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Chapter 4: Joint Venture: Rohit Agarwal
Chapter 4: Joint Venture: Rohit Agarwal
All Transactions are recorded All Transactions are recorded Each Co-Venturer records only
in books of all Co-Venturers.(II) by one of the Co-Venturers. (III) his transactions. (IV)
rohit.agarwal@icai.org 17
Rohit Agarwal 9883248954
Method I: Recording in a Separate Set of Books
Under this method, generally the following accounts are maintained:
1. Joint Bank Account which is personal in nature, is used to record Cash and Bank Transactions
2. Co-Venturers’ Accounts which are personal in nature, are used to record their dealings with the Joint
Business and to ascertain the amount due to/ from them.
3. Joint Venture Account which is nominal in nature, is used to calculate profit or loss on joint venture.
Journal Entries in the books of Joint Venture
1. On Deposit of Capital brought in by the Co-Venturer into Bank:
Joint Bank A/c Dr.
To Co-Venturers A/c
2. On Purchase of Goods
Joint Venture A/c Dr.
To Joint Bank / Creditors / Co-Venturers A/c
3. On Making Payment to Creditors
Creditors A/c Dr. [Total Amount]
To Joint Bank A/c [Payment Made]
To Joint Venture [Discount Received]
4. On Supply of Goods out of Co-Venturer’s Stock:
Joint Venture A/c Dr.
To Co-Venturers A/c
5. On Payment of Expenses:
Joint Venture A/c Dr.
To Joint Bank / Co-Venturers A/c
6. On Sale of Goods:
Joint Bank / Debtors / Co-Venturers A/c Dr.
To Joint Venture A/c
7. On receiving Payment from a Customer:
Joint Bank A/c Dr. [Payment Received]
Joint Venture A/c Dr. [Discount Allowed Bad Debts]
To Debtors A/c [Total Amount]
*:
8. On taking away of Unsold Stock by Co-Venturer
Co-Venturers A/c Dr.
To Joint Venture A/c
9. When any Co-Venturer is entitled to some Commission /Salary:
Joint Venture A/c Dr.
To Co-Venturers A/c
10. For Closing Joint Venture A/c by recording Profit or Loss:
(a) In Case of Profit: (b) In Case of Loss:
Joint Venture A/c Dr. Co-Venturers A/c Dr. [In Agreed Ratio]
To Co-Venturers A/c [In Agreed Ratio] To Joint Venture A/c
11. For Closing Co-Venturers’ A/c by making entry for final settlement:
(a) In case of a Debit Balance (b) In case of Credit Balance:
Joint BankA/c Dr. Co-Venturers A/c Dr.
To Co-Venturers A/c To Joint Bank A/c
*
Since business of Joint Venture is of temporary nature, it is necessary to dispose off the unsold stock
some way. So the unsold stock can be taken over by one or more of the co-venturers or it can
be sold off at a discount.
Treatment of Abnormal Loss: No treatment is necessary for abnormal loss. However if the
goods were insured, the amount of insurance claim would be credited to Joint Venture A/c and
Debited to Joint Bank A/c.
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Rohit Agarwal 9883248954
Scheme of Journal Entries: Suppose A and B are co-venturers. Now let us see how the transactions
would be recorded in their books:
In the books of A In the books of B
1. (a) On receipt of amount or Bills receivable from B to A:
Bank / Bills Receivable A/c Dr. A A/c Dr.
To B A/c To Bank /Bills Payable A/c
1. (b) On Discounting the Bills Receivable by A:
Bank A/c Dr. [Net Proceeds]
Joint Venture A/c Dr. [Discounting Charge]
Joint Venture A/c Dr. [Discounting Charge]
To A A/c
To Bills Receivable A/c
2. On Purchase of Goods for Joint Venture by A:
Joint Venture A/c Dr. Joint Venture A/c Dr.
To Bank / Creditors A/c To A A/c
3. On Making Payment to Creditors by A:
Creditors A/c Dr. A A/c Dr.
To Joint Venture A/c [Discount Received] To Joint Venture A/c [Discount Received]
To Bank A/c [Payment made]
4. On Supply of Goods out of Own Stock by B:
Joint Venture A/c Dr. Joint Venture A/c Dr.
To B A/c To Purchases A/c (If supplies at cost price.)
To Sales A/c (If supplies at sale price.)
5. On Payment of Expenses by B:
Joint Venture A/c Dr. Joint Venture A/c Dr.
To B A/c To Bank A/c
6. On Sale of Goods by B
B A/c Dr. Bank /Debtors A/c
To Joint Venture A/c To Joint Venture A/c
7. On receiving Payment from a customer by B:
Joint Venture A/c Dr. [Discount Allowed] Bank A/c Dr [Payment Received]
To B A/c Joint Venture A/c Dr. [Discount Allowed]
To Debtor A/c
8. On taking away of Unsold Stock by A:
Purchase /Assets A/c Dr. A A/c Dr.
To Joint Venture A/c To Joint Venture A/c
9. When B is entitled to some Commission /Salary:
Joint Venture A/c Dr. Joint Venture A/c Dr.
To B A/c To Commission /Salary A/c
10. For Closing Joint Venture A/c by recording Profit or Loss:
(a) In Case of Profit: (a) In Case of Profit:
Joint Venture A/c Dr. Joint Venture A/c Dr.
To Profit & Loss A/c [Own Share] To Profit & Loss A/c [Own Share]
To B A/c [B’s Share] To A A/c [A’s Share]
(b) In Case of Loss: (b) In Case of Loss:
Profit & Loss A/c Dr. [Own Share] Profit & Loss A/c Dr. [Own Share]
B A/c Dr. [B’s Share] A A/c Dr. [A’s Share]
To Joint Venture A/c To Joint Venture A/c
11. For Closing Co-Venturers’ A/c by making entry for final settlement (say A pays to B):
B A/c Dr. Bank / Bills Receivable A/c Dr.
To Bank /Bills Payable A/c To A A/c
rohit.agarwal@icai.org 19
Rohit Agarwal 9883248954
Method III: Recording of all transactions by one of the Co-Venturers.
There is no difference in Method II & Method III. Method II was like passing entries in books of A & B
and Method III is like passing entries in the books of A or B only, the entries being exactly same.
Method IV: Memorandum Joint Venture Account Method.
Under this method, each co-venturer records those transactions with which he is concerned. He does not
record any transactions of his co-venturers. Generally the following accounts are maintained:
1. Joint Venture with ____ A/c, which is personal account in nature, records the transaction of a coventurer.
2. Memorandum Joint Venture Account: As soon as the venture comes to end, profit or loss is to be shared.
So all the information is then pooled into a newly opened account named Memorandum Joint Venture
Account. Since this account is not a part and parcel of double entry system, therefore to distinguish this
account from other ledger accounts, the word memorandum is prefixed. It is nearly the combination of
personal accounts, i.e. debit side of Joint Venture with other co-venturers is posted to the debit side of
Memorandum Joint Venture Account and vice-versa. Thus profit or loss is determined.
Journal Entries in the books of Joint Venture
1.(a) On receipt of amount or Bills 1 (b) On discounting Bills Receivable:
receivable from other co-venturer: Bank A/c Dr. [Net Proceeds]
Bank / Bills Receivable A/c Dr. Joint Venture with _____ A/c Dr. [Discount]
To Joint Venture with _____ A/c To Bills Receivable A/c
2. On Purchase of Goods
Joint Venture with _____ A/c Dr.
To Bank / Creditors A/c
3. On Making Payment to Creditors
Creditors A/c Dr. [Total Amount]
To Bank A/c [Payment Made]
To Joint Venture with _____ A/c [Discount Received]
4. On Supply of Goods out of own stock:
Joint Venture with _____ A/c Dr.
To Purchases A/c (If supplies at cost price.)
To Sales A/c (If supplies at sale price.)
5. On Payment of Expenses:
Joint Venture with _____ A/c Dr.
To Joint Bank A/c
6. On Sale of Goods:
Joint Bank / Debtors A/c Dr.
To Joint Venture with _____ A/c
7. On receiving Payment from a Customer:
Bank A/c Dr. [Payment Received]
Joint Venture with _____ A/c Dr. [Discount Allowed Bad Debts]
To Debtors A/c [Total Amount]
:
8. On taking away of Unsold Stock by Co-Venturer
Purchase /Assets A/c Dr.
To Joint Venture with _____ A/c
9. When any Co-Venturer is entitled to some Commission /Salary:
Joint Venture with _____ A/c Dr.
To Commission /Salary A/c
10. For Closing Joint Venture with _____ A/c by recording share of Profit or Loss:
(a) In Case of Profit: (b) In Case of Loss
Joint Venture with _____ A/c Dr. Profit & Loss A/c A/c Dr.
To Profit & Loss A/c A/c To Joint Venture with _____ A/c
11. For Closing Co-Venturers’ A/c by making entry for final settlement:
(a) In case of a Debit Balance (b) In case of Credit Balance:
BankA/c Dr. Joint Venture with _____ A/c A/c Dr.
To Joint Venture with _____ A/c A/c To Bank A/c
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