Joint Venture Problems and

Solutions
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Problem 1:
Ali of Lahore and Bilal of Karachi entered into joint venture for the sale of a
consignment of goods at March 2018, profit and losses to be shared equally. Ali paid
Rs. 10,000 for goods purchases and consigned to Bilal for Sale. He paid Rs. 400 for
freight, Rs. 350 for brokerage and Rs. 100 for sundry expenses. Bilal received these
goods and paid Rs. 600 for octri, Rs. 200 for warehouse and Rs. 90 for insurance. He
sold the whole consignment for Rs. 16,000.
You are required to pass general entries, joint venture account and
prepare co-venturers’ accounts.
Solution:
Problem 2:
Black and White enter into joint venture to consign 100 bales of cotton piece and
hired a commission agent Red to be sold latter on the joint risk of Black and White,
sharing in proportion of 3/5 and 2/5 respectively in September 2017. Black sends 60
bales at Rs. 1,300 each and pays for freight and other charges Rs. 900. White sends
40 bales at Rs. 1,250 each and pays for freight and other charges Rs. 800. All the
bales are sold by broker for Rs. 150,000 out of which deducted Rs. 1,500 for his
expenses and his commission at 3 per cent and balance remitted to consignors.
You are required to pass general entries, joint venture account and
prepare co-venturers’ accounts.
Solution:
Problem 3:
X and Y enter into joint venture to ship goods abroad at July 2018. X sends goods to
the value of $ 15,000, pays freight $ 1,500 and sundry expenses $ 575. Y sends goods
valued at $ 10,750, pays freight and insurance $ 1,200 and sundry expenses $ 750. Y
advances to X $ 6,000 on account of joint venture. X receives account sales and
remittance of net proceeds for the whole of amounting $ 37,500.
Requires: Show how transactions would appear in the book of X and Y
respectively, assuming final settlement is made between them.
Solution:
Problem 4:
A and B entered into a joint venture to take a building contract which was worth of
Rs. 240,000. They provide following information regarding the expenses incurred by
them.
Plant was value at Rs. 10,000 at the end of contract and A agreed to take it at that
value. Contract amount of Rs. 240,000 was received by B. Pass necessary journal
entries in the book of A and B and prepare joint venture and co-ventures’ accounts
assuming 1/4th and 3/4th profit sharing ratio.
Solution:
ccounting problems on Joint Venture
accounts
Joint Venture Problem and Solution # 1.
Adarji and Bomanji were partners in a joint venture sharing profits
and losses in the proportion of four-fifths and one-fifth respectively.
Adarji supplies goods to the value of Rs 50,000 and incurs expenses
amounting to Rs 5,400. Bomanji supplies goods to the value of Rs
14,000 and his expenses amount to Rs 800. Bomanji sells goods on
behalf of the joint venture and realises Rs 92,000. Bomanji is
entitled to a commission of 5 per cent on sales. Bomanji settles his
account by bank draft. Give the journal entries and the necessary
accounts in the books of Adarji and only the important ledger
accounts in the books of Bomanji.
Alternative method:
An alternative to the above method is to make out the Joint Venture
Account on memoradum basis, just to find out the profit or loss
made but not as part of ledger. The goods sent or expenses incurred
on joint venture are debited to the account of the other party. The
account may be styled as ‘………………….. in Joint Venture Account.’
No entry is passed for goods supplied or expenses incurred on joint
venture by the other party. That account is debited with one’s share
of the profit made on the joint venture (ascertained by the
Memoradum Joint Venture Account), crediting the Profit and Loss
Account. The other party will be credited with one’s share of loss, if
any.

The party receiving the sales proceeds on joint venture must credit
the other party with the full amount.

ADVERTISEMENTS:
The solution of the above illustration will be as follows:

Joint Venture Problem and Solution # 2.

Arun and Varun entered into a joint venture to purchase,
recondition and sell secondhand cars. Arun purchased for cash 50
cars at an average price of Rs 70,000 during the period from 1st
October, 2011 to 31st March, 2012.

ADVERTISEMENTS:

Varun, during the same period reconditioned the cars by

spending the following amounts:
A.C. cars were sold for Rs 3,50,000 each while non-A.C.
cars were sold as follows:
(i) 18 cars @ Rs 2,50,000 each by Arun,

ADVERTISEMENTS:

(ii) 18 cars @ Rs 2,20,000 each and 5 cars @ Rs 2,10,000 each by

Varun.

During testing one non-A.C. car met with a major accident and the
insurance company paid the actual cost as amount of the claim;
Varun receiving the amount.

Prepare Memorandum Joint Venture Account and Varun in Joint

Venture Account in the books of Arun.
ADVERTISEMENTS:
Joint Venture Problem and Solution # 3.
Maneck and Nari decided to work in partnership the
following scheme, agreeing to share profits as under:
Maneck to take – 3/4ths share

Nari to take – 1/4th share

They guaranteed the subscription at par of 10,00,000 shares of Rs

10 each in Shela Ltd. and to pay all expenses up to allotment in
consideration of the Shela Ltd. issuing to them 50,000 shares (other
than 10,00,000 shares issued to public) of Rs 10 each, fully paid.

Maneck introduced cash into the business to meet the

following expenses:

Applications fell short of the 10,00,000 shares by 30,000 shares.

Nari introduced further cash on joint account for the said 30,000
shares. This amount was utillised to subscribe the said 30,000
shares and paid to the company.

The guarantee having been fulfilled, Shela Ltd. handed over to

Maneck and Nari 50,000 shares. The partnership firm sold all the
shares. Nari received the sale proceeds of 20,000 shares amounting
to Rs 1,80,000 and Maneck of the remaining 60,000 shares
amounting to Rs 5,00,000.

Give the necessary accounts in the books of both the parties.

In the books of Maneck, the account with Nari will be as

follows:

Joint Venture Problem and Solution # 4.

A and B doing business separately as building contractors,
undertake jointly to construct a building for a new joint stock
company for a contract price of Rs 10,00,000 payable as to Rs
8,00,000 by instalments in cash and Rs 2,00,000 in fully paid
shares of the company. A banking account is opened in their joint
names, A paying in Rs 2,50,000 and B Rs 1,50,000. They are to
share profit or loss in the proportion of 2/3 and 1/3 respectively.

ADVERTISEMENTS:

Their transactions were as follows:

The contract was completed and the price duly received. The joint
venture was closed by A taking up all the shares of the company at
an agreed valuation of Rs 1,70,000 and B taking up the stock of
materials at an agreed valuation of Rs 17,000.
ADVERTISEMENTS:

In his books, A will have a Joint Venture Investment

Account, which will appear as under:
Joint Venture Problem and Solution # 5.
T. Ltd. and S. Ltd. are both firms of shipping agents whose places of
business are Kolkata and Dacca respectively. The two companies
decided to enter into a joint venture by exporting from Kolkata a
consignment of furniture in knock down form for assembly and sale
in Dacca where the currency is takka.

It was agreed that:

(1) The joint venture was to be financed by bills of exchange.

(2) As the rate of exchange between India and Bangladesh was

fluctuating daily around its nominal parity of 80 P to a takka, and
there was talk of devaluation, all bills of exchange should be covered
by forward purchases of currency.

(3) The venture was to be completed by 30th September, 2011 on

which date all bills of exchange were to mature.

(4) S. Ltd. was to receive a del credee commission of 5% on sales

and after charging that commission, the cost of discounting bills
and any losses on exchange, the profit remaining including any
profit on exchange was to be divided equally between the two
venturers.

You ascertain that the following transactions took place: