A and B started joint venture sharing profit and losses equally. From the following information prepare in the books of A- (i) Joint Venture Account and
(ii) B Account.
A purchased goods for Rs. 1,00,000 and B purchased goods for Rs. 80,000. Goods supplied by A from his own stock for Rs. 10,000 and goods supplied by B for Rs. 8,000. Wages Rs. 6,000 and advertisement cost Rs. 4,000 paid by A. Office rent Rs. 6,000 and Electricity Rs. 1,000 paid by B. Goods sold by A for Rs. 1,60,000 and by B Rs. 1,50,000. A part of unsold goods costing Rs. 4,000 was taken by A at an agreed price of Rs. 2,000 and another part of unsold goods was taken by B for Rs. 1,000. Commission on Sales @10% was payable to A and B on goods sold by them. At the end of the venture final settlement was made by the respective party by Bank draft.?
Answers
Top 5 Problems on Joint Venture Accounts
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In this article we will discuss about the top five accounting problems on Joint Venture accounts with their relevant solutions.
Accounting problems on Joint Venture accounts
Joint Venture Problem and Solution # 1.
Adarji and Bomanji were partners in a joint venture sharing profits and losses in the proportion of four-fifths and one-fifth respectively. Adarji supplies goods to the value of Rs 50,000 and incurs expenses amounting to Rs 5,400. Bomanji supplies goods to the value of Rs 14,000 and his expenses amount to Rs 800. Bomanji sells goods on behalf of the joint venture and realises Rs 92,000. Bomanji is entitled to a commission of 5 per cent on sales. Bomanji settles his account by bank draft. Give the journal entries and the necessary accounts in the books of Adarji and only the important ledger accounts in the books of Bomanji.
Alternative method:
An alternative to the above method is to make out the Joint Venture Account on memoradum basis, just to find out the profit or loss made but not as part of ledger. The goods sent or expenses incurred on joint venture are debited to the account of the other party. The account may be styled as ‘………………….. in Joint Venture Account.’ No entry is passed for goods supplied or expenses incurred on joint venture by the other party. That account is debited with one’s share of the profit made on the joint venture (ascertained by the Memoradum Joint Venture Account), crediting the Profit and Loss Account. The other party will be credited with one’s share of loss, if any.
The party receiving the sales proceeds on joint venture must credit the other party with the full amount.
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