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re business. Hence on
o towards which Peter
profits and losses in
Peter and Jason agree to import Burmese timber for joint venture busine
May 1, 1965, they open a joint Bank Account for Rs. 24,000 towards
contributes Rs. 14,000 and Jason Rs. 10,000. They divide profits an
proportion to their contributions. They send a cheque to their agent in
Rs. 23,000 to pay for the timber purchased and to meet the freight, insura
other charges amounting to Rs. 4,000. On December 2, 1965, the sales amour
Rs. 24,000, and on December 23, Peter took over the unsold stocks of timber
Rs. 3,800. They then closed the joint venture after mutually settling their balances
Write all the ledger accounts relating to the above joint venture.
Answers
Answer:
Explanation:
(I) Joint Venture Account
(II) Joint Bank Account
(III) Co-venturer’s Account
(Venturer’s Capital Account)
(I) Joint Venture Account:
This account represents the results of the business, that is, profit or loss. It is like a Trading/Profit & Loss Account of a trading concern. This account is debited by the cost of goods, expenses; goods supplied by the venturers etc. and are credited by sale proceeds, unsold stock, stock taken by venturers etc.
If credit side of this account is greater than the debit side, the difference represents profit on joint venture and vice versa in the opposite case. The profit or loss so made is transferred to co-venturer’s account.
(II) Joint Bank Account:
It is like an ordinary Cash Book or Bank Account. All incomes including the capital contribution by the ventures appear on the debit side of this account whereas all expenses of the venture appear on the credit side of this account. It is finally closed by payment to the co-venturers, leaving no balance either side.
(III) Co-Venturer’s Account:
This is the capital account of the venturer relating to venture. This account is credited by the capital contributed by the venturers, goods supplied by them from their own stock, expenses made personally by them etc. whereas this account is debited for any withdrawals or any asset taken from the venture.
The profit or loss so made on venture is transferred to this account in profit sharing ratio and this account is closed by cash payment from joint bank and vice versa in the opposite case.
Journal Entries: When Separate Set of Books is Kept
The Joint Bank Account should be now just sufficient to balance off the Co-venturers Account. That is, the Joint Bank Account is then closed by making payment to each partner of what is due to him in respect of his personal account. With the settlement of these accounts the separate books will automatically be closed off.
Illustration 1:
Rajeev and Ashok enter into a joint venture as dealers in land and opened a Joint Bank Account with Rs 60,000 towards which Rajeev contributed Rs 40,000. They agree to share profits and losses in proportion to their cash contribution. They purchased a plot of land measuring 5,000 square yards for Rs 50,000. It was decided to sell the land in smaller plots and a plan was got prepared at a cost of Rs 1,200.
In the said plan 1/5th of the total area of the land was left over for public roads and the remaining land was divided into 8 plots of equal size. Out of 8 plots, 3 plots were sold @ Rs 15 per square yard and the remaining 5 plots were sold @ Rs 14 per square yard. Expenses incurred in connection with the plots were: Registration Expenses Rs 4,000, Stamp Duty Rs 400 and Other Expenses Rs 1,000. Allow 2% on the sale proceeds as a commission to Rajeev.
Journalise the above transactions and prepare the necessary ledger accounts.
A and B were partners in a joint venture sharing profits and losses in the proportion of four-fifth and one-fifth respectively. A supplies goods to the value of $5,000 and inures expenses amounting to $400. B supplies goods to the value of $4,000 and his expenses amounting to $300. B sells goods on behalf of the joint venture and realizes $12,000. B is entitled to a commission of 5 percent on sales. B settles his accounts by bank draft.