Maintenance of accounts in the Books of Co-venturers

22/07/2020 2 By indiafreenotes

When one of the Venturers keeps Accounts

If one of the co-venturers is appointed to manage the joint venture, he is awarded an extra commission or remuneration out of the profit for his services.

Journal Entries

When share of investment received from other co-venturers Cash/Bank A/cDr

To Co-venturers A/c

When goods are purchased Joint Venture A/cDr

To Cash A/c (in case of cash purchase)

Or

To Creditors A/c (for credit purchase)

When expenses incurred Joint Venture A/cDr

To Cash A/c

When goods are sold Cash A/cDr

Or

Debtors A/cDr

To Joint Venture A/c

When commission allowed to working co-venturer Joint Venture A/cDr

To Commission A/c

In case of Profit balance of joint venture, account will be transferred to profit & Loss (own share of working co-venturer) and other co-venture’s personal accounts Joint Venture A/cDr

To Profit & Loss A/c

To Co-venturers personal A/c

In case of Loss Profit & Loss A/cDr

To Joint Venture A/c

On settlement of accounts All Co-venturer A/cDr

To Cash/Bank A/c

When Separate Books of Accounts are kept for the Joint Venture

Under this method, all co-venturers contribute their share of investment and deposit their shares in a Joint Bank account newly opened for the specific purpose of the Joint Venture. They may use this bank account to make any kind of payments and to deposit sale proceeds or any other kind of receipts.

In addition to Bank account, a Joint venture account is also opened in the books to keep records of all transactions routed through this account.

This category of accounts is a personal account of the each co-venturer. Thus following three accounts are opened:

  • Joint Bank Account
  • Joint Venture Account
  • Personal account of co-venturers

When Separate Books of Accounts are not kept for the Joint Venture

It is of two types:

  • When all venturers keep separate accounts
  • Memorandum joint venture method

When all Venturers keep Separate Accounts:

  • Separate Joint venture account and personal accounts of other co-venturers are opened under this method of accounting.
  • Joint venture account is debited and bank account or creditor account is credited on the account of goods purchased or expensed.
  • Joint venture account is credited and a bank account or debtor account is debited in case of either cash sale or credit sale.
  • Each co-venturer debits joint venture account and credits personal accounts of other co-venturer on the account of either goods purchased or expensed by other co-venturers.
  • Joint venture account is credited and personal account of others co-venturer account is debited in case of sale made by other co-venturers.
  • Joint venture account is debited and commission account is credited if, commission is receivable, but if commission is receivable by other co-venturer, then the concerned co-venturer account will be credited instead of the commission account.
  • If unsold stock is taken, then goods account will be debited by crediting Joint venture account. On the other hand, if unsold stock is taken by any other co-venturer, then personal account of the co-venturer will be debited.
  • Balance in the joint venture accounts represents profit or loss and later that amount of profit or loss will be transferred to the personal accounts of co-venturers.

Note: Above transactions are possible only when all the co-venturers exchange information’s on regular basis.