up Joint Venture Account,
Joint Bank Account and Venturers’ Accounts.
[C.U.
B. Com. (Hons.) – 1994]
Solution:
Working Notes:
1. Calculation of Sales
|
Sales made by A:
|
Rs.
|
|
-Cost of goods sold [90% of Rs.(40,000 + 6,000)]
|
41,400
|
|
-Add: profits on goods( 30% on 41,400)
|
12,420
|
|
|
53,820
|
|
Sales made by B:
|
|
|
-Cost of goods sold [80% of Rs.(50,000 + 6,500)]
|
45,200
|
|
-Add: profits on goods( 25% on 45,200)
|
11,300
|
|
|
56,500
|
2. Calculation of Closing Stock
90% of goods were sold by A. Therefore, 10% goods remain as unsold
stock. Again 1/5th of the 10% was destroyed by fire. It will be
subtracted from the stock in the hands of A.
80% of goods were sold by B. Therefore, 20% goods remain as unsold
stock. The unsold stock will remain in Joint venture.
|
For A:
|
Rs.
|
|
10% of Rs.(40,000 + 6,000)
|
4,600
|
|
Less: goods destroyed by fire (1/5th of 4,600)
|
920
|
|
|
3,680
|
|
For B:
|
|
|
20% of Rs.( 50,000 + 6,500)
|
11,300
|
|
Total Closing stock in Joint Venture (3,680 + 11,300)
|
14,980
|
|
|
|
Joint Venture Account
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|
Date
|
Particulars
|
Rs.
|
Rs.
|
Date
|
Particulars
|
Rs.
|
Rs.
|
|
|
To Joint Bank A/c:
|
|
|
|
By Joint Bank A/c
|
|
|
|
|
- Goods
purchased by A
|
40,000
|
|
|
(Wn. 1)
|
|
|
|
|
- Goods
purchased by B
|
50,000
|
90,000
|
|
- Sales made by A
|
53,820
|
|
|
|
To Co-Venturers’ A/cs:
|
|
|
|
- Sales made by B
|
56,500
|
1,10,320
|
|
|
- Expenses incurred by A for purchase
|
6,000
|
|
|
By Joint Bank A/c (Insurance claim) [Note]
|
|
2,000
|
|
|
- Expenses incurred by B for purchase
|
6,500
|
12,500
|
|
|
|
|
|
|
- Expenses incurred by A for sale
|
2,500
|
|
|
|
|
|
|
|
- Expenses incurred by B for sale
|
3,000
|
5,500
|
|
|
|
|
|
|
To Co-Venturers’ A/cs
|
|
|
31.3.94
|
By Closing Stock
|
|
14,980
|
|
|
(Commission):
|
|
|
|
(Note 2)
|
|
|
|
|
A – (5% on Rs.53,820)
|
2,691
|
|
|
|
|
|
|
|
B – (5% on Rs.56,500)
|
2,825
|
5,516
|
|
|
|
|
|
31.3.94
|
To Co-Venturers’ A/cs
|
|
|
|
|
|
|
|
|
– share of profit:
|
|
|
|
|
|
|
|
|
A – (3/8th of
Rs.13,784)
|
5,169
|
|
|
|
|
|
|
|
B – (5/8th of
Rs.13,784)
|
8,615
|
13,784
|
|
|
|
|
|
|
|
|
1,27,300
|
|
|
|
1,27,300
|
Joint Bank Account
|
Dr.
|
|
|
|
|
Cr.
|
|
|
Date
|
Particulars
|
|
Rs.
|
Date
|
Particulars
|
Rs.
|
|
1.10.93
|
To C-Venturers’ A/cs
|
|
|
|
By Joint Venture A/c (purchase)
|
90,000
|
|
|
A
|
60,000
|
|
31.3.94
|
By Balance c/d [Note]
|
1,22,320
|
|
|
B
|
40,000
|
1,00,000
|
|
|
|
|
|
To Joint Venture A/c
|
|
|
|
|
|
|
|
(
|
1,10,320
|
|
|
|
|
|
|
To Joint Venture A/c
|
|
|
|
|
|
|
|
(Insurance Claim)
|
2,000
|
|
|
|
|
|
|
|
2,12,320
|
|
|
2,12,320
|
|
Co-
Venturers’ Accounts
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|
Date
|
Particulars
|
A
|
B
|
Date
|
Particulars
|
A
|
B
|
|
|
To Balance c/d [Note}
|
76,360
|
60,940
|
|
By Joint Bank A/c (capital invested)
|
60,000
|
40,000
|
|
|
|
|
|
|
By Joint Venture A/c (expenses)
|
8,500
|
9,500
|
|
|
|
|
|
|
By Joint Venture A/c (Commission)
|
2,691
|
2,825
|
|
|
|
|
|
|
By Joint Venture A/c (Profit)
|
5,169
|
8,615
|
|
|
|
76,360
|
60,940
|
|
|
76,360
|
60,940
|
Note: In the problem, there is no mention about the final
settlement on 31.3.94. Therefore, the
value of closing stock and balances on
Co- Venturers’ Accounts and Joint Bank Account will be carried forward
next year.
In case of stock destroyed, only insurance claim received is taken as
income in the Joint Venture and Joint Bank Account.
18.5.1.2 Accounting
Methods when no separate set of books are maintained
When no separate set of books of account are
maintained for joint venture, then each venture may maintain their accounts
independently, in following ways:
(i)
Each
co-venturer keeps records of all transactions
(ii)
Each co-venturer keeps records of their own
transactions only.
Under this method, a Memorandum Joint Venture Account
is prepared.
18.5.1.2.1 When each
co-venturer keeps records of all transactions:
i)
Under
this method, every co-venturer maintains two accounts in his books of account
viz. Joint Venture Account, and other Co- venturer Account.
ii)
Joint Venture Account: It is a nominal account and treated as Profit &
Loss Account of the venturer in whose books of account the Joint Venture
Account, and other Co- venturer Account are maintained. Own shares of profit or
loss are transferred to Profit & Loss Account and the other Co- venturer’s share
is transferred to his personal account.
iii)
Journal
entries are passed by the co-venturers in his books of account.
Journal Entries|
(1)
|
For supply of goods to
venture out of business stock.
|
|
|
|
|
Joint Venture A/c
|
Dr.
|
|
|
|
To Purchase A/c
|
|
|
|
(2)
|
For meeting expenses of
venture.
|
|
|
|
|
Joint Venture A/c
|
Dr.
|
|
|
|
To Bank A/c
|
|
|
|
(3)
|
When co-venturer supplies
goods and incurs expenses for venture.
|
||
|
|
Joint Venture A/c.
|
Dr.
|
|
|
|
To Co-venturers’ A/c.
|
|
|
|
(4)
|
For sale of goods.
|
|
|
|
|
Bank A/c
|
Dr.
|
|
|
|
To joint Venture A/c.
|
|
|
|
(5)
|
For venture sale made by
the co-venturers’
|
|
|
|
|
Co-venturers’ A/c
|
Dr.
|
|
|
|
To Joint Venture A/c.
|
|
|
|
(6)
|
For cash contributed by
co-venturers’
|
|
|
|
|
Bank A/c
|
Dr.
|
|
|
|
To Co-venturers’ A/c.
|
|
|
|
(7)
|
For goods taken over for
business
|
|
|
|
|
Purchase A/c
|
Dr.
|
|
|
|
To Joint Venture A/c
|
|
|
|
(8)
|
For goods taken over by
co-venturer
|
|
|
|
|
Co-venturers’ A/c
|
Dr.
|
|
|
|
To Joint Venture A/c
|
|
|
|
(9)
|
a. For venture profit.
|
|
|
|
|
Joint Venture A/c
|
Dr.
|
|
|
|
To Profit or Loss A/c.
|
|
(for own shares)
|
|
|
To Co-venturer A/c.
|
(for co-venturer’s share)
|
|
|
|
b. For venture loss.
|
|
|
|
|
Profit and Loss A/c
|
Dr.
|
(for own shares)
|
|
|
Co-venturer A/c
|
Dr.
|
(for
co-venturer’s share)
|
|
|
To Joint Venture A/c.
|
|
|
|
(10)
|
For settlement of claims.
Account with co-venturer will be settled through appropriate remittance.
|
||
|
|
a. When payment is due to
co-venturer
|
|
|
|
|
Co-venturer A/c
|
Dr.
|
|
|
|
To Bank A/c.
|
|
|
|
|
b. When payment is due from
co-venturer
|
|
|
|
|
Bank A/c
|
Dr.
|
|
|
|
To Co-venturer A/c.
|
|
|
So, two special
ledger accounts are necessary for joint venture transactions in the book of a
venturer:
(i)
Joint
Venture Account and
(ii)
Co-venturer’s
Account.
Example:
A and B are partners in a joint venture
sharing profit and losses in the proportion of 3/5th and 2/5th respectively. A supplied
goods of the value of Rs.8,000 and incurs expenses amounting to Rs.400. B
supplies goods of the value of Rs.3,900 and his expenses amount to Rs.300. B
sells goods on behalf to the joint venture and realizes Rs.32,000, and is
entitled to a commission of 2.5% on sales. B settles his account by bank draft.
Give the journal entries and relevant ledger
accounts in the books of A.
Solution:
Journal
Entries in the book’s of A
|
|
|
|
|
Dr.
|
Cr.
|
|
Date
|
Particulars
|
|
L
F
|
Amount
(Rs.)
|
Amount
(Rs.)
|
|
|
Joint Venture A/c
|
Dr.
|
|
8,400
|
|
|
|
To Purchases A/c.
|
|
|
|
8,000
|
|
|
To Cash A/c.
|
|
|
|
400
|
|
|
(Goods supplied valued Rs.8,000 and incurring
expenses for Rs.800)
|
|
|
|
|
|
|
Joint Venture A/c
|
Dr.
|
|
4,200
|
|
|
|
To B’s A/c
|
|
|
|
4,200
|
|
|
(Goods supplied Rs.3,900, expanses Rs.300)
|
|
|
|
|
|
|
B’s A/c
|
Dr.
|
|
32,000
|
|
|
|
To Joint venture A/c
|
|
|
|
32,000
|
|
|
(
|
|
|
|
|
|
|
Joint venture A/c.
|
Dr.
|
|
800
|
|
|
|
To B’s A/c
|
|
|
|
800
|
|
|
(2.5 % commission payable to B on joint venture sale i.e.
[25% on Rs.32,000])
|
|
|
|
|
|
|
Joint venture A/c
|
Dr.
|
|
18,600
|
|
|
|
To Profit and Loss A/c Rs.(18,600 x 3/5)
|
|
|
|
11,160
|
|
|
To B’s A/c Rs.18,600 x 2/5)
|
|
|
|
7,440
|
|
|
(Profit on joint
venture transferred to Profit & Loss A/c and B’s A/c)
|
|
|
|
|
|
|
Bank A/c
|
Dr.
|
|
19,560
|
|
|
|
To B’s A/c
|
|
|
|
19,560
|
|
|
(Being the sum due from B received)
|
|
|
|
|
In
the book’s of A
Joint
Venture A/c
|
Dr.
|
|
|
Cr.
|
|
|
Particulars
|
Amount
(Rs.)
|
Particulars
|
Amount
(Rs.)
|
|
|
To Purchases A/c
|
8,000
|
By B’s A/c
|
|
|
|
|
|
(
|
32,000
|
|
|
To Cash A/c
|
400
|
|
|
|
|
To B’s A/c
|
4,200
|
|
|
|
|
To B’s A/c
(Commission)
|
800
|
|
|
|
|
To B’s A/c(B’s Share
of Profit)
|
7,440
|
|
|
|
|
To Profit &
Loss A/c (A’s Share of Profit)
|
11,160
|
|
|
|
|
|
32,000
|
|
32,000
|
|
B’s
Account.
|
Dr.
|
|
|
Cr.
|
|
|
Particulars
|
Amount
(Rs.)
|
Particulars
|
Amount
(Rs.)
|
|
|
To Joint Venture
A/c
|
32,000
|
By Joint Venture
A/c
|
4,200
|
|
|
(
|
|
(Contribution of B for joint venture)
|
|
|
|
|
By Joint Venture
A/c
|
800
|
||
|
|
|
(Commission)
|
|
|
|
|
|
By Joint Venture
A/c
|
7,440
|
|
|
|
|
(Share of Profit)
|
|
|
|
|
|
By Bank A/c
|
19,560
|
|
|
|
|
(Due balance received from B)
|
|
|
|
|
32,000
|
|
32,000
|
|
18.5.1.2.2 When each
co-venturer keeps records of their own transactions only:
a)
Sometimes
the venturers find it unnecessary to keep full record of venture transactions.
Rather they keep record of own transactions only. For this purpose, open ‘Joint
Venture with Co-venturer A/c’. All expenses, profit earned and materials sent
should be debited and receipt from joint venture, loss should be credited.
b)
Following
accounts are prepared in the books of each co-venturer:
(A)
Memorandum
Joint Venture Account
(B)
Joint
Venture with other Co-venturer Account.
c)
Journal
entries in the books of Venturers:
Journal Entries
|
(1)
|
For supply of material from stores.
|
|
|
|
|
Joint Venture with X A/c
|
Dr.
|
|
|
|
To Purchase A/c
|
|
|
|
(2)
|
For payment of expenses.
|
|
|
|
|
Joint Venture with X A/c
|
Dr.
|
|
|
|
To Bank/Cash A/c
|
|
|
|
(3)
|
For sale on venture.
|
|
|
|
|
Bank A/c
|
Dr.
|
|
|
|
To joint Venture with X A/c
|
|
|
|
(4)
|
For profit on venture.
|
|
|
|
|
Joint Venture with X A/c
|
Dr.
|
|
|
|
To Profit or Loss A/c.
|
|
|
|
(5)
|
For final payment to co-venturer.
|
|
|
 |
Joint Venture with X A/c
|
Dr.
|
|
|
|
To Bank A/c.
|
|
|
|
(6)
|
For final payment made by co-venturer.
|
|
|
|
|
Bank A/c
|
Dr.
|
|
|
|
To Joint Venture with X A/c.
|
|
|
d)
Memorandum Joint Venture Account
Memorandum Joint Venture Account
is same in books of both the co-venturers, So, only one Memorandum Joint
Venture Account is shown to compute venture profit.
e)
Joint Venture with other
Co-venturer A/c
‘Joint Venture with other
Co-venturer Account’ is the personal account of the other party. Balance of
this account shows the amount due from or due to the other co-venturer.
Example:
A and B entered into a Joint Venture for the purchase
and sale of second hand bikes and to share profits and losses in the ratio of
2:3.
On 15th
October, 2009 , A bought 5 bikes for Rs.40,000 and on 20th October, 2009 ,
he paid tax and insurance amounting to Rs.2,500. On 31st October, 2009 , he sold
these bikes for Rs.68,000, out of which he remitted Rs.10,000 to C paying the
balance into his own bank account.
On 20th
October, 2009 , B bought 3 bikes for Rs.35,000 and 25th October, 2009 ,
he paid tax and insurance Rs.900 and repair charges amounting to Rs.1,500. He
sold one bike on 2nd
November, 2009 , for Rs.15,000, which he deposited into his own bank
account. A then took over other bike at a valuation of Rs.25,000 and the
venture was closed on 10th
November, 2009 .
Prepare the Memorandum Joint Venture Account and the
Account of the Joint Venture with B in the books of A.
Solution:
Memorandum Joint Venture
Account
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|
Date
|
Particulars
|
J.F.
|
Amount
(Rs.)
|
Date
|
Particulars
|
J.F.
|
Amount
(Rs.)
|
|
2009
|
|
|
|
2009
|
|
|
|
|
Oct.
|
To A A/c
|
|
|
Oct.
|
By A A/c
|
|
|
|
15
|
(Purchases)
|
|
40,000
|
31
|
(Sales proceeds received by A)
|
|
68,000
|
|
20
|
(Tax and Insurance)
|
|
2,500
|
Nov.
|
By B A/c
|
|
|
|
|
To B A/c
|
|
|
2
|
(Sales proceeds received by B)
|
|
15,000
|
|
20
|
(Purchases)
|
|
35,000
|
|
By A A/c
|
|
|
|
25
|
(Tax and Insurance)
|
|
900
|
10
|
(Stock taken over by A)
|
|
25,000
|
|
|
Repairing charges.
|
|
1,500
|
|
|
|
|
|
Nov.10
|
To Profit
|
|
|
|
|
|
|
|
|
(Balance Rs.28,100 allocated to)
|
|
|
|
|
|
|
|
|
A – 2/5th x Rs.28,100
|
|
11,240
|
|
|
|
|
|
|
B – 3/5th x Rs.28,100
|
|
16,860
|
|
|
|
|
|
|
|
|
1,08,000
|
|
|
|
1,08,000
|
In the Book’s of A
Joint Venture Account with B
|
Dr.
|
|
|
|
|
|
|
Cr.
|
|
Date
|
Particulars
|
J.F.
|
Amount
(Rs.)
|
Date
|
Particulars
|
J.F.
|
Amount
(Rs.)
|
|
2009
|
|
|
|
2009
|
|
|
|
|
Oct.
|
To Bank A/c
|
|
|
Oct.
|
By Bank A/c.
|
|
68,000
|
|
15
|
(Purchases)
|
|
40,000
|
31
|
(Sales proceeds
received by A)
|
|
|
|
20
|
(Tax and Insurance)
|
|
2,500
|
Nov
|
By Bikes A/c
|
|
25,000
|
|
31
|
(Remitted to C)
|
|
10,000
|
|
(Stock taken by
A)
|
|
|
|
Nov. 10
|
To Profit and
Loss A/c (Profit)
|
|
11,240
|
|
|
|
|
|
10
|
To Bank A/c (bal.
fig.)
|
|
29,260
|
|
|
|
|
|
|
|
|
93,000
|
|
|
|
93,000
|
