Entries when separate books are Maintained

A joint venture is an arrangement where two or more parties pool their resources for accomplishing a specific task or project. In a joint venture, each of the co-venturers is responsible for profits, losses, and costs associated with the venture. However, the venture is a separate entity and thus, requires the maintaining of account books in that respect.

Entries when Separate Account Books are Maintained

The books of a joint venture can be maintained by the following two methods:

1. Maintaining separate books
2. Not maintaining the separate books

Here, we shall discuss the journal entries when the co-venturers maintain separate books of accounts for the joint venture.

Due to the short duration of the venture, the books are not very comprehensive here. The main aim of preparing the books is to ascertain the profit or loss from the venture. The accounts that we usually maintain are:

Joint Bank Account

The co-ventures open a separate bank account for the transactions of the venture. They usually operate this account jointly.

They record their initial contributions, sale proceeds, collection from debtors, expenses of the venture, purchases, payment to creditors, etc.

Also, they record the distribution of net balances on the completion of the venture. After this, the account is closed.

Learn more about Entries when Separate Books are not maintained here in detail

Joint Venture Account

This account is similar to the profit and loss A/c. It thus measures the profit or loss from the venture. The co-venturers debit this account for all venture purchases and expenses and credit it with all sales and collections.

The excess of credit side over debit side of this account shows the profit and vice versa. We transfer the Profit or Loss to the co-venturers’ accounts in the profit-sharing ratio.

Co-ventures Accounts

These are the Personal accounts of the venturers and record their contributions in cash and goods. It also records the payment of expenses by them and receipts of the venture by the.

After transferring the profit or loss to this account and settling the accounts this account also closes automatically.

Journal entries when separate books are kept:

Date	Particulars		Amount (Dr)	Amount (Cr)
1.Initial contribution by the co-venturers	Joint Bank A/c	Dr.	XXX
	To Co-venturers’ A/c			XXX
	(Being initial contribution by the co-venturers)
2. Co-venturer brings goods from his own stock	Joint Venture A/c	Dr.	XXX
	To Co-venturer’s A/c			XXX
	(Being co-venturer bring goods from own stock)
3. Co-venturer pays expenses	Joint Venture A/c	Dr.	XXX
	To Co-venturer’s A/c			XXX
	(Being co-venturer pays expenses of the joint venture)
4. Purchases of material out of the joint venture funds	Joint Venture A/c	Dr.	XXX
	To Joint Bank A/c			XXX
	(Being purchases from joint venture funds)
5. Expenses out of Joint bank A/c	Joint Venture A/c	Dr.	XXX
	To Joint Bank A/c			XXX
	(Being expenses met out of joint bank A/c)
6. For cash sales	Joint Bank A/c	Dr.	XXX
	To Joint Venture A/c			XXX
	(Being cash sales)
7. When the contract or sale price received in form of shares or cash	Joint Bank A/c	Dr.	XXX
	Shares A/c	Dr.	XXX
	To Joint Venture A/c			XXX
	(Being receipt of contract or sale price in the form of shares or cash)
8. Commission or salary due to co-venturers	Joint Venture A/c	Dr.	XXX
	To Co-venturer’s A/c			XXX
	(Being commission or salary due)
9. Co-venturer takes unsold goods	Co-venturer’s A/c	Dr.	XXX
	To Joint Venture A/c			XXX
	(Being unsold goods taken over)
10. Co-venturer takes shares	Co-venturer’s A/c	Dr.	XXX
	To Shares A/c			XXX
	(Being shares taken over)
11. On sale of shares in open market	Joint Bank A/c	Dr.	XXX
	To Shares A/c			XXX
	(Being sale of shares in open market)
12. On loss of goods	No entry
13. For receipt of insurance claim	Joint Bank a/c	Dr.	XXX
	To Joint Venture a/c			XXX
	(Being insurance claim received)
14. For depreciation on joint assets	No entry
15. On profit from joint venture	Joint Venture a/c	Dr.	XXX
	To Co-ventures’ a/c			XXX
	(Being transfer of profit)
16. On loss from joint venture	Co-venturer’s A/c	Dr.	XXX
	To Joint Venture A/c			XXX
	(Being transfer of loss)
17. For final settlement	Co-ventures’ a/c	Dr.	XXX
	To Joint Bank a/c			XXX
	(Being final distribution of funds)

 

Source: freepik.com

Solved Example for You

Ami and Bella enter into a joint venture to sell winter wears. They open a separate joint bank account, especially for the venture. Ami deposits ₹300000 and Bella ₹200000. Ami supplies shawls worth ₹40000 and Bella supplies sweaters worth ₹20000. They purchase the jackets out of the joint bank A/c worth ₹350000 and incur ₹5000 as transportation charges. Ami pays the advertisement expenses of ₹3500 directly. The cash sales amounted to ₹550000 and sundry expenses were ₹4500. Ami took goods worth ₹10000 from the venture. They share profits equally. Prepare the necessary ledger accounts.

Ans.

Joint Bank A/c

Date	Particulars	Amount		Date	Particulars	Amount
1.	To Ami’s A/c (contribution)	300000		3.	By Joint Venture A/c (purchase)	350000
	To Bella’s A/c (contribution)	200000			By Joint Venture A/c (transportation exp.)	5000
5.	To Joint Venture A/c (sales)	550000		5.	By Joint Venture A/c (expenses)	4500
				8.	By Ami’s A/c (final settlement)	402000
				8.	By Bella’s A/c (final settlement)	288500
		1050000				1050000

 

 Joint Venture A/c

Date	Particulars	Amount		Date	Particulars	Amount
2.	To Ami’s A/c (shawls)	40000		5.	By Joint Bank A/c (sales)	550000
	To Bella’s A/c (sweaters)	20000		6.	By Ami’s A/c (goods taken)	10000
3.	To Joint Bank A/c (purchase)	350000
	To Joint Bank A/c (transportation exp.)	5000
4.	To Ami’s A/c (advertisement)	3500
5.	To Joint Bank A/c (expenses)	4500
7.	To Profit on Venture:
	Ami	68500
	Bella	68500
		560000				560000

 

Co-venturer’s A/c

Date	Particulars	Ami	Bella		Date	Particulars	Ami	Bella
6.	To Joint Venture A/c (goods taken)	10000			1.	By Joint Bank A/c (contribution)	300000	200000
8.	To Joint Bank A/c (final settlement)	402000	288500		2.	By Joint Venture A/c (goods)	40000	20000
					4.	By Joint Venture A/c (advertisement)	3500
					7.	By Joint Venture A/c (profit)	68500	68500
		412000	288500				412000	288500