You are on page 1of 8

Illustration 1.

Sunder of Sundernagar and Nagpal of Nagpur entered into a joint venture to trade together in the buying and re-selling of cheap machinery. Profit or loss to be shared in the ratio of 2:3 . Sunder undertook to make the purchases and Nagpal to effect sales. Nagpal remitted Rs. 75,000 to Sunder towards Joint Venture. Sunder purchased machinery worth Rs. 60,000 and paid Rs. 28,500 for repairs of these, 2 ½% as buying commissions and Rs. 2,700 for other sundry expenses. He then sent all the machines purchased and repaired to Nagpal at Nagpur. While taking delivery of the machinery at Nagpur, Nagpal incurred Rs. 4,500 towards Railway Freight and Rs. 2,100 toward Octroi. He sold part of the machinery for Rs. 1,05,000 and kept the remaining for himself at an agreed value of Rs. 22,500. Other expenses of Nagpal were: I. II. III. IV. Godown rent Insurance Brokerage Miscellaneous Rs. 1,350 Rs. 1,680. Rs. 2,490 and Rs. 1,920

Both the parties decided to close the Venture at this stage. You are to prepare accounts for the joint venture to show how matters stood in each party’s ledger and prepare a statement showing the result of the venture.

Solution: Joint Venture with Nagpal Account (In Sunder’s Ledger)
Particulars To Bank Purchase of machinery Repairs Commission Sundry Expenses To Profit and loss a/c (2/5th share) Amount (`) 60,000 28,500 1,500 2,700 8,304 1,01,004 Particulars By Bank A/c Amount received (from Nagpal) By Balance c/d Amount (`) 75,000 26,004

1,01,004

05.05. 60.490 1.490 1. .000) Sundry expenses Expenses by Nagpal: Railway freight Octroi Godown rent Insurance Brokerage Miscellaneous expenses Total [(A) + (B)] Profit : Sunder (2/5) Nagpal (3/5) 1.700 4.27. 20.Joint Venture with Sunder (In Nagpal Books) Particulars To Bank (Amount remitted to Sunder) To Bank: Railway freight Octroi Godown rent Insurance Brokerage Miscellaneous expenses To profit and loss account (3/5th share of profit) To Balance c/d Amount (`) 75.500 2.456 26.100 1.27.000 22. On October 1 2006.700 92.000 22.500 Particulars By Bank (Sales Proceeds) By Purchases A/c (Machinery taken over) Amount (`) 1.100 1.500 60.000.500 1. 60. 2. Bheem and Arjun entered into a joint venture for buying and selling plastic goods and agreed to share profit and losses of in the ratio of 3:2.740 8.350 1.27.004 1.000 28.456 20.500 2.760 (A) (B) Illustration 2. On October 15. He incurred expenses of Rs.920 12. he again purchased goods worth Rs.000 4.500 Statement showing the result of the Venture Sales proceeds received by Nagpal Add: Value of machinery retained by Nagpal Less: Purchases and expenses by sunder: Purchases of machinery Cost of repairs Buying commission (2 ½ % of Rs.000 and half of the goods were handed towards to Arjun.920 14. Bheem purchased goods at a cost of Rs.680 2.350 1.500 1.680 2.06.040 1.000.500 2.500 1.304 12.

which were badly damaged and were treated as unsalable. I.000 owing to Bheem was unrecoverable and treated as joint loss.600 . Solution: In the books of Bheem Joint Venture Account Particulars To Cash (Purchases) To Cash (Purchases) To Cash (Expenses) To Bank To Share of profit Amount (`) 60.000 34. parties decided to close the books. 16.500. He incurred expenses of Rs.000.000 37.000 8. You are required to prepare.000 3.500 and on the same day he sent to Bheem goods worth Rs. Bheem had unsold stock of goods Rs.000 8. Rs.040 Particulars By Bheem: Sales Goods taken over Sales By Arjun: Sales Amount (`) 70. Arjun also made a purchase of Rs.000 were taken away by him and the remainder sold for Rs.560 Particulars By Cash (Sales) Less: Bad debts By Goods taken over By Sales store By Bank (from Arjun) 70.560 In the books of Bheem and Arjun Memorandum Joint Venture Account Particulars To Bheem: Purchases Purchases Expenses Bad debts To Arjun: Purchases Expenses To Profit: Bheem Arjun Amount (`) 60.000 2. 8. 900. On march 31st.14.000 16. On March 31st 2007. On October 20. Bheem in order to help Arjun sent Rs.000 27. 15. 5.560 11.000 16560 1.000 5. 1.500 of these goods costing Rs.000 2.On October 15. 12. Both the parties sold goods at a profit of 25% on sales. 2007.000.000 3. II.500 900 16. 3.000 5. Arjun was able to sell away complete goods expecting goods costing Rs.000 68. The joint venture account as it would appear in the books of Bheem recording his own transactions.000 Amount (`) 67.000 20.14.000 20.000 to him.560 1. and A memorandum joint venture account showing the profit of the business. 37.

000 . On November 30 2006.500 1.500 15. 4.000 65.000 were taken personally by Ravi at an agreed price of Rs.000 1. They also agreed to receive 5 per cent commission on their individual sales and the following information was extracted from the records: July 1.38. they decided to close the venture by transforming the balance of goods unsold.51. personal account of the partners as they would appear in the books of Ravi and of Suresh.410 Amount (`) By Suresh: Sales (2) By Ravi: Particulars Amount (`) 2.500 51.000 52. 5. Ravi and Suresh entered into a joint venture for purchase and sales of electronic goods.70.000 Illustration 3. 1.000 Calculation of Sales Purchased Received from the other party Less: Sent to other party Less: Stock Add: Profit 1/3 on cost Bheem 60.000 to Suresh and paid Rs. lying with Ravi at cost of Rs. to a wholesale dealer. 2006: Ravi purchased goods worth Rs.000 Arjun 37. by either party were made at an uniform profit of 40% above cost.500 17.000 68. October 1. 9. 13.500 52.000 15.500 17.000 12.90. 1. 350.000 30. Your are required to prepare memorandum joint venture account. 2006: Ravi sent goods costing Rs. August 1. sharing profit and loss in the ratio of 3:2. All sales.000 67.90.000.500 70.410 as freight.1. 1.410 to Ravi.000 20.500 30.000.000 financed to the extent of 90 percent out of his funds and balance by loan from his uncle Shyam. They further disclosed that goods worth Rs.51. Solution: Memorandum Joint Venture Account Particulars To Ravi: Purchase of goods Freight 1.000 1. Suresh paid Rs.000 95. 2006: Suresh sold all the goods sent to him. Ravi repaid the loan taken from his uncle including interest of Rs.

900 23.61.000 11.000 Particulars By Bank Sales Amount (`) 2.000 57.90.000 Working Notes: (1) Sales by Ravi: Purchase Less: Sent to Suresh Less: Transferred to Wholesaler Taken by self Add: 40% of profit Sales price (2) Sales by Suresh: Goods received from Ravi 1.800 5.250 11.89.000 9.000 1.26.Interest paid Commission To Suresh: Commission To Share of profit: Ravi (3/5) Suresh (2/5) 350 490 1.800 2.38.590 22.000 1.90.800 9.800 1.840 In the Books of Suresh Joint Venture with Ravi Account Particulars To Bank (Ravi) To Commission To Profit To Bank (Ravi) Amount (`) 13.61.000 2.060 1.410 350 490 34.000 2.000 1.410 9.000 9.650 2.000 .26840 Particulars By Bank (Suresh) By Bank (Sales) By Stock taken By Bank stock sent to wholesaler By Bank received from Suresh Amount (`) 13.630 2.92.800 5.89.000 7.38.800 In the book of Ravi Joint Venture with Suresh Account Particulars To Bank Purchases To Bank Freight To Bank Interest To Commission To Profit Amount (`) 1.000 4.060 Sales (1) Stock taken By Stock sent to Wholesaler 9.900 34.630 2.38.000 9.410 11.000 20.590 2.70.70.

25 was met from the joint venture bank account. The underwriter through the bank unloaded their lot of holdings in the market in equal lots and realized 90% of the face value for the first lot on 38th September and 85% for the second lot on 31st October.000 The public subscription was for 4.Add: 40% of profit Sales made by Suresh 68. X ltd.500 4. Solution: . the following expenses are incurred. To enable them to do so. agrees to allot them as fully paid 1. (The 4.. Gopal: Printing and Stationary Postage Advertisement Gopi: Postage Solicitors fees Entertainment Expenses 750 3.000 shares only and the underwriters were forced to take up the balance and pay for them.000 Illustration 4.000 shares by X ltd.000 1. 1. The underwriters paid for the share on the same day and were also allotted the 4. In concentrations with the venture. The parties are to share profit and losses equally.00. You are required to draw a memorandum joint venture account in the account of Gopi as appearing in Gopal books and also the settlement of accocunt between the parties.000 equity shares of Rs.. 10 each of a new company X ltd.38.000 2.000 shares formed part of the second lot). The sales proceeds were applied in full to discharge the bank loan and the relative on the same dates.000 5.000 3. A share transfer fee of Rs.000 shares in the company in consideration of the underwriting agreement.80. Gopal and Gopi who share brokers agreed to enter into a joint venture to underwrite 5.006. which on security of the shares advanced the required sum on 1st July 2006 at 15% interest per annum. the two persons approached the new bank of India.

7.00 1243. of shares to be taken up Add: No.500 interest up to September 30 – Rs.000 repaid on sales of shares on 30 September) for one month from October 1 to October 31 @ 15% p.75 9.743.000 sold on 31-10-2005 @ Rs. of shares i.000 1.00. Half no. 9 [90% of the face value of Rs. 5.000 By Loss of Joint Venture Transferred to: Gopal 8.000 shares) Rs.000 .500 (Balance of amount due Rs. 10) per share Total sales proceeds of 24. 12.000 Amount (`) Particulars By Joint Bank Account (Sale Proceeds of 24.02. 1.000 1.08. 10 each) for 3 months from July 1 to September 30 at 15% p.500.a Total Interest Memorandum Joint Venture Account Particulars To Gopal: Printing & Stationery Postage Advertisement To Gopi: Postage Fees to Solicitors Entertainment Expenses Rs. of shares applied for the public No.000 On Oct..e.500 Amount (`) 1. 2.10.. 850 (85% of the face value of Rs.000 20.a On Rs.000 2. 30 1.000 2. 10] per share Add: Half no.000 + Rs. 99.000 shares of Rs.00. of shares available for sale Shares 5. of shares i.e.000/2] sold on 30-9-2005 @ Rs.000 (amount taken for purchase of 20.7.02.250 17.00.500 Gopi 8.000 3.000 750 3. of shares underwriting Less: No.000 24.000 4.500 4. 2.10.08.Ascertainment of Sales proceeds of shares Total no. of shares received as commission No. [12.80.08.75 8.000 4.000 Rs.000 shares Ascertainment of interest payable to the bank On Rs. 31 1.000 Rs. On Sep.000 8.

2.000.31 9.00.000 8.00.27.743. 2.500 250 250 9.000 Particulars Amount (`) To Bank Account (Expenses incurred for the joint venture) By Profit & Loss A/c (Share of Loss on Venture) By Bank Account (1) By Bank Account (Payment In Settlement) 8.10.500 Working Notes: (1) Amount of Joint Venture Account: Sale proceeds of 24.500 8. 10 each) To Interest on Bank Loan To Share Transfer Fees 2.00 2.00 Gopal’s Books Gopi in Joint Venture Account Date 2006 Oct.75 1.31 Particulars Amount (`) Date 2006 Oct.250 250 8.09.000 Gopi’s Books Gopal in Joint Venture Account Date 2006 Oct.31 8.25 2.000 shares of Rs.750 250 .31 Particulars Amount (`) Date 2006 Oct.000.006.31 Oct.To Joint Bank Account (Amount for purchase of 20.27.000 Oct.000 shares Less: Repayment for Bank Loan Interest on loan Share Transfer fees Amount given to Gopal Rs.000 2.75 1.31 9.500 Particulars Amount (`) To Bank Account (Expenses incurred for the joint venture) To Bank Account (Amount Paid in settlement) By Profit & Loss A/c (Share of Loss on Venture) 8.000 8.743.25 Rs.006.