Joint Venture Accounts and entries

Study Objectives

After Studying this page you will be able to -
⦁ Know the Meaning & Introduction Of Joint Venture
⦁ Know the Difference between joint Venture & Partnership
⦁ Know the Accounting method for Joint Ventures.

i. Separate Set of Books is Maintained for Joint Venture
ii. No Separate Set of Books is Maintained for Joint Venture

a. Each Co-Venturer Keeps Record Only For Transaction Which were concluded by himself.
b. Each Co-Venturer Keeps Record of All the Transaction of Joint Venture

Meaning & Introduction

               
              Joint venture is a Specific type Of business venture, which is Carried by two or More Persons or any Other Concerns. this type of Business venture is Undertaken to Execute a Particular Work or it may be undertaken for a Particular Period of time.
 As Soon as the Particular Work is Completed or Particular Period of time is Over
, Joint venture is Terminated Profit or Loss on Joint venture is shared by coventurs in Agreed Proportion. Persons Entering into Joint venture are Known as Co-ventures. Each co-venturer brings his share of Capital into Joint venture for Business venture.

             Generally a Joint venture is an association of Two or more Persons. it is like a Temporary Partnership. it is formed for trading of Particular Goods, Import-export Business, Construction of Building, underwriting of shares or debentures of a Company, Purchases and Development of Land and to Sell in the form of Plots or Houses Etc. Joint Venture has no Particular Name for itself and all Co-Venturer do work Jointly. mutual Understanding is very Important in Joint Venture.
Characteristics of Joint venture

Primarily Joint venture Looks like a partnership but it is not so. Main Features of Joint venture are as Under,:
1. Joint venture is undertaken to execute a Particular Work or it may be for a Particular Period of Time.
2. After the Completion of Such work or period of time, Joint venture is terminated.
3. With the termination of Joint venture, Accounts are to be Settled with Distribution of Profit or loss on Joint venture.
4. Joint venture is formed for a Small Period of time and all coventures do work Jointly.
5. Joint Venture has no Particular Name for itself. Coventures may do their Own Business along With, Joint venture Business.
                       

    Difference between joint Venture and Partnership

Main differences between two are as under-
1. Partnership has a firm's name while, joint venture has no such Particular Name.
2. Partnership is regulated by Indian Partnership Act 1932 but for joint Venture no Specific Act is Applicable.
3. Generally Partnership Firms are to be registered but there is no need of such registration for joint venture.
4. Partnership firm may carry business till all the partners are willing to do so. while, joint venture will be terminated after the completion of particular work or time. with the termination of venture, accounts are settled.
5. Persons Participating in Partnership are called Partners and in Joint Venture they are called co-ventures.
6. In case of Partnership, number of Minimum Members will be 2 and maximum will be Limited to 20 in Ordinary business and 10 in banking business. In joint venture Minimum numbers will be 2 and there is no limit for Maximum number.
7. In Partnership there is a Relation between Partners but in joint venture there is only Mutual understanding.

                                                Accounting Methods for Joint Venture

The following are two methods of keeping accounts for joint venture:-
1. Separate set of books is maintained for joint venture.
2. No Separate set of books is maintained for joint venture.

a. Each co-venturer records only those transactions of Joint Venture which were Concluded by himself
b. Each Co-venturer records all the transaction of Joint Venture

Separate set of books for Joint Venture
            When All Co-ventures are living at the same place, venture business is large enough or when all Co-ventures agree, the separate set of books of accounts can be maintained to record the transactions of Joint venture. In such a situation the following accounts are Opened.
- joint Bank Account
- Joint venture Account
- co-venture's Capital  or Personal Account.

                    Co-Ventures Bring Cash for joint ventures as share of capital. They deposit this amount into joint  bank ac. This a/c is used for cash transaction such as cash purchases, expenses paid in cash. Cash sales, Receipts from customers etc. Joint venture a/c is nominal a/c in nature. All purchases and expenses are debited to this a/c and all sales and other incomes are credited to this a/c. This a/c is used for calculation of Profit or Loss made on joint venture.
            Profit disclosed by joint venture a/c is to be distributed among co-ventures. At the end of joint venture, capital a/c will reveal the balance of amount due to or Due from co-ventures,Which are to be paid out off joint bank a/c.

                                         Details of Journal Entries:-
1. When co-venture bring cash and deposit it into joint bank a/c.
        Joint bank a/c                                   Dr.
                   To co-venturer's  a/c
(Being cash contribution by co-ventures)
2. When goods are purchased for cash.
Joint venture a/c                                      Dr.
               To joint Bank a/c
(Being goods purchased for cash)
3. When expenses are incurred on joint venture.
Joint Venture a/c                                  Dr.
             To joint Bank a/c
(Being expenses paid for cash)
Note: if purchases are for credit, supplier's  a/c will be credited. Similary, when expenses are paid by co-ventures, His a/c will be credited.
4. When goods are sold for cash.
  Joint Bank A/c                                    Dr.
               To Joint Ventures A/c
(Being goods sold for cash)
5. When goods are sold for credit.
Customer's  a/c                                    Dr.
              To joint Venture A/c
(Being goods sold on credit)
6. When payment received form customers.
Joint bank A/c                                        Dr.
             To Customer's  A/c
(Being payment received in cash)
7. When suppliers are paid in cash.
Supplier's A/c                                        Dr.
                 To joint bank A/c
(Being payment made to suppliers)
Note: -  Any discount on payment, received or allowed, it will be charged to joint venture ac/.
8. When some goods are taken by any co-venturer
Co-Venturer's A/c                                    Dr.
                  To joint Venture Ac/
(Being stock taken by co-venture)
9. If interest on capital or commission on sale is payable to any co-venturers:
Joint venturer A/c                                    Dr.
                   To co-venturer's a/c
(Being interest / commission credited)
10. At the end of venture business, Profit shown by joint venture a/c will be distributed.
Joint Venture a/c                                       Dr.
                    To Co-venturer's a/c
(Being profit on joint venture credited)
11. In case of loss on joint venture.
Co-venture's a/c                                      Dr.
                   To joint venture a/c
(Being loss on joint venture debited)
12. At the last, amount due to co-venturers are paid off.
Co-venturer's A/c                                    Dr.
                     To joint bank a/c
(Being balance off co-venturer's capital / personal a/c paid off.)

When Seprate books are not maintained for joint venture
  when all co-venturers are not living at the same place and venture business is't so big enough the saprate books off a/c for joint venture may not be kept. In such a situation co-ventureres can record the transaction of joint venture in thair own books also, for this purpose one of the methods described hereafter may be adopted-
A. Each co-venturers records in his books only those transaction concluded by himself.
(Memorandum joint venture method)
B. Each co-venturers records all the transaction of joint venture including transaction concluded by other co-venturers.

A. Each venturers records only those transaction concluded by himself only-
1. Under this method of accounting, each co-venturers opens joint venturers with.............
a/c  in his books of accounts. This a/c is  individuals a/c in  nature. At the end of the venture business, balance of this a/c  shows the amount due to or due from such co-venturers.
2. For every payment made for joint venture, purchase of goods and any other expenses, Joint venture with....a/c , Is debited, similary for sale proceeds and other income of joint venture, this a/c is credited.
3. For any case remittance to other co-venturers above a/c is debited and on cash receipts this a/c is credited.
4. On termination of joint venture each co-venturer sends the copy of "Joint venture with........a/c" to other co-venturers. then a memorandum joint venture a/c is opened. this a/c is nominal in nature.
5. amounts paid for purchases of goods for joint venture and all expenses made for joint venturer are debited to memorandum joint venturer a/c. similarly all sales proceeds and other incomes are credited to this a/c. Debit balance of this a/c  shows the loss and credit balance shows the profit of the joint venture.
6. For the distribution off profit shown by joint venture a/c joint venture with ..........a/c will be debited and P&L a/c will be credited. In case of loss, reverse entry will be made.

B. Each co-venturers records the transaction of joint venture including transaction conculed by the other co-venturers-  under this method of accounting for joint venture, each co-venturers records all the transactions of joint venture in his own books of accounts. for this purpose they open two accounts in  their books which are, Joint venture a/c and other co-venturer's personal a/c. In such a situation, Joint venture a/c is  nominal a/c in nature and it shows the profit or loss on joint venture. Each co-venturers sends his transaction detail to other time to time,so that others can record the transaction of senders.in their respective books of a/c. at the end, the co-venturer's a/c are settled.
Accounting Entries
1. On purchases of goods and expenses made for joint venture by himself.
Joint venture a/c                                       Dr.
           To Cash/Bank a/c
(Being goods purchased/expenses incurred)
Note: If purchases are made on credit then suppliers a/c will be credited.
2. For sale of goods for joint venture by himself.
Cash/Bank a/c                                          Dr.
                  To Joint venture a/c
(Being goods sold for cash)
Note: In case of credit sales, Customer's a/c will be debited.
3. For purchases and expenses made by other co-venturers for joint venture.
Joint venture a/c                                     Dr.
            To co-venturer's a/c
(Being goods purchased/ expenses incurred by ..........(Co venturer's Name)
4. For sale of goods made by other co-venturers for joint venture.
Co-venturer's a/c                                     Dr.
                To joint venture a/c
(Being goods sold by......)
5. For interest, commission etc. charged form joint venture for his self.
Joint venture a/c                                     Dr.
                To interest/ Commission a/c
(Being interest / commission charged to joint venture )
6. For interest / Commission charged by other co-venturers.
Joint Venture a/c                                      Dr.
                 To co-venturer's a/c
(Being intrest / commission charged by .........Co-venturers)
7. For distrubution of profit , shown by joint venture.
Joint venture a/c                                        Dr. (for total profit)
                To P&L a/c                                          (share of salf)
                 To coventurer's a/c                          (share of co-venturere)
(Being profit on joint venture distuributed )
Notes: In case of loss, reverse entery will  made,
8. For payment received for other co-venturers.
Cash / Bank/ B/R a/c                                  Dr.
               To coventurer's  a/c
(Being cash/ cheque/ B/R received)
9. For payment made to other co-venturer.
Co-venture's a/c                                         Dr.
             To cash/ Bank /B/P/ a/c
(Being cash remitted / B/P accepted)
10. If coventurers gives goods from his godown for joint venture
Joint venture a/c                                           Dr.
               To sales a/c
(Being goods given for joint venture)
Notes: If any payment is received in the form of B/R, and it is discounted, then discount will be debited to joint venture a/c .