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Method 1 - Recording in a separate set of books

Under this method, all joint venture transactions are recorded in a separate set of books maintained for this purpose. Generally, the following accounts are opened in a separate set of books:
  • Joint venture account which is nominal in nature is used to calculate the profit/loss on joint venture.It shows purchases of goods, expenses of venture, sale of goods etc.
  • Joint bank account which is a real account is used to record cash and bank transactions
  • Co-venturer’s personal account, which are personal in nature are used to record their dealings with the joint business and to ascertain the amount due to/from them. They show investments, receipts, drawings, entitlements etc. by the co-venturer

Note: Balance of Joint venture account will show profit or loss of the business and is distributed between co- venturers in an agreed ratio.

Journal Entries


Note: Unless specifically mentioned, the discount charges on discounting a bill are to be debited to Joint Venture account

Illustration 1


X, Y and Z of Hyderabad decided to purchase sugar from Karnataka and sell it on joint venture. On 1st October, they invested ₹ 48,000, ₹ 36,000 and ₹ 24,000 respectively, which was deposited to a Joint bank account. They divide profits and losses in the ratio of capital. On 4th October, ₹ 96,000 was remitted to the commission agent of Karnataka. He purchased sugar for ₹ 84,000 and charged ₹ 12,000 for his expenses and commission.


On 15th October, on receiving goods at Hyderabad, ₹ 7,500 was paid for freight, octroi etc. Up to 31st December, total sales of sugar was ₹ 1,30,800, on which sales commission of ₹ 4,500 was paid. The balance of stock of sugar was purchased by Z for ₹ 4,200. On completion of the joint venture, the capital of the co-ventures was refunded. Make journal entries and prepare necessary ledger accounts.




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