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Home > Fundamentals of Accounting > Joint Venture > Entries when separate books are Maintained
Joint Venture

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)

 

account books

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

 

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