JOINT VENTURE

UNIT I

MUKUL MANON
UIM (FUGS)
Meaning of Joint Venture:
• A joint venture is an association of two or more than two
persons who have combined for the execution of a specific
transaction and divide the profit or loss thereof in the agreed
ratio.

• For Ex. If A & B undertake the job of construction of school

building for a sum of INR 1,00,000 their coming together for
this specific job will be termed as joint venture and each one of
them will be termed as a co-venturer.

• The venture will over as soon as the transaction is over i.e., the
school building is completed.

• Joint venture agreements can be made for similar other

transactions.
Features of Joint Venture:
• Agreement between two or more than two persons for a
temporary partnership.

• The venture is made for the execution of a specific venture.

• Parties in venture are called Co-venturer of Joint Venturer.

• Co-venturer may contribute fund for serving the venture or

supply from their regular business.

• Their purpose is to make profit & distribute that profit among

all co-ventures in agreed ratio like partnership.

• As soon as the transaction is completed, the agreement

regarding the venture is automatically over.
• Accounting for Joint Venture is done on Liquidation basis
because Going Concern Assumption of accounting is not
appropriate for their joint venture accounting.
 Difference between Joint Venture and Partnership
BASIS JOINT VENTURE PARTNERSHIP
Purpose Complete a project or task Conduct a business
Involved Companies, Organisations Usually, two or more
parties or Government called Co- individuals, called partners
Venturers
Duration For as long it takes for the It usually does not have a
objective to be defined duration
accomplished
Governing Not regulated by a specific Regulated by The Indian
Law law Partnership Act, 1932 or
The limited Liability
Partnership Act, 2008

Formation It can be informal Needs registration with

the Secretary of State
Accounting Cash Basis Accrual Basis
 ACCOUNTING RECORDS
There are three ways in which Joint Venture Account can be kept.
They are as follows:
• When separate set of books for the Venture are maintained:
This will be necessary when venture is of a large magnitude.

• When one venturer keeps the accounts: In this case entire

work is entrusted to one of the ventures and the rest simply
contribute their share of investment and place it at the disposal
of the working venturer.

• When All venturers keep accounts: Where venture is not of

such magnitude as to warrant a distinct set of books being kept,
each venturer will record only such transactions as directly
concern him.
 WHEN SEPARATE SET OF BOOKS ARE MAINTAINED
Where a complete set of books are maintained for the joint
venture, following accounts are opened:
1. Joint Bank Account: In this method parties first pay their
contribution to joint funds in the Joint Bank Account and their
payments on joint account are made out of Joint Bank Account.

2. Joint Venture Account: This account is of the nature of an

ordinary Trading & Profit and Loss Account. It is debited with
goods purchased, and expenses incurred, while credited with
the sales made. Its balance shows the profit or loss incurred on
the joint venture.

3. Personal Accounts of Each Venturer: It is credited with the

amount of contribution made by him to the joint funds and his
share of profit (and debit is case of loss).
 WHEN SEPARATE SET OF BOOKS ARE MAINTAINED
Journal Entries:
• When Capital contributed by Co-Venturer, deposited into bank:
Joint Bank A/c Dr.
To Co-Venturers’ A/c

•When Asset Purchased/Material Purchased/Exp. paid by the

bank:
Joint Venture A/c Dr.
To Joint Bank A/c

•When Asset Purchased/Material Purchased/Exp. paid by the

Co-Venturer:
Joint Venture A/c Dr.
To Co-Venturer’s A/c
•When Asset Sold/Material Sold/Other Receipts deposited into
bank:
Joint Bank A/c Dr.
To Joint Venture A/c

•When Asset taken over/Material taken over/Receipts taken over

by Co-Venturer:
Co-Venturer’s A/c Dr.
To Joint Venture A/c

•Any type of Normal loss/Abnormal loss

NO ENTRY

•If Joint Venture A/c shows profit i.e. (Credit Excess)

Joint Venture A/c
Dr.
To Co-
•If Joint Venture A/c shows loss i.e. (Debit Excess):
Co-Venturer’s A/c Dr.
To Joint Venture A/c

•For final Settlement:

If Amount of investment is greater than amount
withdrawn:
Co-Venturer’s A/c
Dr.
To Joint Bank A/c

If Amount of investment is less than amount withdrawn:

Joint Bank A/c Dr.
To Co-Venturer’s A/c
Q-1 Radha and Meera entered into a Joint Venture to make and sell
cotton shirts for a season. Profit and losses to be shared in the
ratio of 3:2. Radha deposited Rs. 40,000 and Meera deposited
Rs. 50,000 in the Joint Bank A/c. They bought cloth of Rs.
30,000 and spent Rs. 2,000 on its cartage. Bought Machines of
Rs. 25,000. Wages to labourers were Rs. 20,000. Radha paid
Rs. 1,500 on advertisement and Meera paid Rs. 2,500 on excise
duty. They sold shirts for Rs. 1,00,000 and money deposited in
the Joint Bank. Remaining material was taken by Radha and
Meera at Rs. 5,000 and Rs. 3,000 respectively. Machines sold
for Rs. 15,000.
Show Joint Venture A/c, Co-Venturers’ A/c and Joint Bank A/c.

ANSWER:
Profit: Rs. 42,000,
Final Payment: Radha A/c 61,700, Meera: 66,300
 Joint Bank A/c Dr. 90,000
To Radha’s A/c 40,000
To Meera’s A/c 50,000
(Radha & Meera contributed for capital in Joint Venture)

Joint Venture A/c Dr.

77,000
To Joint Bank A/c
77,000
(Several Material and Assets Purchased, Expenses paid i.e.
Cloth Rs. 30,000, Cartage Rs. 2,000, Machine Rs. 25,000,
Wages Rs. 20,000)

Joint Venture A/c Dr. 4,000

To Radha’s A/c
1,500
 Joint Bank A/c Dr. 1,00,000
To Joint Venture A/c 1,00,000
(Shirts sold worth Rs. 1,00,000)

Radha’s A/c Dr. 5,000

Meera’s A/c Dr. 3,000
To Joint Venture A/c
8,000
(Radha and Meera took over material left worth Rs. 5,000
and 3,000 respectively)

Joint Bank A/c Dr. 15,000

To Joint Venture A/c
15,000
(Machine sold for Rs. 15,000)
 Joint Venture A/c Dr. 42,000
To Radha’s A/c
25,200
To Meera’s A/c
16,800
(Profit given to Radha and Meera)

Radha’s A/c Dr. 61,700

Meera’s A/c Dr. 66,300
To Joint Bank A/c
1,28,000
(Final Settlement made to Radha and Meera)
 Dr. JOINT VENTURE A/C Dr. JOINT BANK
To J.B. A/c Cr.
By J.B. A/c 1,00,000 ToA/C Cr.J.V. A/c
Radha’s A/c 40,000 By
Cloth 32,000 By Radha’s A/c 5,000 To Meera’s A/c 50,000 Cloth 32,000
Cart. 2,000 By Meera’s A/c 3,000 To J.V. A/c 1,00,000 Cart. 2,000
Mach. 25,000 By J.B. A/c 15,000 To J.V. A/c 15,000 Mach. 25,000
Wages 20,000 77,000 Wages 20,000 77,000
To Radha’s A/c 1,500 By Radha’s A/c 61,700
To Meera’s A/c 2,500 By Meera’s A/c 66,300
To Profit Trf. to
Coventurer 42,000
1,23,000 1,23,000 2,05,000 2,05,000

Dr. CO-VENTURER’s
A/CPARTICULARS RADHA MEERA PARTICULARS Cr. RADHA MEERA
To J.V. A/c 5,000 3,000 By J.B. A/c 40,000 50,000
To J.B. A/c 61,700 66,300 By J.V. A/c 1,500 2,500
By J.V. A/c 25,200 16,800

66,700 69,300 66,700 69,300

 IN THE BOOKS OF EACH OR ANY CO-VENTURER
ACCOUNTS ARE MAINTAINED
Where work for recording joint venture transactions are
entrusted to one of the co-venturers, he is usually
allowed an extra remuneration out of the profit for his
services.
Following main accounts are maintained by him:
1. Joint Venture Account which shows the amount of
profit or loss made on the venture.
2. Personal Accounts of all the Co-venturers.
 IN THE BOOKS OF EACH OR ANY CO-VENTURER
ACCOUNTS ARE MAINTAINED
Journal Entries:
•When Asset Purchased/Material Purchased/Exp. paid:
Joint Venture A/c Dr.
To Cash/Bank A/c (self)
To Other Co-Venturer’s A/c

• When Asset supplied/Material supplied by the Co-Venturers:

Joint Venture A/c
Dr.
To Asset A/c
(self)
To Purchases
A/c (self)
To Other Co-
•When Asset sold/Material sold/Other Receipts:
Cash A/c
Dr. (self)
Other Co-Venturer’s
A/c Dr.
To Joint
Venture A/c

• When Asset taken over/Material taken over/Share or Debenture

taken over by the Co-Venturers:
Purchases A/c
Dr. (self)
Asset A/c
Dr. (self)
Shares/Debenture A/c
Dr. (self)
Other Co-Venturer’s
•For distribution of Net Profit in Joint Venture A/c:
Joint Venture A/c
Dr.
To Profit & Loss A/c
(self)
To Other Co-Venturer’s
A/c

•For distribution of Net Loss in Joint Venture A/c:

Profit & Loss A/c
Dr. (self)
Other Co-Venturer A/c
Dr.
To Joint Venture A/c

• When any payment received from other Co-Venturer:

• When any payment made to other Co-Venturer:
Other Co-Venturer’s A/c
Dr.
To Cash/Bank A/c (self)
 Joint Venture A/c Dr. 77,500
To Cash A/c
25,000
To Purchases A/c
15,000
To Cash A/c
5,500
To Machine A/c
22,000
To Cash A/c
10,000
(X provided asset, material & paid expenses of joint venture)

Joint Venture A/c Dr.

1,72,500
 Cash A/c Dr. 2,50,000
To Joint Venture A/c 2,50,000
(X received complete amount of consideration of joint
venture)

Y’s A/c Dr. 45,000

To Joint Venture A/c
45,000
(Y sold some of the left over asset & material of joint venture
i.e., Machine Rs. 40,000 and Material Rs. 5,000)

Y’s A/c Dr. 14,000

To Joint Venture A/c
14,000
(Y took over left over asset & material of joint venture i.e.,
 Equipment A/c Dr. 12,000
Purchases A/c Dr. 2,000
To Joint Venture A/c 14,000
(X took equipment and material from joint venture)

Joint Venture A/c Dr.

36,500
To Y’s A/c
36,500
(Share of Y’s profit provided to him)

Y’s A/c Dr. 1,50,000

To Cash A/c 1,50,000
(Final settlement done with Y)
 IN THE BOOKS OF X
Dr. JOINT VENTURE A/c Dr. Y’s A/c
To Cash A/c Cr.
By Cash A/c 2,50,000 To J.V. A/c By J.V. A/c Cr.
25,000 By Y’s A/c Mach.40,000 Cem. 35,000
To Pur. A/c Mach.40,000 Mat. 5,000 45,000 Paint 20,000
15,000 Mat. 5,000 45,000 To J.V. A/c Wag. 43,000
To Cash A/c By Y’s A/c Mixer.12,500 S. Ex. 12,000
5,500 Mixer.12,500 Mat. 1,500 14,000 Mac. 37,500
To Mach. A/c Mat. 1,500 14,000 To Cash A/c 1,50,000 Mix. 25,000 1,72,500
22,000 By Equip. A/c 12,000 (Bal. Fig.) By J.V. A/c 36,500
To Cash A/c By Pur. A/c 2,000
10,000
To Y’s A/c 2,09,000 2,09,000
Cem. 35,000
Paint 20,000
Wag. 43,000
S. Ex. 12,000
Mac. 37,500
Mix. 25,000 1,72,500
To Pft. trf. to 3,23,000
P&l A/c36,500
 Memorandum Joint Venture Method
•Each party will maintain only ONE account in the books.
This account will be personal account of other parties. It
may be very carefully noted that even if there are more than
two venturers only one personal account is to be opened in
each party’s books.

•Each party will record only such transactions as entered by

him on joint venture account.

•In order to find out profit or loss made on the venture a

Memorandum Joint Venture Account will be opened. It is
merely a combination of personal accounts.
Q-3 A and B entered into joint venture to construct the building for a hospital
for Rs. 5,00,000.
The following transactions were of A:
Material Supplied : Rs. 70,000
Material Purchased : Rs. 40,000
Wages paid : Rs. 85,000
Fees Paid : Rs. 25,000
Machine Supplied : Rs. 75,000
Mixer Purchased : Rs. 50,000
The following transaction were of B:
Cement purchased : Rs. 50,000
Cement supplied : Rs. 30,000
Freight paid : Rs. 11,000
Equipments supplied : Rs. 44,000
Equipments Purchased : Rs. 20,000
The construction was completed on time and whole of the consideration was
received by A. Machine and material sold by B for Rs. 80,000 and 10,000
respectively. A took Mixer at Rs. 25,000, remaining material at Rs. 3,000.
B took Equipments at Rs. 12,000 and remaining cement at Rs. 2,000.
Show Joint Venture A/c and Co-Venturer A/c in the books of each Co-Venturer.
(Profit Rs. 1,32,000, A will pay and B will receive Rs. 1,17,000)
 IN THE BOOKS OF A IN THE BOOKS OF B
Dr. JOINT VENTURE WITH B Dr. JOINT VENTURE WITH A
ToA/c
Pur. A/c Cr. By Cash A/c 5,00,000 ToA/c
Cash A/c Cr. By Cash A/c 80,000
70,000 By Mixer A/c 25,000 50,000 By Cash A/c 10,000
To Cash A/c By Pur. A/c 3,000 To Pur. A/c By Equip. A/c 12,000
40,000 30,000 By Pur. A/c 2,000
To Cash A/c To Cash A/c
85,000 11,000
To Cash A/c To Equip. A/c
25,000 44,000
To Mach. A/c To Cash A/c
75,000 20,000
To Cash. A/c 50,000
Dr. MEMORANDUM JOINT VENTURE A/c
ToCr.
A’s A/c By A’s A/c
Pur. 70,000 Cash 5,00,000
Cash 40,000 Mixer 25,000
Cash 85,000 Pur. 3,000 5,28,000
Cash 25,000
Mach75,000 By B’s A/c
Cash 50,000 3,45,000 Cash 80,000
Cash 10,000
To B’s A/c Equip.12,000
Cash 50,000 Pur. 2,000 1,04,000
Pur. 30,000
Cash 11,000
Equip 44,000
Cash 20,000 1,55,000

To Pft. trf. to
A 66,000
B 66,000 1,32,000

6,32,000 6,32,000
 IN THE BOOKS OF A IN THE BOOKS OF B
Dr. JOINT VENTURE WITH B Dr. JOINT VENTURE WITH A
ToA/c
Pur. A/c Cr. By Cash A/c 5,00,000 ToA/c
Cash A/c Cr. By Cash A/c 80,000
70,000 By Mixer A/c 25,000 50,000 By Cash A/c 10,000
To Cash A/c By Pur. A/c 3,000 To Pur. A/c By Equip. A/c 12,000
40,000 30,000 By Pur. A/c 2,000
To Cash A/c To Cash A/c By Cash A/c 1,17,000
85,000 11,000 (Bal. Fig.)
To Cash A/c To Equip. A/c
25,000 44,000
To Mach. A/c To Cash A/c
75,000 20,000 2,21,000
To Cash. A/c 50,000 5,28,000 To P&l A/c 66,000
To P&l A/c 66,000
To Cash A/c 1,17,000
(Bal. Fig.)
2,21,000
5,28,000