1. Accounting for Joint Ventures

2. Meaning of Joint Venture
It is usually a temporary partnership without the use of a firm name.
It is limited to carryout a particular business plan, in which the persons concerned agree to contribute capital and to share profit (or losses).
The parties in a joint ventures are known as co- venturers.
Their liability is limited to the venture concerned for which they agree to contribute capital and share profit or losses

3. Meaning of Joint Venture
Examples of Joint ventures:
>Purchase and sale of goods
>Joint consignment of goods
>Speculation in shares
>Underwriting of shares and debentures
>Construction of a building, etc

4. Characteristics of a Joint Venture
It is a temporary partnership which comes to an end after the completion of a particular venture.
It is for a specific venture, so it is a particular partnership.
The partnership is without the use of a firm name.
The main purpose it to make profit and to distribute it among all co- venturers. Loss, if any, will also be borne in agreed ratio or equally if no agreement regarding ratio has been made.

5. Difference between Joint Venture and Consignment
Relation between Parties:
JV- Is that of owners.
C- Is that of principle and agent.
Methods of maintaining Accounts:
JV- Four methods of keeping accounts.
C-Only one method of keeping accounts
Continuity of Relationship:
JV- Is terminated as soon as the venture is over.
C- Will be there even after one transaction.
Ownership of Goods:
JV- Is that of the co- venturers.
C-Remains with the consignor though possession of goods passes from the consignor to the consignee.

6. Difference between Joint Venture and Consignment
Profit earned:
JV- Belongs to the co- venturers.
C- Belongs to the consignor and not the consignee.
Account Sales:
JV-Is not sent by one co- venturer to another.
C- Is sent by the consignor to consignee.
Management:
JV-Co- venturers enjoy full powers to manage the business
C- The consignee being an agent has no powers except he has to obey the instruction of the consignor.

7. Difference between Joint Venture and Consignment
Finance:
JV- Money is contributed by all the co- venturers in certain proportion.
C-All money is invested by the consignor.
Risk:
JV- Risk is shared between co- venturers.
C- Sales are made at consignor’s risk.
Scope:
JV- Wide as it covers many activities besides trade.
C- Limited only for trade.

8. Distinction between Joint Venture & Partnership
Name of the firm:
JV- It is carried on without a firms name.
P- Carried on with a firm name.
Co-Venturers/Partners:
JV- Parties are called co-venturers.
P- Parties are called partners.
Continuity:
JV- Comes to an end after completion of a particular venture.
P- Continuous
Liability:
JV- Limited to the venture concerned.

9. Distinction between Joint Venture & Partnership
Liability:
P-Unlimited to the extent of business and private estate.
Location of Business:
JV- Generally Local.
P-May be located at different places.
Position of a Minor:
JV-Minor is generally not admitted.
P-Minor can be admitted for benefits only.
Application of the Act:
JV- No enactment is applicable.

10. Distinction between Joint Venture & Partnership
Application of Act:
P- Indian Partnership Act, 1932 is applicable.
No of Members:
JV- Number of members can be unlimited.
P- Limited to 20 in ordinary trade and 10 in banking business.

11. Methods of Recording Joint Venture Transactions
Following are the methods of recording in a Joint Venture:
i) When one of the co-venturer is appointed to manage the joint venture.
ii) When separate sets of books is not maintained.
iii) When separate set of books is maintained.
iv) When a joint venture transaction is recorded through the Memorandum Joint Venture Account.

12. A) When one co-venturer is appointed to manage the joint venture
Question 1>
Ram, Mohan and Rahim were partners in a joint venture, each contributing Rs Ram purchased goods for Rs and also supplied goods worth Rs.1000 from his stock. Rahim also supplied goods worth Rs.1500 from stock and his expenses in connection with the supplying of goods on account of joint venture amounted to Rs.50. Ram paid Rs.250 for expenses in connection with the joint venture. Ram sold goods on behalf of the joint venture and realised Rs Ram was entitled to a commission of 5 percent on sales. Unsold goods amounting to Rs.500 were taken over by Mohan. Ram settled accounts of Mohan and Rahim by bank drafts.
Prepare Joint venture, Mohan’s & Rahim’s accounts in Ram’s books.

13. Solution: Joint Venture account 21,300 Particulars
To Bank a/c (Purchases)
To Goods a/c (Goods Supplied)
To Rahim (Goods & Expenses)
To Bank a/c (Exps)
To Commission a/c (5%)
To Profit on Joint Venture Rs.
P/l a/c ,486
Mohan ,487
Rahim ,487
Amt (Rs)
13,000
1,000
1,550
250
1,040
4,460
By Bank a/c (Sales)
By Mohan (unsold goods taken)
20,800
500
21,300

14. Mohan’s account Rahim’s account
Particulars
To Joint Venture a/c
To Bank a/c
Amt(Rs)
500
5,987
By Bank a/c
By Joint Venture A/c (Profit)
5,000
1,487
6,487
Rahim’s account
Particulars
To Bank a/c
Amt(Rs)
8,037
By Bank a/c
By Joint Venture a/c
By Joint Venture a/c (Profit)
5,000
1,550
1,487

15. B) When separate sets of books is not maintained
Under this method, each co- venturer opens a joint venture account and personal accounts of the other co- venturers.
Problem> A and B enter into a joint venture to take a building contract for Rs.24,00,000.They provide the following information regarding the expenses incurred by them:
A B
Materials ,80, ,00,000
Cement ,30, ,70,000
Wages ,70,000
Architect’s Fee ,00,
Licence Fees ,000
Plant ,00,000

16. Plant was valued at Rs.1,00,000 at the end of the contract and B agreed to take it at that value. Contract amount of Rs.24,00,000 was received by Ram. Profit and losses are shared equally. You are asked to show:
i) Joint Venture and B’s a/c in the books of A.
ii) Joint Venture and A’s a/c in the books of B
assuming that the balance due has been settled between the venturers.

17. In the books of A Joint Venture a/c
Solution:
In the books of A Joint Venture a/c
Particulars
To Bank a/c:
Material 6,80,000
Cement 1,30,000
Architect’s
Fee 1,00,000
To B’s a/c:
Material 5,00,000
Wages ,70,000
Cement 1,70,000
L .Fees ,000
Plant ,00,000
To Net Profit:
B’s a/c ,00,000
P/l A/c ,00,000
Amt(Rs)
9,10,000
11,90,000
4,00,000
By Bank a/c
By B’s a/c (Plant)
24,00,000
1,00,000
25,00,000

18. In the books of A B’s a/c Particulars To Joint Venture a/c (Plant)
To Bank a/c
Amt(Rs)
1,00,000
12,90,000
By Joint Venture a/c (Sundries)
By Joint Venture a/c (Profit)
11,90,000
2,00,000
13,90,000

19. In the books of B Joint Venture a/c
Particulars
To Bank a/c:
Material 6,80,000
Cement 1,30,000
Architect’s
Fee 1,00,000
To B’s a/c:
Material 5,00,000
Wages ,70,000
Cement 1,70,000
L .Fees ,000
Plant ,00,000
To Net Profit:
B’s a/c ,00,000
P/l A/c ,00,000
Amt(Rs)
9,10,000
11,90,000
4,00,000
By Bank a/c
By B’s a/c (Plant)
24,00,000
1,00,000
25,00,000

20. In the books of B A’s a/c Particulars
To Joint Venture a/c (Contract Amount)
Amt(Rs)
24,00,000
By Joint Venture a/c (Sundries)
By Joint Venture a/c (Profit)
By Bank a/c
9,10,000
2,00,000
12,90,000

21. C) When separate set of books is maintained
In this method, no individual co-venturer makes a record in his individual books but a complete set of double entry books is used for writing up joint venture transactions.
The accounting treatment in this method is similar to that of partnership transactions.
This method is usually followed when the co-venturers are at the same place and when the joint venture undertaken is sufficiently large.

22. Problem:
A and B undertake jointly to construct a building for a contract price of Rs.25,00,000 payable as to Rs.20,00,000 by instalments in cash and Rs.5,00,000 in the fully paid shares of the company. A bank account is opened in their joint names, A paying Rs.6,25,000 and B Rs.3,75,000. they share profit or loss in 2:1 ratio respectively. Their transactions are: Rs.
Wages paid ,50,000
Bought Materials ,00,000
Materials supplied by A ,00,000
Materials supplied by B ,500
Architect’s fees paid by A ,000

23. The contract was completed and the price duly received
The contract was completed and the price duly received. The joint venture was closed by A taking up all the shares of the company at an agreed valuation of Rs.4,25,000 and B taking up stock of materials at an agreed valuation of Rs.42,500. Prepare necessary accounts.

24. Solution: Joint Venture Account Particulars To Joint bank a/c:
Materials
15,00,000
Wages 7,50,000
To A:
1,00,000
Architect’s
fees ,000
To B (Materials)
To Shares a/c-loss
To profit
A ,000
B ,000
Amt(Rs)
22,50,000
1,50,000
49,500
75,000
18,000
By Joint Bank a/c
By Shares a/c
By B (Materials taken over)
20,00,000
5,00,000
42,500
25,42,500

25. Joint Bank Account Share’s account
Particulars
To A
To B
To Joint Venture a/c
Amt(Rs)
6,25,000
3,75,000
20,00,000
By Joint Venture a/c
By A
By B
22,50,000
3,62,000
3,88,000
30,00,000
Share’s account
Particulars
To Joint Venture a/c
Amt(Rs)
5,00,000
By A’s a/c
By Joint Venture a/c
4,25,000
75,000

26. Co- Venturer’s account
Particular
To Shares
To Joint Venture a/c
To Joint Bank a/c
A(Rs)
4,25,000
---
3,62,000
B(Rs)
42,500
3,88,000
By Joint Bank a/c
By Joint Venture a/c
By joint Venture a/c
6,25,000
1,50,000
12,000
3,75,000
49,500
6,000
7,87,000
4,30,500

27. D) Memorandum Joint Venture Account Method
This method is followed when each co- venturer in a joint venture wants to make a record of joint venture transactions in his books.
This method is an alternative of (B) method and operates as follows:
i> Every co- venturer will open a personal account called Joint Venture with-(name of the other co- venturer) Account.
ii> In addition to the personal accounts, a Memorandum Joint Venture account is also opened to ascertain profit or loss.
iii>The balance in Joint Venture with-… account will show the amount due to or due from the other co- venturer.

28. Problem:
A and b entered into a joint venture of underwriting the subscription at par of 50,000 shares of Rs.10 each of a joint stock company. Their profit sharing ratio being 3:2 respectively. The consideration for guaranteeing the subscription was 500 other shares of the Rs.10 each fully paid to be issued by them.
the public took up 48,000 shares and remaining shares of the guaranteed issue were taken by A and B who provide cash equally. The entire shareholding of the venture was then sold through other brokers, 60% at a price of Rs.9.50 less brokerage 50 paise per share, 20% at Rs.9.75 less brokerage 50 paise per share and the balance was taken over by A and

29. Memorandum Joint Venture Account
B equally at Rs.9 per share. The share proceed were collected by A.
Show Memorandum Joint Venture and Joint Venture with B in the books of A and Joint venture with A in the books of B assuming the final settlement of accounts was made between A and B.
Memorandum Joint Venture Account
Particulars
To A (Purchase)
To B (Purchase)
To Profit:
A:3/ = 1,575
B:2/ =1,050
Amt(Rs)
10,000
2,625
By A (Sale)
WN(1)
By A (Shares taken)(1)
By B (Shares taken)(1)
18,125
2,250
22,625

30. Joint Venture with B Joint Venture with A Particulars To Bank a/c
To P/ L a/c
Amt(Rs)
10,000
1,575
8,800
By Bank a/c (Sales)
By Shares a/c
18,125
2,250
20,375
Joint Venture with A
Particulars
To Bank a/c
To P/ L a/c
Amt(Rs)
10,000
1,050
By Bank a/c (Sales)
By Shares a/c
2,250
8,800
11,050
Working Notes:
Total no of shares to be sold are as follows:
Total no of shares underwritten ,000
(-)No. of shares subscribed by the public ,000
No of shares purchased on account of joint venture = 2000
(+)Number of shares received as commission
= 2500

31. Interest
Problem>
V and W entered into a joint venture for purchase and sale of cotton. Their profit ratio being 2:1 and are also entitled to an interest of 12%/annum(on monthly basis) on money received as well as invested. Following transactions took place:
On , V purchased 1000 bales of brokerage being Rs10/bale
On , W purchased 500 bales of brokerage being Rs10/bale
0n ,V sold 800 brokerage being Rs12/bale and took proceeds to himself.
0n ,W sold 600 brokerage being Rs10/bale and took proceeds to himself.

32. It was also agreed that each co- venturer will at first sell from his own purchases and then, if need be, from the goods purchased by the other co-venturer . The balance stock left unsold was taken by V at cost on when the accounts were settled between the coventurers.
You are required to show the accounts as would appear when maintained in a separate set of books.

33. Solution: Joint Venture account Particulars 2010 J-1 To V (Purchases+
Brokerage)
F-1 To W
A-30 To V
(20,400- 8,960)
A-30 To W
(7,950-3,420)
A -30 To Profit:
V ,353
W ,677
Amt(Rs)
5,10,000
2,65,000
11,440
4,530
50,030
F-28 By V
(sales-
A-1 By W
(Sales-
A-30 By V
(stock taken)
4,48,000
3,42,000
51,000
8,41,000

34. V’s account W’s account
Particulars
2010
F-28 To Joint
Venture-Sales
A-30 To Joint
Venture
A-30 To Joint Bank
Amt(Rs)
4,48000
51,000
55,793
J-1 By Joint
Venture-Purchase
A-30 By Joint
Venture-Interest
Venture a/c-Profit
5,10,000
11,440
33,353
5,54,793
W’s account
Particulars
2010
A-1 To Joint
Venture-Sales
Amt(Rs)
3,24,000
F-1 By Joint
Venture-Purchase
A-30 By Joint
Venture-Interest
-Profit
A-30 By Joint Bank
2,65,000
4,530
16,677
55,793

35. Joint Bank Account
Particulars
2010
A-30 To W
Amt(Rs)
55,793
A-30 By V

36. Conversion Of Consignment Into Joint Version
Problem>
On R consigned 100 table fans to S of Panipat, each costing Rs200.They were invoiced at Rs250 each. Freight and insurance charger paid by R amounted to Rs table fans were damage in transit and on R received Rs500 on account of damaged fan from the insurance company.
S took the delivery and accepted the a bill for Rs10,000 for 3 months. R got it discounted at 12%/annum.
On , S sent an account sales showing:
85 table were sold
Damaged fans

37. He had incurred the following expenses:
Rs.
Octroi and carriage inwards
Godown expenses
Selling Expenses
S is entitled to a commission of Rs.20 per table fan sold plus 1/5th of the amount by which the gross sales proceeds exceeds a sum calculated at the invoice price. The commission is not payable on the sale of damaged fans. S remitted the balance due from him.
After the preparations of the accounts it was decided that the relationship between R and S should be one of joint venture, the cost of table fan being taken at Rs220. under new agreement S is entitled to commission of 5%on all sales and R is entitled to on his capital outlay. R’s accounting year ends on

38. Consignment To Panipat account
Particulars
2010
A-1 To goods sent
on consignment
a/c
A-1 To Cash
(freight &
insurance)
J-30 To S (Expense)
J-30 To S (Comm.)
( )
J-30 To Stock
Reserve
(10 each)
J-30 To Profit on
consignment
transferred to
P/l a/c
Amt(Rs)
25,000
500
1,870
2,050
J-30, 2010
By Bank (Insurance claim)
By S (Sales)
By S (Sale of damaged fans)
By consignment stock a/c:
Invoice price of each
Add:
Proportionate
(freight&
Insurance)
(octroi &
Cartage)
Bt goods sent on consignment-loading
22,100
650
2,570
5000
30,820

39. Goods Sent On Consignment Account
Particulars J
To consignment to Panipat a/c
To Trading a/c
Amt(Rs)
5,000
20,000
2010 April
By consignment to Panipat a/c
25,000
S’s Account
Particulars
June
To Consignment to Panipat a/c( sale of 85 fans)
To Consignment to Panipat a/c (sale of damaged fans)
Amt(Rs)
22,100
650
2010
A-1 By Bills Receivable a/c
June 30
By Consignment to Panipat a/c (Exps)
By Consignment to Panipat a/c-Comm.
By Bank a/c
10,000
900
1,870
9,980
22,750

40. Memorandum Joint Venture Acccount
Particulars
To Goods(100
To Expenses (R)
To Discount
To Expenses (S)
To commission (S-5% on 22, )
To Interest to R
(12,800x12%x 3/12)
To Stock Reserve
To Profit on Venture: R S
Amt(Rs)
22,000
500
300
900
1,138
384
200 98
By sales(85 Rs260)
By sales (Damaged fans)
By Insurance Claim
By Consignment Stock a/c
Cost
Proportionate
Freight &
Insurance
Octroi &
Cartage
22,100
650
2,270
25,520

41. Thank you