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JOINT VENTURE

December 9, 2010

JOINT VENTURE
A Joint Venture is avery short duration “ business “ (generally confined to a single Transaction, like buying some surplus stores and selling them ) entered into by two Or more persons jointly . It is a short duration special purpose Partnership . The Parties in Joint Venture are called Co-Ventures. Co-venturers may contribute funds for running the venture or supply stock from their regular business . Co-venturers share profit/loss of the Venture at an agreed ratio like Partnership . Generally Profit/Loss of the Venture is computed on completion of the Venture .

Going Concern assumption of accounting is not appropriate for Joint Venture accounting . There does not arise problem of distinction between Capital and Revenue expenditure . Plant, Machinery and other Fixed Assets when used in the Venture are first charged to Venture account at cost. On completion of the Venture such assets are revalued and shown as Revenue of the Venture. In case separate set of books are maintained : 1. The following accounts should be opened. (a) Joint Venture A/c (b) Joint Bank A/c (c) Co-venturer’s A/c (d) Shares/Debentures A/c 2. Order for closing the books. (a) Shares/Deb. A/c - Difference to be transferred to Joint Venture A/c. (b) Joint Venture A/c - Difference will be Profit / Loss which should be distributed among co-venturers in agreed ratio. (c) Co-venturers A/c - Difference to be transferred to Joint Bank A/c. (d) Joint Bank A/c - It has to tally. 3. If payment is received by the Joint Venture for the contract in cash and shares/debentures, separate account should be opened for shares/debentures 1 Joint Bank A/c is opened. Joint Bank A/c Dr. To Co-venturers A/c Expenses paid by Co-venturer Joint Venture A/c Dr. To Co-venturers A/c Goods taken by Co-venturer Co-venturer A/c Dr. To Joint Venture A/c Shares sold Joint Bank A/c To Shares A/c 2 Expenses are paid Joint Venture A/c Dr. To Joint Bank A/c Goods are sold Joint Bank A/c Dr. To Joint Venture A/c Contract Price received Joint Bank A/c Dr. Shares A/c Dr. To Joint Venture A/c Shares taken by Co-venturers Co-venturers A/c Dr. To Shares/Debentures A/c Page 1

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JOINT VENTURE 9 Profit on Joint Venture Joint Venture A/c Dr. To Co-venturers A/c Cash paid to Co-venturer 1 Co-venturers A/c Dr. 1 To Joint Bank A/c

December 9, 2010 10 Loss on Joint Venture. Co-Venturers A/c Dr. To Joint venture A/c

Dr. Joint Venture A/c To Joint Bank A/c xx (Expenses / Goods) To Co–venturer A/c (Exps./Goods) xx To Shares / Debentures ( Loss ) xx To Profit on Joint Venture xx xx Total Dr. To Joint Venture A/c (Goods) To Joint Venture A/c (Loss) To Shares / Debentures A/c To Joint Bank A/c Total Dr. To Co – venturer A/c To Joint Venture A/c To Shares / Debentures A/c Total xx xx xx xx xx

Cr. By Joint Bank / Shares A/c (Sales / Contract Price ) By Co- venturer A/c (Goods ) By Share/ Debentures (Profit) By Loss on Joint Venture Total Cr.

xx xx xx xx xx

Co – venturers A/c

By Joint Bank A/c By Joint Vent. A/c(Exps./Goods) By Joint Venture A/c (Profit) By Joint Bank A/c Total Cr.

xx xx xx xx xx

Joint Bank A/c xx xx xx xx By Joint Vent.A/c (Exps./Goods) By Co-venturer A/c Total

xx xx xx

(B)

When separate set of books are not maintained. 1. Each co-venturer opens the following A/c’s. (a) Joint venture A/c (b) Co-venturer A/c (c) Agent A/c. 2. Own share of Profit/Loss is to be transferred to Profit & Loss A/c. 3. Discount on bill received from Co-venturer is to be debited to Joint Venture A/c. JOURNAL ENTRIES Goods purchased/Expenses paid. Joint Venture A/c Dr. To Cash/Bank A/c Goods/ Exp. paid by Co-enturer Joint Venture A/c Dr. To Co-venturer A/c 2 Goods supplied Joint Venture A/c Dr. To Goods / Stock A/c Goods Sold. Cash/Bank A/c Dr. To Joint Venture A/c Page 2

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JOINT VENTURE 5 Goods sold by Co-venturer. Co- venturer A/c Dr. To Joint Venture A/c Goods taken by Co-venturer. Co-venturer A/c Dr. To Joint Venture A/c Comm. Payable to Co-venturer. Joint Venture A/c Dr. To Co-ventures’ A/c Bill Accepted by Co-venturer Co-venturer A/c Dr. To Bills Payable A/c Bill discounted by Co-venturer. Joint Venturer A/c Dr. To Co-venturer (Discount) A/c Comm./Exps. Payable to Agent. Joint Venture A/c Dr. To Agent A/c. Amt. paid by Agent to Co-venturer Co-venturer A/c Dr. To Agent A/c Loss on Joint Venture. Profit & Loss A/c Dr. Co-venturer A/c Dr. To Joint Venture A/c 6

December 9, 2010 Goods taken for personal use Goods/Stock A/c Dr. To Joint Venture A/c Commission due to us Joint Venture A/c Dr. To Commission A/c Bill drawn on Co-venturer. Bills Receivable A/c Dr. To Co-venturer Bill discounted by self Joint Venture A/c Dr. To Discount A/c Goods sold by agent Agent A/c Dr. To Joint venture A/c Cash/Bill received from agent. Cash/Bank/B/R A/c Dr. To Agent A/c Advance given to Co-venturer Co-venturer A/c Dr. To Cash A/c Profit on Joint Venture. Joint Venture A/c Dr. To Profit & Loss A/c To Co-venturer A/c

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In the Books of Co - venturer Dr. Joint Venture A/c To Cash / Bank A/c (Exp./Goods) xx By Cash / Bank A/c (Sales) To Co–venturer A/c (Exp./Goods ) xx By Co–venturer A/c (sales) To Profit xx By Loss Total xx Total

Cr. xx xx xx xx

Dr. To Bills Payable A/c To Agent A/c To Joint Venture A/c (Loss) To Cash / Bank / Bills A/c Total

Co – venturers A/c xx xx xx Xx xx By Joint Vent. A/c (Exps/Goods) By Bills Receivable A/c By Joint Venture A/c(Profit) By Cash/Bank / Bills A/c Total

Cr. xx xx xx xx xx Page 3

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JOINT VENTURE

December 9, 2010

Dr. To Joint Venture A/c (Sales)

Total

Agent A/c Cr. xx By Joint Vent.A/c (Exps & Comm.) By Co-venturer A/c By Cash / Bank / Bills A/c xx Total

xx xx xx xx

MEMORANDUM JOINT VENTURE METHOD :In this method each co-venturer records only his own transactions each co-venturer opens only ‘Joint Venture with Co-venturer’. A memorandum Joint Venture A/c is opened to record all the expenses and incomes of the Joint Venture Difference in Memorandum Joint Venture A/c is the profit or loss. Journal entries are the same as separate set of books are not maintained.

Other Journal Entries
(1) Amount paid to Co-venturer Joint Venture with Co-venturer A/c To Cash / Bank / Bills Payable A/c Amount received from Co-venturer Cash / Bank / Bills Receivable A/c To Joint Venture with Co-venturer A/c Profit on joint Venture Joint Venture with Co-venturer A/c To Profit & Loss A/c Loss on Joint Venture Profit & Loss A/c To Joint Venture with Co-venturer A/c Dr.

(2)

Dr.

(3)

Dr.

(4)

Dr.

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JOINT VENTURE Dr. Joint Venture with Co _ venturer A/c xx xx xx Total Dr. To Co – venturer (A) A/c To Co – venturer (B) A/c To Profit Total xx

December 9, 2010 Cr. xx xx xx Total Cr. xx xx xx Total xx xx

To Cash/Bank A/c (Exp/ Goods) Top Cash / Bank / Bills Pay. A/c To Profit

By Cash/Bank A/c (Sales) By Cash/Bank/Bills A/c By Loss

Memorandum Joint Venture A/c xx xx xx xx By Co – venturer (A) A/c By Co – venturer (B) A/c By loss

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