1. J OINT V ENTURE A CCOUNTS PI

2. M EANING OF J OINT V ENTURE 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. C HARACTERISTICS OF A J OINT V ENTURE 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.

4. D IFFERENCE BETWEEN J OINT V ENTURE AND C ONSIGNMENT Relation between Parties: JV- Is that of owners. C- Is that of principle and agent. 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.

5. J OINT V ENTURE V S C ONSIGNMENT (C ONTD.) 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.

6. J OINT V ENTURE V S C ONSIGNMENT (C ONTD.) 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- Generally sales are made at consignor’s risk. Scope: JV- Wide as it covers many activities besides trade. C- Limited only for trade.

7. D ISTINCTION BETWEEN J OINT V ENTURE & P ARTNERSHIP 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- Going concern

8. J OINT V ENTURE V S P ARTNERSHIP (C ONTD.) Liability: JV- Limited to the venture concerned. P-Unlimited to the extent of business and private estate. No of Members: JV- Number of members can be unlimited. P- Limited to 20 in ordinary trade and 10 in banking business.

9. M ETHODS OF R ECORDING J OINT V ENTURE T RANSACTIONS i) When separate set of books is maintained. ii) When separate sets of books is not maintained. (a) each co-venture maintains a complete record of all the Joint Venture transactions (b) each co-venture maintains a record of his/her own transactions

10. ( I ) W HEN SEPARATE SET OF BOOKS IS MAINTAINED. Characteristics: Generally a large venture Duration of the venture is protraced Following accounts are commonly maintained: Joint bank account Co-ventures’ accounts Joint Venture account

11. SEPARATE SET OF BOOKS IS MAINTAINED. Accounting entries in books of Joint Venture 1. For cash contribution by the ventures Joint Bank AccountDr. Co-ventures’ AccountCr. 2. For goods purchased Joint venture AccountDr. Joint Bank Account/Cr. Accounts Payable/ Co-ventures’ Accounts 3. For expenses Joint venture AccountDr. Joint Bank Account/Cr. Accounts Payable/ Co-ventures’ Accounts

12. SEPARATE SET OF BOOKS IS MAINTAINED (C ONTD.) 4. For goods sold Joint Bank Account/Dr. Accounts Receivable/ Co-ventures Account Joint Venture AccountCr. 5. For goods taken over by the co-ventures Co-ventures AccountDr. Joint Venture AccountCr. 6. For collection from debtor Joint Bank AccountDr. Accounts ReceivableCr. 7. For Bad bebts Joint Venture Account Dr. Accounts ReceivableCr……………….?????

13. SEPARATE SET OF BOOKS IS MAINTAINED (C ONTD.) 8. For payment to creditors Accounts payableDr. Joint bank AccountCr. 9. For commission payable to any managing venture Joint venture accountDr. Co-ventures accountCr. 10. To transfer the profit/loss to co-ventures accounts (a) For profit Joint venture accountDr. Co-ventures accountCr. (b) For loss Co-ventures accountDr. Joint venture accountCr.

14. SEPARATE SET OF BOOKS IS MAINTAINED (C ONTD.) 11. For final settlement (a) when co-ventures’ account shows debit balance Joint Bank AccountDr. Co-ventures’ AccountCr. (b) when co-ventures’ account shows credit balance Co-ventures’ AccountDr. Joint Bank AccountCr.

15. E XAMPLE D and G entered into a joint venture to construct a building, with a profit sharing ratio 3.2 D and G invested $200,000 and $100,000 respectively D supplied materials amounting $35,000 G paid a fees of $15,000 and supplied a machine of $25,000 Building materials $400,000 and salaries $100,000 met from the joint venture account After completion the joint venture received $800,000, $400,000 cash and remaining balance by shares of $10 each. Shares were sold for $9.5 each and D and G shares the amount with the ratio of 3.1. G took the machine back with an agreed amount of $15,000 Bank interest charged $1,000

16. ( I ) W HEN SEPARATE SET OF BOOKS IS NOT MAINTAINED. Characteristics: Generally a small venture Co-ventures are residing at distance place (a) each co-venture maintains a complete record of all the Joint Venture transactions Following accounts are commonly maintained: Co-ventures’ accounts Joint Venture account

17. ( A ) EACH CO - VENTURE MAINTAINS A COMPLETE RECORD OF ALL THE J OINT V ENTURE TRANSACTIONS Accounting entries in books of each Co-ventures 1. For cash contribution by the venture Joint Venture AccountDr. Cash/BankCr. 2. For goods purchased Joint venture AccountDr. Cash/Bank Account/Cr. Accounts Payable/ Purchase Account (if paid from own stock)/ Co-ventures’ Accounts 3. For expenses Joint venture AccountDr. Joint Bank Account/Cr. Accounts Payable/ Co-ventures’ Accounts

18. SEPARATE SET OF BOOKS IS MAINTAINED (C ONTD.) 4. For goods sold Cash/ Bank Account/Dr. Accounts Receivable/ Co-ventures Account Joint Venture AccountCr. 5. For goods taken over by the co-ventures Co-ventures AccountDr. Joint Venture AccountCr. 6. For goods taken over for business/own purpose Purchase/DrawingsDr. Joint Venture AccountCr.

19. SEPARATE SET OF BOOKS IS MAINTAINED (C ONTD.) 7. To transfer the profit/loss to co-ventures accounts (a) For profit Joint venture accountDr. Income statement/ Cr. Co-ventures account (b) For loss Income statement/Dr. Co-ventures account Joint venture accountCr.