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Meaning of Joint Venture



Joint venture is a partnership without the use of a firm name. It is a temporary partnership between two or more persons confined to a particular venture or piece of business. A joint venture is an association of two or more persons who combine for the execution of a particular transaction. Persons agreeing to work in a joint venture are called co-venturers .co-venturers bring into the business their share of capital and divide the profit of the venture in an agreed ratio. Joint venture business comes to an end as soon as the venture is over.

Features of joint venture

 

The main characteristic features of a joint venture are as follows :
 

(a)   it is an agreement between two or more persons.

 

(b)   no specific name of the firm is necessary for a joint venture business.

 

(c) the object is execution of a specific work.

 

(d)   theventurers share profits or losses in an agreed ratio. In the absence of any agreement, it is assumed to be equal.

 

(e)   the venture comes to an end as soon as the venture is completed. Hence it is temporary in nature.

 

(f) theventurers may do any type of business of their own during the course of the venture.

Benefit of Joint Venture



A joint venture business has the following benefits :
 

(i) sharing of risk. The risk of the joint venture transaction is not to be borne only by one person.

 

(ii)   financial resources. Financial resources are collected by two or more persons in the joint venture transaction.

 

(iii)  sufficient experience. More people can come together in a joint venture business having wide experience in a particular line. Combine together to undertake costly and profitable projects and execute them efficiently.

Ways of keeping joint venture Accounts


 

1.  Separate set of Books.
 

(Joint Venture; Joint Bank; Co-venture A/c.)_____________________ Entries.

2. 
Record in the Books of one venturer.

(Joint Venture; Co-venture A/c.) ______________________________Entries
 

3.  Record in the Books of All Co-ventures.
“(Co-venture’s A/c.)


Journal Entries for joint venture Accounts

 

 

On Deposit of Capital:

On Deposit of Capital brought in by the Co-Venturer into bank

 

Joint Bank A/c  

        Dr.  

 

[with total]

 

 

To Co-Venturers' Personal A/cs

[with individual sum contributed)



 

 




2. On purchase of Goods

 

(a)For Cash Joint Venture A/c     

        Dr.  

 

 

To Joint Bank A/c

On Credit Joint Venture A/c     

        Dr.  

 

 

To Supplier's A/c

 


 

 



3. 
(a)  On Making Payment to Supplier of Goods

 

Supplier's A/c

Dr.                  

 

[with total]

 

To Cash/Bank A/c/B/P A/C

[with Payment made]             

 

To Joint Venture A/c 

[with Discount Received]

                       

(b) On Discharging Bills Payable

 

Bills Payable A/c

Dr.                  

 

 

To Bank A/c

       

 

 


4. On Supply of Goods out of Own Stock by any of the Co-Venturers

 

Joint Venture A/c

Dr.                  

 

 

To Co-Venturer's Personal A/c

 

       

 

 


5. On Payment of Expenses

 

(a)   Out of Joint Bank A/c

 

Joint Venture A/c

Dr.                  

 

 

To Joint Bank A/c

                       

(b)   By any Co-Venturer

 

Joint Venture A/c

Dr.                  

 

 

To Co-Venturer's Personal A/c



 

 

 


6. On Sale of Goods

 

(a) For Cash
 

Joint Venture A/c

Dr.                  

 

To Joint Venture A/c

       

(b)   On Credit

 

Customers' A/c        

Dr.                  

 

To Joint Venture A/c


 

 

 


7. (a) On Receiving Payment from a customer

 

Cash/Bank A/c/B/R A/c

Dr.  

       

[with Payment received]

Joint Venture A/c       

Dr.  

[with Discount allowed/Bad debts]

       

        To Customer's A/c    

 

[with total]

 

(b) On Discounting Bills Receivable

 

Bank A/c  

Dr.  

[with Net]

Joint Venture A/c       

        Dr.  

 

[with Discount]

       

        To Bills Receivable A/c     

 

[with total]



 

 

 


8. On Sale of Good by any of the Co-Venturers

 

Co-Venturer's Personal A/c

Dr.

Joint Venture A/c     

        To Joint Venture A/c


 

 

 


9. On Taking away of Unsold Stock in Full/in Part by any of the Co-Venturers

 

Co-Venturer's Personal A/c

Dr.

 

        To Joint Venture A/c


 

 

 


10. When any Co-Venturer is entitled to Some Commission/Salary

 

Joint Venture A/c     

Dr.

 

        To Co-Venturer's Personal A/c



 

 


11.   On Transferring the Balance of Joint Venture Account

 

(a)   In case of Profit

 

Joint Venture A/c

Dr.

 

 

To Co-Venturer's Personal A/c

[In Agreed Ratio]

                       

(b)   In case of Loss

 

All Co-Venturers Personal A/c    

Dr.

[In Agreed Ratio]

 

        To Joint Venture A/c

[In Agreed Ratio]

               


 

 


12.   On Settlement of the Balance of Personal Accounts of Co-Venturers

 

(a)   In case of a Debit balance
 

Joint Bank A/c  

Dr.

 

        To Co-Venturer's Personal A/c

               

(b)   In case of a Credit balance

 

Co-Venturer's Personal A/c

Dr.

 

        To Joint Bank A/c






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