Joint Venture Accounting Questions and Answers


Joint Venture Accounting Questions and Answers:

Learning Objectives:

  1. Answers of some important joint venture questions.

Theoretical Questions:

  1. Define a “joint venture”. What are the different methods of recording transactions relating to joint venture?

  2. Differentiate between “joint venture” and “consignment”.

  3. What is memorandum joint venture account? How is it prepared?

    Objective:

    1. State whether each of the following statements is true or false:

      (i) Joint venture and partnership are synonymous terms.
      (ii) Joint venture has very long life.
      (iii) Parties of joint venture are known as co-venturers
      (iv) Co-venturers work for commission.
      (v) Principle of mutual agency is applicable to joint venture.
      (iv) Co-ventures and co-partners are interchangeable terms.
      (iiv) Joint venture must have a permanent and distinct name to be a legal form of organization.

      Answers: [i. False ii. False iii. True iv. False v. True vi. False vii. False]

    2. Select the most appropriate answer:

      (i) Joint venture account is: (a) a nominal account; (b) a personal account; (c) a real account
      (ii) Joint bank account is opened: (a) when no separate books for the venture are maintained; (b) when separate books for the venture are maintained (c) under no circumstances
      (iii) When goods are purchased for the joint venture, the amount is debited to: (a) Purchase account; (b) Joint venture account; (c) Venturer’s capital account.
      (iv) In case of memorandum method when there are three co-venturers, each co-venturer opens in its books for the venture: (a) one account; (b) two accounts; (c) three accounts.
      (v) When a venturer recording the transactions brings goods to the joint venture from his own stock, the amount is credited to: (a) joint venture account; (b) purchases account; (c) capital account.

      Answers: [i. a ii. b iii. b iv. a v. b]

    Short Answer Questions:

    1. (i) A has spent $20,000 on account of a joint venture. What journal entry will you pass?

      (a). When separate set of books are kept.
      (b). When records are kept by A only.
      (c). When records are kept by B (a co-venturer) only, and
      (d). when records are kept by all parties

      (ii) Is it necessary to pass a journal entry for the above transaction in the books of B when memorandum method is adopted? [Answer: No]

    2. B, a co-venturer, took away goods worth $9,000 at the end of a venture.  What entries will you make when:

      (a). There is a separate set of books.
      (b). Records are kept by B only
      (c). Records are kept by A only.
      (d) There is a memorandum, method of recording transactions

    3. A and B completed a venture and earned $30,000. They shared profits in the ratio of 2:1. What journal entry will be passed when:

      (a). There is a separate set of books.
      (b). Records are kept by A only
      (c). Records are kept by B only.
      (d) There is a memorandum, method of recording transactions.

    4. A purchases goods worth $20,000 for the joint venture and spend $2,000 on packing, insurance, freight, etc. He sends it to B, who receives goods and spends $1800.

      What journal entry will be passed when memorandum joint venture method is adopted?

    You may also be interested in other articles from “accounting for joint venture” chapter:

    1. Definition and Explanation of Joint Venture
    2. Difference Between Joint Venture and Consignment
    3. Advantages and Disadvantages of Joint Venture
    4. Joint Venture Accounting – Journal Entries
    5. Memorandum Joint Venture Account
    6. General Questions and Answers About Joint Venture Accounting
    7. Joint Venture Accounting Exercises and Problems

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