Joint Venture Accounting B.Com 1st year and describes the cooperation between two or more individuals to carry out a certain business project and divide the profit or loss of the project. This subject is always examined as long questions, examples and short notes.
This is a full-fledged guide on the concept of joint ventures, the various types of joint ventures, characteristics, entry modes, examples and accounting procedures on joint ventures in simple English. You will also be in a position to save this article in a PDF format to use, as a study or assignment.
What is Joint Venture?
Joint Venture (JV) is a short term business association between two or more individuals in order to participate in a given project.
They will spend money, share resources, incur expenses and eventually split the profit or loss in a pre-determined proportion.
Simple Example
Ali and Bilal make a decision to conduct a construction project.
Ali will buy material and Bilal will be involved with the labour costs and once a project is complete, they will split the profit and equal shares.
This kind of a temporary alliance is termed as a Joint Venture.
What do you mean by Joint Venture Accounting?
Joint Venture Accounting is the procedure of registering all transactions that are connected with a joint venture. It includes:
- Capital contributed by individual partners.
- Expenses paid
- Goods supplied
- Sales or income generated
- Profit or loss allocation Final.
It is not equal to partnership accounting as JV is short-term and only on one project.
Joint Venture Accounting (According to B.Com 1 st year)
There are two primary methods of explaining Joint Venture Accounting in B.Com 1 st Year:
1۔ Separate Set of Books Method
In this approach, there is a different set of accounts that are maintained by the joint venture. These include:
Main Accounts:
- Joint Venture Account
- Personal Account Co-Venturer.
Major Entries:
a) For expenses paid:
Joint Venture A/C Dr
To Cash/Bank A/C
b) In case of goods supplied by partner:
Joint Venture A/C Dr
To Partner’s Account
c) For sales or receipts:
Cash/Bank A/C Dr
To Joint Venture A/C
d) For profit distribution:
Joint Venture A/C Dr
To Partners’ Capital A/C
2۔ Joint Venture Memorandum Method
In this method:
- Spouses have their own individual books.
- There is no official Joint Venture Account opened.
- A Memorandum Joint Venture Account is only prepared at the end in order to find profit or loss.
It is normally applied in cases where the project is minor or partners are covering their expenses separately.
Solved Example (B.Com Style)
Ali and Ahmed begin with a joint venture.
- Ali purchases goods worth Rs. 80,000
- Ahmed compensates carriage and wages worth Rs. 20,000.
- The goods are sold for Rs. 140,000
- Profit-sharing ratio = 1:1
Solution:
Sales = 140,000
Total Expenses = 80,000 + 20,000 = 100,000
Profit = 40,000
Ali’s Share = Rs. 20,000
Ahmed’s Share = Rs. 20,000
Features of Joint Venture
- Temporary business
- Established to work on a given project.
- Profit- sharing ratio predetermined.
- There is no permanent firm that is required.
- Risk sharing is between partners.
- Combination of resources and skills is done.
Benefits of Joint Venture Accounting
- Shared Risk
- Shared Expertise
- Temporary arrangement
- Greater use of resources.
- Swift project execution.
Joint Venture Accounting has its drawbacks
- Potential confusion among co-venturers.
- Profit-sharing disputes
- Needs to be coordinated in record-keeping.
- Relys on the trustworthiness of partners.
Partnership vs Joint Venture (Easy Comparison)
| Joint Venture | Partnership |
|---|---|
| Temporary | Permanent |
| For one specific project | For continuous business |
| Profit per project | Annual profit |
| Separate books optional | Proper books maintained |
| No firm name needed | Firm name required |
Journal Entries (B.Com Examination Standard
1. For goods purchased:
Joint Venture A/C Dr
To Cash/Bank A/C
2. For expenses:
Joint Venture A/C Dr
To Cash/Bank A/C
3. In the case of goods being supplied by partner:
Joint Venture A/C Dr
To Partner’s A/C
4. For sales:
Cash/Bank A/C Dr
To Joint Venture A/C
5. For profit distribution:
Joint Venture A/C Dr
To Partners’ Capital A/C
What is the reason why students search joint venture accounting b.com 1st year PDF?
- Because they want:
- Exam-ready notes
- Simple explanations
- Solved examples
- Printable material
- Easy revision content
You can have this entire article in the form of a PDF file in case you require it.
FAQs about
What is a Joint Venture?
Joint venture is a short term contract that involves two or more individuals to undertake a certain business venture and share in the loss or gain.
What is Joint Venture Accounting?
It is the process of documenting all the expenses, incomes, contributions and distribution of profits pertaining to a joint venture.
Are there any more than methods of Joint Venture Accounting?
There are two methods:
- Separate Set of Books Method
- Memorandum Joint Venture Technique.
Is Joint Venture like Partnership?
No. A partnership is long-term whereas a joint venture is short term and project oriented.
Is it possible to obtain the PDF of Joint Venture Accounting Notes?
Yes. I am able to create a full PDF copy of these notes to study. And simply say, and I shall make it.
Conclusion
Joint venture accounting, which is a subject matter of B. Com 1 st year, assists students to learn about short term business provisions in which the partners collaborate in a given project. The chapter imparts techniques, journal notes, computations and practicality.
This reference provides you with all the knowledge on easy English which is acceptable during exams, assignments and PDF documents.
