Joint Venture is an agreement between two or more parties who come together for carrying a specific business for a specified period of time. The persons undertaking a Joint Venture are the Co-venturers. They jointly control the joint venture. Also, they share the profits and losses of the joint venture as per the agreement between them. It comes to an end when the time period elapses or after the fulfillment of the specific purpose. They maintain a Joint Venture Account to measure the profit or loss from the Joint Venture. Let us study the joint venture entries in accounting.
Entries when Separate Books are not Maintained
Joint Venture Accounting is done in the following ways
- By maintaining Separate books
- By maintaining no separate books
Separate books are not maintained
In this case, each Co-venturer independently and separately maintains the records of the joint venture transactions.
He maintains the entire records of own transactions and that of the other co-venturers. However, if the co-venturers choose to keep the records of their own transactions only then Memorandum Joint Venture A/c is prepared.
Learn the Differences Between Joint Venture and Partnerships here in detail
When each Co-Venturer keeps records of all the transactions:
Under this method, each co-venturer prepares Joint Venture A/c and Co-venturer’s A/c in his books. the co-venturers do not contribute in cash and open no Joint Bank A/c. they supply the goods to the venture out of their own stock and also meet the expenses. Also, each co-venturer calculates profit or loss separately.
Following are the journal entries:
Journal Entries
In the books of Co-venturer X
Date | Particulars | Amount (Dr.) | Amount (Cr.) | |
1. X supplies goods to venture out of business | Joint Venture A/c | Dr. | Â XXX | |
   To Purchases A/c | Cr. |  XXX | ||
(Being supply of goods to Joint Venture from the business stock) | ||||
2. X meets the expenses of venture | Joint Venture A/c | Dr. | Â XXX | |
To Bank/ Cash A/c | Cr. | Â XXX | ||
(Being payment of expenses regarding the Joint Venture) | ||||
3. Y incurs expenses or supply goods | Joint Venture A/c | Dr. | Â XXX | |
To Y’s A/c | Cr. |  XXX | ||
(Being expenses incurred or goods supplied to the Joint Venture by B) | ||||
4. X accepts a bill or gives any advance to Y | Y’s A/c | Dr. |  XXX | |
To Bills Payable A/c | Cr. | Â XXX | ||
To Cash / Bank A/c | Cr. | Â XXX | ||
(Being bill accepted drawn by Y or advance given to Y) | ||||
5. X receives the sale proceeds | Cash/Bank A/c | Dr. | Â XXX | |
To Joint Venture A/c | Cr. | Â XXX | ||
(Being receipt of sale proceeds) | ||||
6. Y receives the sale proceeds | Y’s A/c | Dr. |  XXX | |
To Joint Venture A/c | Cr. | Â XXX | ||
(Being sale proceeds received by Y) | ||||
7. When X takes over the unsold goods | Purchases A/c | Dr. | Â XXX | |
To Joint Venture A/c | Cr. | Â XXX | ||
(Being unsold goods taken over) | ||||
8. When Y takes over the unsold goods | Y’s A/c | Dr. |  XXX | |
To Joint Venture A/c | Cr. | Â XXX | ||
(Being unsold goods taken over by Y) | ||||
9. For venture profit | Joint Venture A/c | Dr. | Â XXX | |
To Profit &Loss A/c | Cr. | Â XXX | ||
To Y’s A/c | Cr. |  XXX | ||
(Being sharing of profit on Joint Venture) | ||||
10. For venture loss | Profit &Loss A/c | Dr. | Â XXX | |
Y’s A/c | Dr. |  XXX | ||
To Joint Venture A/c | Cr. | Â XXX | ||
(Being sharing of loss on Joint Venture) |
Source: freepik.com
In the books of Co-venturer Y
Date | Particulars | Amount (Dr.) | Amount (Cr.) | |
1. X supplies goods to venture out of business | Joint Venture A/c | Dr. | Â XXX | |
To X’s A/c | Cr. |  XXX | ||
(Being supply of goods to Joint Venture by X) | ||||
2. X meets the expenses of venture | Joint Venture A/c | Dr. | Â XXX | |
To X’s A/c | Cr. |  XXX | ||
(Being payment of expenses regarding the Joint Venture by X) | ||||
3. Y incurs expenses or supply goods | Joint Venture A/c | Dr. | Â XXX | |
To Purchases A/c | Cr. | Â XXX | ||
To Cash/ Bank A/c | Cr. | Â XXX | ||
(Being expenses paid or goods supplied to the Joint Venture) | ||||
4. X accepts a bill or gives any advance to Y | Cash/ Bank A/c | Dr. | Â XXX | |
Bills Receivable A/c | Dr. | Â XXX | ||
To X’s A/c | Cr. |  XXX | ||
(Being receipt of advance or acceptance of bill by X) | ||||
5. X receives the sale proceeds | X’s A/c | Dr. |  XXX | |
To Joint Venture A/c | Cr. | Â XXX | ||
(Being sale proceeds received by X) | ||||
6. Y receives the sale proceeds | Cash/Bank A/c | Dr. | Â XXX | |
To Joint Venture A/c | Cr. | Â XXX | ||
(Being receipt of sale proceeds) | ||||
7. When X takes over the unsold goods | X’s A/c | Dr. |  XXX | |
To Joint Venture A/c | Cr. | Â XXX | ||
(Being unsold goods taken over by X) | ||||
8. When Y takes over the unsold goods | Purchases A/c | Dr. |  XXX | |
To Joint Venture A/c | Cr. | Â XXX | ||
(Being unsold goods taken over) | ||||
9. For venture profit | Joint Venture A/c | Dr. | Â XXX | |
To Profit &Loss A/c | Cr. | Â XXX | ||
To X’s A/c | Cr. |  XXX | ||
(Being sharing the profit on Joint Venture) | ||||
10. For venture loss | Profit &Loss A/c | Dr. | Â XXX | |
X’s A/c | Dr. |  XXX | ||
To Joint Venture A/c | Cr. | Â XXX | ||
(Being sharing the loss on Joint Venture) |
Solved Example for you
Kanha, Hiten, and Harish are partners in a joint venture each contributing ₹50000. Kanha purchases goods for ₹130000 and also supplies goods worth ₹10000 from his stock. Harish also supplies goods worth ₹15000 and also pays expenses of ₹500. Kanha pays expenses of ₹2500. Kanha effected a sale of ₹208000 and he is eligible for a commission of 5% on sales. Unsold goods of ₹5000 were taken by Hiten. Kanha settles the accounts of Hiten and Harish by cheque.
Record the transactions in the books of Kanha.
Ans.
In the books of Kanha
Journal Entries
Date | Particulars | Amount (Dr.) | Amount (Cr.) | |
1. | Bank A/c | Dr. | 100000 | |
To Hiten’s A/c | Cr. | 50000 | ||
To Harish’s A/c | Cr. | 50000 | ||
(Being receipt of the amount for joint venture) | ||||
2. | Joint Venture A/c | Dr. | 140000 | |
To Purchases A/c | Cr. | 10000 | ||
To Bank A/c | Cr. | 130000 | ||
(Being purchase of goods and supply of goods to Joint Venture from the business stock) | ||||
3. | Joint Venture A/c | Dr. | 15500 | |
To Harish’s A/c | Cr. | 15500 | ||
(Being expenses incurred or goods supplied to the Joint Venture by Harish) | ||||
4. | Joint Venture A/c | Dr. | 2500 | |
To Bank A/c | Cr. | 2500 | ||
(Being payment of expenses regarding the Joint Venture) | ||||
5. | Bank A/c | Dr. | 208000 | |
To Joint Venture A/c | Cr. | 208000 | ||
(Being receipt of sale proceeds) | ||||
6. | Joint Venture A/c | Dr. | 10400 | |
To Commission A/c | Cr. | 10400 | ||
(Being commission @ 5% on sales) | ||||
7. | Hiten’s A/c | Dr. | 5000 | |
To Joint Venture A/c | Cr. | 5000 | ||
(Being Y takes over the unsold goods) | ||||
8. | Joint Venture A/c | Dr. | 44600 | |
To Profit &Loss A/c | Cr. | 14866 | ||
To Hiten’s A/c | Cr. | 14867 | ||
To Harish’s A/c | Cr. | 14867 | ||
(Being sharing of the profit on Joint Venture) |
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