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Joint Venture
By Sheela Warrier MeraSkill.com Š MeraSkill
Joint Venture
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INDEX What is a Joint Venture Distinction between Joint Venture and Partnership Accounting for Joint Venture - Separate set of books Accounting for Joint Venture - Individually With Memorandum Joint Venture Without Memorandum Joint Venture
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Concept
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What is Joint Venture ➢ Business of short duration ➢ Short term partnership ➢ Special purpose partnership ➢ Co venturers ➢ Share profit or loss
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Joint Venture 1. Specific venture 2. Coventurers 3. Profit and loss at end of venture 4. No firm name 5. No need for separate set of books 6. Minor cannot be a co venturer 7. Accounting on liquidation basis 8. May be governed by a MOU
vs
Partnership 1. Not limited to specific venture 2. Partners 3. Profit and loss annually 4.Must have firm name 5. Separate set of books required 6. Minor can be admitted to the benefits of a partnership 7. Accounting on going concern basis 8. Governed by Partnership Act
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Accounting Treatment
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Accounting Treatment (separate set of books)
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Separate set of books for Joint Venture 1) Joint Bank a/c - jointly operated account, cash inflows and outflows, closed by transfer to co venturers’ accounts 2) Joint Venture a/c - profit or loss 3) Co Venturers’ Personal accounts - Capital accounts
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Accounting entries - separate set of books On opening bank a/c (capital): Joint Bank a/c Dr To Co Venturers’ a/c (individually) For expenses paid out of Bank: Joint Venture a/c Dr To Joint Bank a/c For expenses paid or materials brought in by Coventurer : Joint Venture a/c Dr To Co venturer a/c For sale and payment received in cash or shares: Joint Bank a/c Dr Shares a/c Dr To Joint Venture a/c
For payment received by Co venturers personally: Co Venturer’s a/c Dr To Joint Venture a/c For profit on Joint Venture: Joint Venture a/c Dr To Co Venturers’ a/c For loss on Joint Venture: Co Venturers’ a/c Dr To Joint Venture a/c For closing Joint Bank: To Co Venturers’ a/c (individually) Dr To Joint Bank a/c © MeraSkill
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