by Co-Venturer’s Account is prepared to record transactions between co-venturers, including contributions, expenses, sales, and the settlement of profits or losses. This account helps track individual shares and ensures transparency in managing the joint venture’s financials.
Features of Co-Venturer’s Account:
- Personal Nature:
It is a personal account prepared by one co-venturer to record the activities related to the other co-venturer.
- Two-Sided Record:
The debit side includes expenses incurred or payments made on behalf of the other co-venturer, while the credit side includes amounts received or profits credited to the co-venturer.
- Balance Settlement:
At the end of the venture, the balance in the account is settled in cash or other agreed terms.
illustration: Preparation of Co-Venturer’s Account
Scenario:
Two co-venturers, A and B, agree to undertake a joint venture to trade in mobile phones.
- A contributes ₹1,00,000 in cash and incurs ₹20,000 on advertising.
- B contributes mobile phones worth ₹1,50,000 and incurs ₹10,000 on transportation.
- Total sales amount to ₹2,70,000, and unsold stock is valued at ₹30,000.
- Profits are shared equally.
Steps to Prepare Co-Venturer’s Account
- Record contributions and expenses incurred by both co-venturers.
- Record the revenue from sales and adjust the value of unsold stock.
- Determine the profit or loss and allocate it as per the agreed ratio.
- Calculate the net balance payable/receivable by each co-venturer.
Co-Venturer’s Account in the Books of A
| Date | Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|---|
| Opening Contributions | – | – | – |
| YYYY-MM-DD | To Cash (B’s Contribution) | – | 1,50,000 |
| YYYY-MM-DD | To Joint Venture A/c (Expenses by B) | – | 10,000 |
| Revenue and Stock Adjustments | – | – | – |
| YYYY-MM-DD | To Joint Venture A/c (Sales) | – | 1,35,000 |
| YYYY-MM-DD | By Joint Venture A/c (Unsold Stock) | 15,000 | – |
| Profit Allocation | – | – | – |
| YYYY-MM-DD | To Joint Venture A/c (Profit Share) | – | 45,000 |
| YYYY-MM-DD | By Joint Venture A/c (Profit Share) | 45,000 | – |
| Settlement | – | – | – |
| YYYY-MM-DD | By Cash (Net Balance Payable to B) | 60,000 | – |
Explanation of Entries
- Opening Contributions:
- B’s contribution of ₹1,50,000 in goods is credited.
- Expenses incurred by B (₹10,000) are also credited to his account.
- Revenue from Sales:
- The total sales amount is shared equally (₹1,35,000 credited to B).
- Unsold Stock:
- The value of the unsold stock is ₹30,000, half of which (₹15,000) is debited to B.
- Profit Sharing:
- The total profit is shared equally between A and B, recorded on both sides.
- Settlement:
- After balancing the account, B is owed ₹60,000, which is settled in cash.
Profit Calculation
- Revenue from Sales: ₹2,70,000
- Less: Expenses by A and B: ₹20,000 + ₹10,000 = ₹30,000
- Add: Unsold Stock: ₹30,000
- Profit: ₹2,70,000 – ₹30,000 + ₹30,000 = ₹2,70,000
- Profit Share: ₹1,35,000 each for A and B.
Final Balance Settlement
- Total Credits in B’s Account:
- Contribution (₹1,50,000)
- Expenses (₹10,000)
- Sales Share (₹1,35,000)
- Profit Share (₹45,000)
- Total: ₹3,40,000
- Total Debits in B’s Account:
- Unsold Stock (₹15,000)
- Profit Share Adjustment (₹45,000)
- Cash Paid (₹60,000)
- Total: ₹1,20,000
- Net Balance: ₹3,40,000 – ₹1,20,000 = ₹2,20,000 (Paid to B).
Key Points to Note
- The Co-Venturer’s Account reflects all joint venture-related transactions with the other co-venturer.
- Proper record-keeping ensures accurate profit sharing and settlement.
- Adjustments for unsold stock, expenses, and revenue are crucial for fairness.
