by When there are no separate books of accounts for the joint venture, in this case, each Co-venturer can maintain the records in the following two ways:
- Keep records of all the transactions
- Keep records of own transactions only
When the co-venturers choose to keep the record of their own transactions only, then we prepare the Memorandum Joint Venture A/c. In this case, each co-venturer records only his own transactions.
However, we cannot ascertain the profit or loss from the venture from this account. For determining the profit or loss of the Joint Venture, they prepare ‘Memorandum Joint Venture A/c’.
Each co-venturer sends a periodic statement of his transactions relating to the joint venture to the other co-venturers.
This statement helps in the preparation of the Memorandum Joint Venture A/c. As this account is not a part of the double entry system, we call it memorandum A/c.
Journal Entries
| Date | Particulars | Amount (Dr.) | Amount (Cr.) | |
| 1. Receipt of any amount or bill from other co-venturer | Cash/ Bank/ Bills receivable A/c | Dr. | XXX | |
| To Joint Venture with Co-venturer’s A/c | XXX | |||
| (Being receipt of money or bill from the other co-venturer) | ||||
| 2. On discounting of B/R | Bank A/c (amount received) | Dr. | XXX | |
| Joint Venture with Co-venturer’s A/c (discount) | Dr. | XXX | ||
| To Bill Receivable A/c | XXX | |||
| (Being bill discounted with the bank) | ||||
| 3. Purchase of goods for venture | Joint Venture with Co-venturer’s A/c | Dr. | XXX | |
| To Cash/ Bank A/c | XXX | |||
| To Supplier’s A/c | XXX | |||
| (Being cash or credit purchase of goods for Joint Venture) | ||||
| 4. On payment to supplier | Supplier’s A/c | Dr. | XXX | |
| To Bank A/c (amount paid) | XXX | |||
| To Joint Venture with Co-venturer’s A/c (discount received) | XXX | |||
| (Being payment to the supplier) | ||||
| 5. Supply of goods out of business | Joint Venture with Co-venturer’s A/c | Dr. | XXX | |
| To Purchases/ Goods sent to Joint venture A/c (when at cost) | XXX | |||
| To Sales A/c (when at profit) | XXX | |||
| (Being supply of goods to Joint Venture from the business stock) | ||||
| 6. On payment of expenses | Joint Venture with Co-venturer’s A/c | Dr. | XXX | |
| To Cash/ Bank A/c (cash expenses) | XXX | |||
| To Creditors A/c (outstanding expenses) | XXX | |||
| (Being payment of expenses of the joint venture) | ||||
| 7. On the sale of goods | Cash/ Bank A/c (cash sales) | Dr. | XXX | |
| Customer’s A/c (credit sales) | Dr. | XXX | ||
| To Joint Venture with Co-venturer’s A/c | XXX | |||
| (Being sale of goods) | ||||
| 8. Receipt from customers | Cash/ Bank A/c (amount received) | Dr. | XXX | |
| Joint Venture with Co-venturer’s A/c (discount allowed) | Dr. | XXX | ||
| To Customer’s A/c | XXX | |||
| (Being receipt of the amount from the customers) | ||||
| 9. On taking unsold goods | Goods sent on Joint venture A/c | Dr. | XXX | |
| To Joint Venture with Co-venturer’s A/c | XXX | |||
| (Being unsold goods taken) | ||||
| 10. Commission or salary to the co-venturer | Joint Venture with Co-venturer’s A/c | Dr. | XXX | |
| To Commission/ Salary A/c | XXX | |||
| (Being commission or salary payable to the co-venturer) | ||||
| 11. On profit from the venture | Joint Venture with Co-venturer’s A/c | Dr. | XXX | |
| To Profit and Loss A/c | XXX | |||
| (Being profit on joint venture) | ||||
| 12. On loss from venture | Profit and Loss A/c | Dr. | XXX | |
| To Joint Venture with Co-venturer’s A/c | XXX | |||
| (Being loss on venture) | ||||
| 13. For settlement of balance of Joint Venture with Co-venturer’s A/c | ||||
| a. When debit balance | Cash/ Bank A/c | Dr. | XXX | |
| To Joint Venture with Co-venturer’s A/c | XXX | |||
| (Being settlement of Joint Venture with Co-venturer’s A/c) | ||||
| b. When credit balance | Joint Venture with Co-venturer’s A/c | Dr. | XXX | |
| To Cash/ Bank A/c | XXX | |||
| (Being settlement of Joint Venture with Co-venturer’s A/c |
Important features of memorandum method are given as hereunder:
- Only one personal account is opened by each co-venturer in his book named Joint Venture account with…………… (Name of other co-venturer). Same process will be followed by other co-venturer in his books of accounts.
- Only one personal account will be opened by each co-venturer irrespective of the fact, how many other co-venturers are exists. For example, there is a joint venture of 4 person A,B,C, & D; now, A in his books will open only one personal account named as Joint venture with B,C, & D account.
- Each party will record only those transactions in his book, which are done by him; the transactions done by other co-venturers will be ignored.
- In addition to above said personal account, a combined account named as “memorandum joint venture account” will also be opened.
- Memorandum account is merely a combined account of personal accounts opened by each co-venturer. Debit side of personal account will be transferred to the memorandum account and the credit side of personal account will be transferred to the credit side of memorandum account.
- Transactions done by co-venturers among themselves including cash received or paid by one co-venturer to other will be ignored at the time of preparation of a memorandum account.
- Balance of memorandum joint venture account will represent profit or loss of the particular business. Further, the profit or loss will be transferred to the individual co-venturer account in their profit sharing ratio.
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