JOINT VENTURE ACCOUNT

Meaning:

When two or more persons undertake to get involved in a particular venture, other than normal
business activities, for a temporary period to which they contribute capital and share profits or
losses on some agreed ratio, it’s called a joint venture and it ceases with completion of the task
undertaken. It is regarded as temporary partnership without a firm name.

For example, if X and Y undertake the job of construction of a cinema theatre for a sum of Rs 20,
00,000, their coming together for this specific job can be termed as joint venture and each one of
them may be called a ‘Co-venture’. The venture will be over as soon as this transaction is over i.e
the construction of cinema theatre is completed.

Accounting for Joint Ventures

I. when a separate set of books II. When separate set of books III. Memorandum Joint venture

Books is Kept is not kept Method

1. Joint venture A/c 1. Joint venture A/c 1. Joint venture A/c

2. Co-ventures A/c 2. A/c of the other co-ventures 2. Memorandum Joint venture A/c

3. Joint bank A/c

I. When a separate set of books

[Link] Particulars Dr Cr
1 For cash contributed by each venture towards the joint venture:
Joint Bank A/c Dr xxx
To Respective Co-venture A/c xxx
2 On making purchases for joint venture operations:
a) Cash purchase
Joint venture A/c Dr Xxx
To Joint bank A/c Xxx
b) Credit purchase
Joint venture A/c Dr Xxx
To creditors A/c Xxx
c) For materials supplied by a venturer
Joint venture A/c Dr xxx
To respective venture A/c xxx
3 On incurring expenses for joint venture:
a) When they are paid from joint funds:
Joint venture A/c Dr Xxx
To joint bank A/c Xxx
b) When they are paid by a venturer
Joint venture A/c Dr xxx
To respective venture’s A/c xxx
4 On sale of goods or collection of contract price:
a) When collected as joint funds:
Joint bank A/c Dr Xxx
To joint venture A/c Xxx
b) When collected by a venturer privately:
Respective venture’s A/c Dr Xxx
To Joint venture A/c Xxx
5 For goods sold on credit:
Debtors A/c Dr Xxx
To joint venture A/c Xxx
6 For payment made to the creditors
Creditors A/c Dr(with amount due) Xxx
To joint bank A/c (with payment made) Xxx
To joint venture A/c (with discount received) Xxx
7 For payment received from debtors:
Joint bank A/c Dr(with amount received) Xxx
Joint venture A/c Dr (with discount allowed) Xxx
To debtors A/c Xxx

8 For bill accepted by a Co-venture for mutual accommodation:

Bills receivable A/c Dr Xxx
To respective co-venture A/c Xxx
9 For discounting of the bill:
Joint bank A/c (with the amount received) Xxx
Joint venture A/c (with discounting charges) Xxx
To bills receivable A/c(with the amount of the bill) Xxx
10 For goods taken over by a Co-Venture:
Respective Co-venture A/c Dr Xxx
To joint venture A/c Xxx
11 For allocation of the result of the venture:
If Profit:
Joint venture A/c Dr Xxx
To each venture’s (in the agreed ratio) Xxx
12 If loss:
Each venture’s A/c Dr Xxx
To joint venture A/c (in the agreed ratio) xxx
 13 For settlement of accounts with the Co-Venturers:
Each Co-Venture’s A/c Dr Xxx
To joint bank A/c (for the Co-venturer with credit balance) Xxx
Joint bank A/c Dr
To Each co-venture’s A/c (for the Co-Venture’s, with debit
balance)
Note:

The above entry will close joint bank account and each Co-Venture’s account and thus the separate
set of books will be closed on completion of the venture.
Specimen Ledger Accounts
Joint Venture A/c

Particulars Rs Particulars Rs
To Joint Bank A/c (goods Xxx By Joint Bank A/c (sale proceeds) Xxx
purchased)
To Joint Bank (expenses) Xxx By respective ventures capital
A/c (unsold stock taken and sale
proceeds collected by them)
To Respective Ventures A/c Xxx
(expenses met or material supplied
personally)

To joint venture’s A/c (Profit) Xxx

([Link])
Xxx Xxx

Venture’s Capital A/c

Particulars Venturer Venturer Particulars Venturer Venturer

Name Name Name Name
To joint venture A/c xxx xxx By joint bank A/c xxx xxx
(unsold stock taken and (capital)
sale proceeds collected)
To joint bank A/c (B.F) By joint venture A/c
final settlement) xxx xxx (expenses/materials) xxx xxx
By joint venture A/c
(share of profit) xxx xxx
xxx xxx xxx xxx
Joint Bank A/c

Particulars Rs Particulars Rs
To respective venture’s A/c (capital xxx By joint venture A/c (goods xxx
contribution) purchased)
To joint venture A/c (sale proceeds) xxx By joint venture A/c (Expenses) xxx
By respective venture A/c(final
settlement)
xxx xxx

II. When separate set of books is not kept

Model Journal entries

Assuming there are two venture’s Viz., X and Y

[Link] In the books of X In the books of Y

1 For material supplied by X Joint venture A/c Dr
Joint venture A/c Dr To X A/c
To purchase A/c
Note: In the above entry, if the
materials were supplied not at cost,
but at profit, sales A/c must be
credited instead of purchase A/c
2 For expenses incurred by X Joint venture A/c Dr
Joint venture A/c Dr To X A/c
To bank/cash A/c
3 For goods sold by X X A/c Dr
Bank / cash A/c Dr To Joint venture A/c
To joint venture A/c

4 For commission charged by X on Joint venture A/c Dr

sales: To X A/c
Joint venture A/c Dr
To commission A/c
5 For unsold goods taken over by X X A/c Dr
Drawing A/c Dr(taken over by To Joint venture A/c
personal use)
Purchase A/c Dr(if taken over for
business use)
To joint venture A/c
6 For materials supplied by Y Joint venture A/c Dr
Joint venture A/c Dr To purchase A/c
 To Y A/c
7 For expenses incurred by Y Joint venture A/c Dr
Joint venture A/c Dr To bank/cash A/c
To Y A/c
8 For goods sold by Y Bank / cash A/c Dr
Y A/c Dr To joint venture A/c
To Joint venture A/c
9 For commission charged by Y on Joint venture A/c Dr
sales: To commission A/c
Joint venture A/c Dr
To Y A/c
10 For unsold goods taken over by Y Drawing A/c Dr(taken over by
Y A/c Dr personal use)
To Joint venture A/c Purchase A/c Dr(if taken over for
business use)
To joint venture A/c
11 For profit on joint venture: Joint venture A/c Dr
Joint venture A/c Dr To X A/c (X’s Share)
To Profit& loss A/c To profit & loss (Y’s share)
(X’s share) Note: For loss, the above is to be
To Y A/c (Y’s share) reversed
Note: For loss, the above entry is to
be reversed.
12 For settlement with the Co-venture: Bank /cash A/c Dr
Y A/c Dr To X A/c
To bank / cash A/c (if Co-venturer has debit balance
(if Co-venturer has credit balance)
When final settlement is made, the joint venture account and the Co-ventures accounts are closed.
Specimen ledger accounts
In the books of X
Joint venture A/c

Particulars Rs Particulars Rs
To Purchases A/c (Materials supplied) xxx By bank A/c (sale proceeds) xxx
To bank A/c (Expenses) xxx By purchase A/c (goods taken xxx
over)
To commission A/c xxx By Y A/c (goods sold by Y) xxx
To Y a/c (Materials supplied by Y) xxx By Y A/c (unsold goods taken
over by Y)
To Y A/c ( Expenses paid by Y) xxx
To Y A/c ( Commission of Y) xxx
To profit ([Link])
P&L A/c xxx
Y A/c xxx
Xxx xxx

Y A/c

Particulars Rs Particulars Rs
To Joint venture (sales Proceeds) xxx By joint venture A/c (Materials xxx
supplied)
To joint venture A/c (unsold goods Xxx By joint venture A/c (expenses)
taken)
By joint venture A/c(commission) xxx
By joint venture A/c (share of xxx
profit)
By cash / bank (B.F) xxx
xxx xxx

In the books of Y
Joint venture A/c

Particulars Rs Particulars Rs
To X A/c (Materials supplied by X) xxx By X A/c (Sale Proceeds) xxx
To X A/c (Expenses paid by X) xxx By X A/c (unsold goods taken xxx
over by X)
To X A/c (Commission of X) xxx By bank A/c (sale proceeds) xxx
To purchase A/c (Materials supplied) xxx By purchase A/c (unsold goods xxx
taken)
To bank A/c (expenses) xxx
To commission A/c xxx
To profit ([Link])
P&L A/c xxx
X A/c xxx
xxx xxx

Y A/c

Particulars Rs Particulars Rs
To Joint venture (sales Proceeds) xxx By joint venture A/c (Materials xxx
supplied)
To joint venture A/c (unsold goods Xxx By joint venture A/c (expenses)
taken)
To bank / cash ([Link]) xxx By joint venture A/c(commission) xxx
By joint venture A/c (share of xxx
profit)
xxx xxx

III) Memorandum Joint venture Method

[Link] Particulars Rs Rs
1 For goods purchased for cash on account of joint
venture :
Joint ventures with ……. A/c Dr xxx
To bank/ cash A/c xxx
2 For goods purchased on credit on account of joint
venture:
Joint ventures with ……. A/c Dr xxx
To creditors A/c xxx
3 For goods supplied to the venture out of the business
stock:
Joint venture with….. A/c Dr xxx
To Purchase A/c xxx
4 For expenses incurred for the venture :
Joint ventures with ……. A/c Dr xxx
To bank/ cash A/c xxx
5 For expenses of the venture still payable :
Joint ventures with ……. A/c Dr xxx
To creditors for expenses A/c xxx
6 For some’ on account’ payment received from the Co-
venture :
Bank /cash A/c Dr xxx
To Joint ventures with ……. A/c xxx
7 For goods sold for cash on behalf of the venture:
Bank /cash A/c Dr xxx
To Joint ventures with ……. A/c xxx
8 For goods sold on credit for the venture:
Debtors A/c Dr xxx
To Joint venture with…..A/c xxx
9 For materials supplied by the Co-venturer:
No entry
10 For expenses paid by the Co-venturer:
No entry
11 For commission payable to the Co-venturer
 No entry
12 For goods sold by Co-venturer
No entry
13 For assets taken over self:
Asset A/c Dr xxx
To joint venture with… A/c xxx
14 For goods taken over by self
Drawing A/c Dr (Personal use) Xxx
Purchase A/c Dr (business use) Xxx
To Joint venture with… A/c xxx

15 For own share of the profit(or loss) on joint ventures:

If Profit: Joint venture with…. A/c xxx
To General Profit& loss A/c xxx
16 If Loss:
General Profit& loss A/c Dr xxx
To Joint venture with…. A/c xxx
17 For settlement with the co-venture:
If Co-venture has credit balance:
Joint venture with… A/c Dr xxx
To bank/ cash A/c xxx
18 If co-venture has debit balance:
Bank / cash A/c Dr
To Joint venture A/c
Specimen ledger accounts assuming X & Y are the ventures
Memorandum Joint venture A/c

Particulars Rs Particulars Rs
To X (cost of materials ) xxx By X (sales Proceeds) xxx
To Y (cost of materials) xxx By X (unsold goods) xxx
To X (Expenses) xxx By Y (sales Proceeds) xxx
To Y (Expenses) xxx By Y (unsold goods) xxx
To Profit ([Link]) xxx
X
Y
xxx xxx
Note: this account is prepared by both X and Y on memorandum basis and is not a part of the
double entry mechanism.
In the books of X
Joint venture with ‘Y’ A/c

Particulars Rs Particulars Rs
To bank A/c (cost of materials) xxx By bank A/c (sales Proceeds) xxx
To bank A/c (expenses) xxx By purchase A/c (unsold xxx
goods)
To General P&L A/c (share of Profit) xxx
To bank A/c (final settlement) xxx
xxx xxx
In the books of Y
Joint venture with ‘X’ A/c

Particulars Rs Particulars Rs
To bank A/c (cost of materials) xxx By bank A/c (sales Proceeds) xxx
To bank A/c (expenses) xxx By purchase A/c (unsold xxx
goods)
To General P&L A/c (share of Profit) xxx By bank A/c (final settlement) xxx
To bank A/c (final settlement) xxx
xxx xxx

1. Separate set of books or Joint Bank Account Method

Problem No: 1

S and P entered into a joint venture and agreed to divide the profit as to 60% and 40%. S and P
contributed Rs 1, 80,000 and Rs 1, 20,000 respectively for carrying on transactions relating to the
venture. They purchased three old state buses for Rs 2, 40,000. S and P personally paid Rs
45,000 and Rs 30,000 respectively for repairs and renewals. They purchased a few tyres and
tubes costing Rs 54,000. Two buses were sold for Rs 2, 70,000 and the third one was taken by P
at cost price. Pass necessary journal entries, prepare joint venture account, joint bank account,
and close the accounts of the venture.

2. When separate set of books is not kept

a) When each Co-venturer maintains a complete record of all transactions:

Problem No: 2

Ramu and chand enter into a joint venture to share the results as to 2:1. The joint venture
transactions are as under:

Particulars Ramu Rs Chand Rs

Goods supplied 60,000 30,000
Expenses paid 8,000 2,000
Sale proceeds received 80,000 56,000
Show the journal entries and ledger accounts in the books of both the parties.

3. Memorandum joint venture account method

Problem No: 3

A & B were partners in a joint venture sharing profits and losses equally. A supplied goods to the
value of Rs 10,000 and incurred expenses amounted to Rs 800. B supplied goods to the value of Rs
8000 and his expenses amounted to Rs 800. B sold the entire goods on behalf of the joint venture
and realized Rs 24,000. B was entitled to a commission of 5% on sales. B settled his account by bank
draft. Show the journal entries and ledger accounts in the books of A&B under Memorandum joint
venture method.

Working Notes: 1

Value of bus taken over by P

Purchase Price 2,40,000/3 = 80,000

(60% 40% ) 3:2)
Add: cost of tyres and tubes 54,000/3= 18,000
Add: cost of Repairs& Renewals 75,000/3 25,000
Total 1,23,000

Solution:

In the books of Joint venture

Journal Entries

Date Particulars Lf Debit Rs Credit Rs

Joint bank A/c Dr 3,00,000
To S A/c 1,80,000
To P A/c 1,20,000
(Being the capital
contributed by covertures)
Joint venture A/c Dr 2,40,000
To Joint bank A/c 2,40,000
(Being purchase of three
old buses)
Joint venture A/c Dr 75,000
To S A/c 45,000
To P A/c 30,000
(Being repairs and renewals
 expenses paid by S&P)
Joint venture A/c Dr 54,000
To Joint bank A/c 54,000
(Being purchase of tyres
and tubes)
Joint bank A/c Dr 2,70,000
To Joint venture A/c 2,70,000
(Being sale of two buses)
P A/c Dr (W.N.1) 1,23,000
To Joint ventures A/c 1,23,000
(Being the remaining one
bus taken over by P at cost
Joint venture A/c Dr 24,000
To S A/c (24,000x60%) 14,400
To P A/c (24,000x40%) 9,600
S A/c Dr 2,39,400
P A/c Dr 36,600
To Joint bank A/c 2,76,000
(Being the final settlement
between the Co-ventures)

Joint ventures A/c

Particulars Rs Particulars Rs
To Joint bank A/c 2,40,000 By Joint bank A/c 2,70,000
To S A/c 45,000 By P A/c (Bus taken) 1,23,000
To P A/c 30,000
To Joint bank A/c 54,000
To S A/c ( Profit) 24,000
24,000x60% = 14,400
To P A/c (Profit)
24,000x 40% = 9,600
3,93,000 3,93,000

Venture’s Capital A/c

Particulars S Rs Y Rs Particulars S Rs Y Rs
To joint venture A/c 1,23,000 By joint bank A/c 1,80,000 1,20,000
(unsold stock taken and (capital)
sale proceeds collected)
To Joint bank A/c (B.F) 2,39,400 36,600 By joint venture A/c 45,000 30,000
final settlement) (expenses/materials)
 By joint venture A/c 14,400 9,600
(share of profit)
2,39,400 1,59,600 2,39,400 1,59,600

Joint bank A/c

Particulars Rs Particulars Rs
To S A/c 1,80,000 By Joint ventures A/c 2,40,000

To P A/c 1,20,000 By Joint ventures A/c 54,000

To joint venture A/c 2,70,000 S A/c 2,39,400

P a/c 36,600
5,70,000 5,70,000

II) When separate set of books is not kept

a) When each Co-venture maintains a complete record of all transactions

Problem No: 2

Solution:

In the books of Ramu

Journal entries

Date Particulars L.F Dr Cr

Joint venture A/c Dr 60,000
To Purchase A/c 60,000
(Being goods supplied on Joint
venture)
Joint venture A/c Dr 30,000
To chand A/c 30,000
(Being goods supplied by chand)
Joint venture A/c Dr 8,000
To Bank A/c 8,000
(Being expenses paid for joint
venture)
Joint venture A/c Dr 2,000
To chand A/c 2,000
(Being expenses paid by chand)
Bank A/c Dr 80,000
To Joint venture A/c 80,000
 (Being sale proceeds received on joint
venture)
Chand A/c Dr 56,000
To Joint venture A/c 56,000
(Being sale proceeds received by
chand on Joint venture)
Joint venture A/c Dr 36,000
To chand A/c 12,000
To Profit& loss A/c 24,000
(Being Profit on joint venture shared)
Bank A/c Dr 12,000
To chand A/c 12,000
(Being final payment received from
chand)
Ledger A/c

Joint venture A/c

Particulars Rs Particulars Rs
To Purchase A/c 60,000 By Bank A/c 80,000
To chand A/c 30,000 By chand A/c 56,000
To Bank A/c 8,000
To chand A/c 2,000
To Profit(B.F) 36,000
Chand: 36,000x1/3=12,000
P& L A/c 36,000x2/3= 24,000
1,36,000 1,36,000

Chand A/c

Particulars Rs Particulars Rs
To Joint venture A/c 56,000 By Joint venture A/c 30,000
(goods)
By joint venture A/c 2,000
(Expenses)
By Joint venture(profit) 12,000
By bank A/c ([Link]) 12,000
56,000 56,000
 In the books of chand

Journal entries

Date Particulars L.F Dr Cr

Joint venture A/c Dr 30,000
To Purchase A/c 30,000
(Being goods supplied on joint
venture)
Joint venture A/c Dr 60,000
To Ramu A/c 60,000
(Being goods supplied by Ramu)
Joint venture A/c Dr 2,000
To Bank A/c 2,000
(Being expenses paid for Joint
venture)
Joint venture A/c Dr 8,000
To Ramu A/c 8,000
(Being expenses paid by Ramu)
Bank A/c Dr 56,000
To Joint venture A/c 56,000
(Being sale proceeds received on joint
venture)
Chand A/c Dr 80,000
To Joint venture A/c 80,000
(Being sale proceeds received by
chand on joint venture)
Joint venture A/c Dr 36,000
To Ramu A/c 24,000
To Profit& loss A/c 12,000
(Being Profit on joint venture shared)
Bank A/c Dr 12,000
To Ramu A/c 12,000
(Being final payment received from
Ramu)
Ledger A/c Joint venture A/c

Particulars Rs Particulars Rs
To Purchase A/c 30,000 By Bank A/c(sales) 56,000
To Ramu A/c 60,000 By Ramu A/c (sales) 80,000
To Bank A/c 2,000
To Ramu A/c 8,000
To Profit(B.F) 36,000
Ramu: 36,000x2/3=24,000
P& L A/c 36,000x1/3= 12,000
1,36,000 1,36,000

Ramu A/c

Particulars Rs Particulars Rs
To Joint venture A/c(sales) 80,000 By Joint venture A/c 60,000
(goods)
By joint venture A/c 8,000
(Expenses)
To bank A/c ([Link]) 12,000 By Joint venture(profit) 24,000

92,000 92,000