Joint Venture Accounting with No Separate Books are maintained

Joint Venture is an agreement where two or more parties come together for carrying a specific business for a specified period of time. The co-venturers jointly control the joint venture and share the profits and losses as per the agreed ratio. Joint Venture ends when the time period elapses or the specific purpose is fulfilled. The persons who undertake a Joint Venture are called Co-venturers.  The co-venturers maintain a Joint Venture Account to measure the profit or loss from the Joint Venture.

Joint Venture Accounting with No Separate Books are maintained

The two ways of Joint Venture Accounting are:

1. Maintain Separate books
2. Do not maintain separate books

In this case, each Co-venturer maintains the record independently of the joint venture transactions. Each Co-venturer maintains the full records of own transactions and that of the other co-venturers. However, if the co-venturers choose to keep the record of their own transactions only then they prepare Memorandum Joint Venture A/c. Thus, there are two conditions:

Browse more Topics under Joint Ventures

• Meaning And Features Of Joint Venture Transactions
• Distinction Between Joint Venture And Partnership
• Joint Venture Accounting with Separate Books

1.When each Co-Venturer keeps records of all the transactions

Under this method, each co-venturer prepares Joint Venture Account and Co-venturer’s A/c. Following  are the journal entries:

Date	Particulars		Amount (Dr.)	Amount (Cr.)
1. Goods supplied to venture out of business	Joint Venture Account	Dr.	xx
	To Purchases A/c			xx
	(Being goods supplied to Joint Venture from the business stock)
2. Meeting expenses or purchase of venture	Joint Venture Account	Dr.	xx
	To Bank/ Creditors A/c			xx
	(Being paid for expenses or purchases regarding the Joint Venture)
3. When other co-venturers incur expenses or supply goods	Joint Venture Account	Dr.	xx
	To Co-venturer’s A/c			xx
	(Being expenses incurred or goods supplied to the Joint Venture by other co-venturers)
4. For venture sale	Bank / Debtors A/c	Dr.	xx
	To Joint Venture Account			xx
	(Being Joint Venture sale)
5. For venture sale made by the co-venturer	Co-venturer’s A/c	Dr.	xx
	To Joint Venture Account
	(Being venture sale made by the co-venturers)
6. Bill of Exchange drawn on the co-venturer	Bills Receivable A/c	Dr.
	To Co-venturer’s A/c			xx
	(Being bills receivable drawn on co-venturer)
7. Discounting of bill	Bank A/c	Dr.	xx
	Joint Venture A/c	Dr.	xx
	To Bills Receivable A/c			xx
	(Being bill discounted)
8. Acceptance of bill drawn by other co-venturer	Co-venturer’s A/c	Dr.	xx
	To Bills Payable A/c			xx
	(Being bill accepted drawn by the other co-venturer)
9. Bill discounted by the other co-venturer	Joint Venture A/c	Dr.	xx
	To Co-venturer’s A/c			xx
	(Being Joint Venture A/c debited with the amount of discount on the bill)
10. For venture profit	Joint Venture A/c	Dr.	xx
	To Profit &Loss A/c (own share)			xx
	To Co-venturer’s A/c (their share)			xx
	(Being profit on Joint Venture shared)
11. For venture loss	Profit &Loss A/c (own share)	Dr	xx
	Co-venturers A/c (their share)	Dr.	xx
	To Joint Venture Account			xx
	(Being loss on Joint Venture shared)
12. Settlement of claim
a. Payment due to co-venturer	Co-venturer A/c	Dr.	xx
	To Bank A/c			xx
	(Being payment made to co-venturers)
b. Payment due from co-venturer	Bank A/c	Dr.	xx
	To Co-venturer’s A/c			xx
	(Being payment received from co-venturer)

 

2. When each Co-Venturer keeps records of own transactions only

Under this method, co-venturers record only their own transactions. For this purpose, they open ‘Joint Venture with Co-venturer’s A/c. They debit all the expenses, incomes, profits and losses from the joint venture to this account. However, we cannot ascertain profit from this account. For determining the profits of the Joint Venture, we prepare ‘Memorandum Joint Venture A/c.

Date	Particulars		Amount (Dr.)	Amount (Cr.)
1. Goods supplied to venture out of business	Joint Venture with Co-venturer’s A/c	Dr.	xx
	To Purchases A/c			xx
	(Being goods supplied to Joint Venture from the business stock)
2. Meeting expenses or purchase of venture	Joint Venture with Co-venturer’s A/c	Dr.	xx
	To Bank/ Creditors A/c			xx
	(Being paid for expenses or purchases regarding the Joint Venture)
3. For venture sale	Bank / Debtors A/c	Dr.	xx
	To Joint Venture with Co-venturer’s A/c			xx
	(Being Joint Venture sale)
4. For venture profit	Joint Venture with Co-venturer’s A/c	Dr.	xx
	To Profit &Loss A/c (own share)			xx
	To Co-venturer’s A/c (their share)			xx
	(Being profit on Joint Venture shared)
5. For venture loss	Profit &Loss A/c (own share)		xx
	Co-venturers A/c (their share)	Dr.	xx
	To Joint Venture A/c			xx
	(Being loss on Joint Venture shared)
6. Settlement of claim
a. Payment due to co-venturer	Joint Venture with Co-venturer’s A/c	Dr.	xx
	To Bank A/c			xx
	(Being payment made to co-venturers)
b. Payment due from co-venturer	Bank A/c	Dr.	xx
	To Joint Venture with Co-venturer’s A/c			xx
	(Being payment received from co-venturer)

Solved Example for You

Q. Atul and Prem enter into a joint venture to buy and sell Air conditioners, on 1^st April 2018. On 1^st April 2018, Atul sent a cheque of ₹500000 to Prem. On 4^th April 2018, Prem purchased 400 A.Cs each at a cost of ₹4000 each. He sent the A.Cs to Atul. Atul collected them and paid the freight of ₹4000 on 15^th April. On 25^th May 2018, Atul settled the account with Prem and sent him a cheque. They share profits equally.

The details of sales by Atul are:

Date	No. of A.Cs	Sale Price per A.C.	Discount on the sales price
16th April 2018	40	6000	20%
30th April 2018	200	5600	Nil
15th May 2018	160	5400	10%

In Atul’s book show:

1. Joint Venture with Prem A/c
2. Memorandum Joint Venture A/c

Ans: In the books of Atul

Joint Venture with Prem A/c

Date	Particulars	Amount		Date	Particulars	Amount
1 Apr	To Bank A/c ( cheque)	500000		16 Apr	By Bank A/c (sales)	192000
15 Apr	To Bank A/c (freight)	4000		30 Apr	By Bank A/c (sales)	1120000
25 May	To Profit & Loss A/c (share of profit)	242800		15 May	By Bank A/c (sales)	777600
25 May	To Bank A/c (settlement)	1342800
		2089600				2089600

Memorandum Joint Venture A/c

Particulars		Amount		Particulars		Amount
To Cost of 400 A.C.s		1600000		By Sale proceeds (net)
To Freight		4000		40 A.C.s @ 4800		192000
To Profit:		485600		200 A.C.s @ 5600		1120000
Atul	242800			160 A.C.s @ 4860		777600
Prem	242800
		2089600				2089600