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JOINT VENTURE NOTES

JOINT VENTURE NOTES – B.COM FIRST YEAR NOTES

Posted on July 19, 2022February 20, 2025 By commerceiets

Joint Venture notes on different methods of recording transactions relating to joint venture; difference between consignment and joint venture; difference between joint venture and partnership.

QUESTION: Explain different methods of recording transactions relating to Joint Venture?

JOINT VENTURE: The Joint venture may be defined as temporary partnership between two or more persons without the use of firm’s name for a specific purpose and limited time period. In other words, two or more persons agree to undertake a particular venture and to share the profits and losses thereof in an agreed ratio. The relationship of co-venturers is governed by the partnership law of land.

The various methods of recording transactions in joint venture are as follows:

JOINT VENTURE NOTES
JOINT VENTURE NOTES

METHOD 1: SEPARATE SET OF BOOKS ARE MAINTAINED

When this method this followed of maintaining the accounts of the joint venture, then following accounts are opened:

  • JOINT BANK ACCOUNT
  • CAPITAL ACCOUNTS OF EACH CO-VENTURER
  • JOINT VENTURE ACCOUNT
  • ANY OTHER ACCOUNT OF DEBTOR, CREDITOR ETC. (if required).

The journal entries passed under this method are as follows:

FOR CAPITAL CONTRIBUTED BY CO-VENTURERS
Joint Bank A/c    Dr.
    To co-venturers personal A/c
FOR PURCHASE OF GOODS AND ASSETS FOR JOINT VENTURE
For Cash
Joint Venture A/c     Dr.
    To Joint Bank A/c
On Credit
Joint Venture A/c     Dr.
     To Supplier’s A/c
ON PAYMENT OF EXPENSES
Joint Venture A/c    Dr.
     To Joint Bank A/c
ON SALE OF GOODS
For Cash
Joint Bank A/c    Dr.
     To Joint Venture A/c
On Credit
Customer’s A/c   Dr.
    To Joint Venture A/c
FOR PROFIT ON JOINT VENTURE
Joint Venture A/c Dr.
    To Co-venturer’s personal A/c
FOR LOSS ON JOINT VENTURE
Co-Venturer’s Personal A/c Dr.
    To Joint Venture A/c
FINAL SETTLEMENT OF ACCOUNTS
For amount due from co-venturers
Joint Bank A/c   Dr.
     To co-venturers personal A/c
For amount due to co-venturers
Co-venturers personal A/c    Dr.
     To Joint Bank A/c
JOINT VENTURE NOTES

METHOD 2: JOINT VENTURE RECORDS MAINTAINED BY ONE OF THE CO-VENTURERS

Under this method, all the Joint Venture transactions are recorded by one of the co-venturers in his own books of accounts. In the books, the co-venturer is authorized to record joint venture transactions. Generally, the following accounts are opened under this method:

  • JOINT VENTURE ACCOUNT : To calculate the profit or loss on the joint venture.
  • PERSONAL ACCOUNT OF OTHER CO-VENTURERS: To record the joint venture transactions effected by other co-venturers and to ascertain the amount due from other co-venturer or due to another co-venturer.

The journal entries under this method are as follows:

FOR CASH SUPPLIED BY CO-VENTURERS
Cash/ Bank A/c    Dr.
    To co-venturers personal A/c
FOR PURCHASE OF GOODS AND ASSETS FOR JOINT VENTURE
For Cash
Joint Venture A/c     Dr.
    To Cash A/c
For goods supplied by self
Joint Venture A/c     Dr.     
To Purchases A/c
ON PAYMENT OF EXPENSES
Payment of expenses by self
Joint Venture A/c    Dr.
     To Cash/ Bank A/c
Payment of expenses by other co-venturer
Joint Venture A/c  Dr.    
To co-venturer personal A/c
ON SALE OF GOODS
For Cash
Cash/ Bank A/c    Dr.
     To Joint Venture A/c
On Credit
Customer’s A/c   Dr.
    To Joint Venture A/c
FOR PROFIT ON JOINT VENTURE
Joint Venture A/c Dr.
    To Profit and Loss A/c
    To Co-venturer’s personal A/c
FOR LOSS ON JOINT VENTURE
Co-Venturer’s Personal A/c Dr.
Profit and Loss A/c    Dr.
    To Joint Venture A/c
FINAL SETTLEMENT OF ACCOUNTS
For amount due from  co-venturers
Cash/ Bank A/c   Dr.
     To co-venturers personal A/c
For amount due to co-venturers
Co-venturers personal A/c    Dr.
     To Cash/ Bank A/c
JOINT VENTURE NOTES

METHOD 3: JOINT VENTURE RECORDS MAINTAINED BY ALL CO-VENTURERS

Under this method each venturer open a joint venture account and the personal accounts of the other co-venturers. Suppose A and B enter into a joint venture then in A’s books joint venture account and the personal account of B will be opened. Similarly, in the books of B joint venture account and the personal account of a will be opened.

The journal entries to be passed are as follows:

EXPENDITURE IS INCURRED OR GOODS SUPPLIED BY SELF
Joint Venture a/c Dr.
    To Cash Account (for expenses)
    To Purchases Account (for purchases)
EXPENSES IS INCURRED OR GOODS SUPPLIED BY CO-VENTURER
Joint Venture A/c
     To Co-venturer Personal A/c
FOR UNSOLD STOCK TAKEN OVER BY SELF
Purchases A/c  Dr.
  To Joint Venture A/c
FOR UNSOLD STOCK TAKEN OVER BY CO-VENTURERS
Joint Venture A/c   Dr.
    To Co-venturer A/c
FOR PROFIT ON JOINT VENTURE
Joint Venture A/c Dr.
    To Profit and Loss A/c
    To Co-venturer’s personal A/c
FOR LOSS ON JOINT VENTURE
Co-Venturer’s Personal A/c Dr.
Profit and Loss A/c    Dr.
    To Joint Venture A/c
JOINT VENTURE NOTES

METHOD 4: OWN RECORDS ARE MAINTAINED BY ALL CO-VENTURERS OR MEMORANDUM METHOD

Under this method, a co-venturer records only those transactions in which he himself entered into. Only one account is maintained under this method i.e. ‘Joint Venture with Co-Venturer Account.’

The Journal entries to be passed are as follows:

GOODS PURCHASED FOR CASH
Joint Venture a/c Dr.
    To Cash Account
GOODS SUPPLIED FROM OWN STOCK
Joint Venture A/c Dr.
    To Purchases A/c
EXPENSES INCURRED ON ACCOUNT OF JOINT VENTURE
Joint venture A/c   Dr.
     To Cash/ Bank A/c
FOR SALES MADE
On Cash basis
Cash/ Bank A/c    Dr.
     To Joint Venture with…. A/c
On Credit basis
Joint Venture with…. A/c    Dr.
     To Cash/ Bank A/c
FOR UNSOLD STOCK TAKEN OVER BY SELF
Purchases A/c  Dr.
  To Joint Venture with… A/c
FOR PROFIT ON JOINT VENTURE
Joint Venture A/c Dr.
    To Profit and Loss A/c
FOR LOSS ON JOINT VENTURE
Profit and Loss A/c    Dr.
    To Joint Venture A/c
JOINT VENTURE NOTES
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UNIVERSITY STUDENT NOTES Tags:JOINT VENTURE, joint venture vs consignment, joint venture vs partnership, methods of recording transactions in joint venture

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