Unit No: 04
Accounting for Joint Ventures
Joint Ventures:-
When two or more person jointly undertakes to get a particular venture for a temporary
agreement.
Joint venture is a temporary business or partnership without the use of firm name, such
temporary partnership comes to an end on the accomplish of the venture.
Joint venture is a temporary partnership formed for the purposes of consigning the goods or
dispatching of goods by the principal to his agent for sale and it is undertaking transactions for
construction work, underwriting of shares and debentures of Joint Stock Company.
Features of Joint Ventures:-
01.Joint venture is a short duration special purpose partnership.
02.The parties of joint venture are called co-ventures
03.The co ventures may contribute funds or supply of stock from their regular business.
04.The co-ventures sharing profits or loss of joint ventures in agreed ratio.
05.Generally profit or loss of joint venture is calculated on the completion of the venture.
06.Accounting for joint venture done on liquidation basis going concern concept is not
appropriate for joint venture accounting.
07.Under joint venture business all the ventures may buy and sell the goods.
08.The relationship between c
09.o ventures similar to that partners.
Difference between Partnership and joint venture.
Joint Venture Partnership
01 A joint venture does not have a firm A partnership firm has a particular
.
Name or common seal. name and common seal
02 A joint venture is restricted to a A partnership firm business is not
.
particular venture or business restricted to a particular venture or biz
03 For joint venture no need of separate The Indian partnership act of 1932 is
.
business acts. applicable.
04 The profit / loss are ascertained at the The profit/ loss are ascertained on the
.
time end of specific venture annual basis /at the end of accounting period.
05 Joint venture accounting liquidation Partnership accounting transactions are
.
transactions are recorded on basis recorded on going concern concept.
06 There is no need for separate sets of Separate sets of books have to be
.
books maintained.
07 Co ventures may engage in completing. Partners generally do not involve in
.
of particular venture completing of business
08 A minor cannot be admitted in a joint A minor can be admitted into partnership
.
venture as he is in competent to contract. firm for benefits.
Difference between Joint Ventures and consignment:-
Joint venture Consignment
01. In a joint venture there is a temporary In a joint consignment there is no
partnership. partnership
02. In a joint venture all the ventures are the In consignment business only the
owners of the business consignor is the owner of the business.
03. In a joint venture all the ventures may In a consignment only the consignor
buy and sell the goods. buy the goods and consignee undertakes
the goods for sale.
04. All the risks of joint ventures are borne All the risks of consignment borne by
by all the co ventures consignor only
05. Entries required funds to joint ventures Entries required funds of consignment
provide by the co ventures. provide by consignor only.
06. The profits / loss of joint ventures The profits / loss of consignment
sharing between the co ventures in relating to consignor only.
agreed ratio or equally.
07. There is no separate act applicable The provision of law of agency applies
provision of partnership act applies in in addition to the term of agreement.
addition to the term of agreement.
08. The relationship among the co- ventures The relation between consignor and
is similar to that of partners. consignee is that of principal and agent.
Methods of maintaining joint venture account.
01.When each separate set of books are maintained.
02.When separate sets of books are not maintained.
03.
01.. When each separate sets of books are maintained
Generally separate sets of books are maintained when the joint venture transactions are
large in number. The following journal entries should be passed under this method.
Journal Entries
Date PARTICULARS L/F DEBIT CREDIT
1. For cash contributed by Co- Venturers
Joint Bank Account Dr. XXX
To Co-Venturers Account XXX
2. For Goods purchased for cash
Joint venture Account Dr. XXX
To Joint Bank Account XXX
3. For Goods purchased for Credit
Joint venture Account Dr. XXX
To Creditors Account XXX
4. For Goods supplied by venturers
Joint Venture Account Dr. XXX
To Co-Venturers Account XXX
5. For Expenses incurred
Joint venture Account Dr. XXX
To Joint Bank Account XXX
6. For Expenses incurred by Co-venturers
Joint venture Account Dr. XXX
To Co-Venturers Account XXX
7. For cash sales
Joint Bank Account Dr. XXX
To Joint venture Account XXX
8. For credit sales
Debtors Account Dr. XXX
To Joint venture Account XXX
9. For Goods taken over / sold by venturer
Co-Venturers Account Dr. XXX
To Joint venture Account XXX
10. For payment made to Creditors
Creditors Account Dr. XXX
To Joint Bank Account XXX
To Joint venture Account (Discount received) XXX
11. For Amount received from Debtors
Joint Bank Account Dr. XXX
Joint venture Account Dr. XXX
To Debtors Account XXX
12. For Joint Venture Profit
Joint venture Account Dr. XXX
To Co-Venturers Account XXX
13. For Joint Venture Loss
Co-Venturers Account Dr. XXX
To Joint venture Account XXX
13. For final balance paid
Co-Venturers Account Dr. XXX
To Joint Bank Account XXX
13. For final balance received
Joint Bank Account Dr. XXX
To Co-Venturers Account XXX
Joint ventures Account:-
Basically it is a nominal account prepared to ascertained profit / loss of particular venture for a
particular period. It is prepared to find out profit / loss of venture.
The profit / loss of venture transfer to venturers A/c in their profit sharing ratio.
Rule of joint ventures Account
Dr Cr
Particulars Amount Particulars Amount
To joint bank A/c [cash purchased] xxx By joint bank A/c [cash sales] Xxx
To creditors A/c [credit purchases] xxx By debtors A/c [credit sales] Xxx
To Co-ventures A/c [goods xxx By venture A/c [unsold goods Xxx
supplied personally] taken]
To debtors A/c[ discount allowed] xx By creditors A/c[discount received] xx
To joint bank A/c[ expenses] xx By ventures A/c [loss] xx
To joint ventures A/c [profit] xx
xxx xx
Co-Venturers account:-
It is basically personal account prepared in columnar form in the name of each venturer.
It is prepared to ascertain the final balance due to venturer / due from venturers.
The final balance transfer to joint bank account
Rule of venturers capital Account:
Dr Cr
Particulars Amount Amount Particulars Amount Amount
To joint venture A/c xxx xxx By joint bank A/c xxx xxx
[ un sold goods taken] [ capital]
To joint venture A/c xxx xxx By joint venture A/c xxx xxx
[Loss] [Profit]
To joint bank A/c xxx xxx By joint venture A/c xxx xxx
[ Final balance] [Goods supplied]
xxx xxx xxx xxx
Joint bank Account:
It is basically personal account prepared to record cash receipts and cash payments of
particular venture for given period. Finally it closed by payment to the venturers.
Dr Rule of Joint bank account:- Cr
Particulars Amount Particulars Amount
To joint venture A/c [capital] xxx By joint venture A/c [cash xxx
purchases]
To joint venture [cash balance] xxx By venture A/c [expenses] xxx
xxx By venture a/c [final payment] xxx
xxx xxx
