Joint Venture Accounting Exercises and Problems:

Learning Objectives:

Prepare journal entries and joint venture accounts in the books of parties doing joint venture business.
How to solve a joint venture problem.

Problem 1 - Journal Entries, Joint Venture Account Co-venturer 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.

Required: Give journal entries and necessary ledger accounts in the books of both the parties.

Solution:

Books of A

Journal Entries

joint venture account	5,000
To Cash account		5,000
(Goods sent to B)

joint venture account	400
To Cash account		400
(Expenses incurred on goods sent to B)

joint venture account	4,000
To B		4,000
(Goods supplied by B)

Joint venture account	300
To To B		300
(Expenses incurred by B on joint venture)

B	12,000
To Joint venture account		12,000
(Sales proceeds received by B)

Joint venture account	600
To B		600
(Commission due to B on sales at the rate of 5%)

Joint venture account	1,700
To B		340
To Profit and loss account		1360
(Profit $1,700 divided as 1/5 to B and 4/5 to self)

Cash account	6,760
To B		6,760
(The draft received from B in settlement)

Joint Venture Account

Debit Side		Credit Side

To Cash - Goods	5,000	By B - Sales	12,000
To Cash - Expenses	400
To B - Goods	4,000
To B - Expenses	300
To B - Commission	600
To B - Share of profit	340
To Profit and loss account	1,360

	12,000		12,000

B Account

Debit Side		Credit Side

To Joint venture account	12,000	By Joint venture - Goods	4,000
		By Joint venture - Expenses	300
		By Joint venture - Commission	600
		By Joint venture - Profit	340
		By Cash	6,760

	12,000		12,000

Books of B

Journal Entries

joint venture account	4,000
To Cash account		4,000
(The value of goods supplied)

joint venture account	300
To Cash account		300
(Expenses incurred on joint venture)

joint venture account	5,000
To A		5,000
(Goods supplied by A)

Joint venture account	400
To A		400
(Expenses incurred by B on joint venture)

Cash account	12,000
To Joint venture account		12,000
(Sales proceeds received in cash)

Joint venture account	600
To Commission account		600
(Commission due on sales at the rate of 5%)

Joint venture account	1,700
To A		340
To Profit and loss account		1360
(Profit $1,700 divided as 1/5 to B and 4/5 to A)

A	6,760
To Cash account		6,760
(The draft sent to A in settlement)

Joint Venture Account

Debit Side		Credit Side

To Cash - Goods	4,000	By Cash account - Sales	12,000
To Cash - Expenses	300
To A - Goods	5,000
To A - Expenses	400
To Commission	600
To A - Share of profit	1,360
To Profit and loss account	340

	12,000		12,000

A Account

Debit Side		Credit Side
To Cash account	6,760	By Joint venture account	5,000
		By Joint venture - Expense	400
		By Joint venture - profit	1,360

	6,760		6,760

Problem 2 - Joint Venture Account and Co-venturer Accounts:

Salim & Sons bought goods of the value of $7,500 and consigned them to Tahir and Co. to be sold to them on a joint venture, profit being divided in 2/3 : 1/3. They also paid $550 for freight, insurance and cartage and drew on Tahir and Co. for $3,000 on account. The bill was discounted by Salim & Sons for $2,900. Tahir and Co. paid $300 for dock dues, storage, rent etc. The sales realised $12,500 and the sales expenses $250 were defrayed by Tahir and Co. The later forwarded a sight draft for the balance due to Salim & Sons after charging their sales commission at 5 percent on the gross proceeds.

Required: Write up the accounts in the books of both the parties. No interest need to be brought into account.

Solution:

Salim & Sons Books

Joint Venture Account

Debit Side			Credit Side
		$		$
To cash - cost of goods		7,500	By Tahir & Co.-sales proceeds	12,500
To cash - expenses		550
To Discount on bill		100
To Tahir and Co.
Dock, dues & storage	300
Sales expenses	250
Commission	625
		1,175
To Profit and loss - 2/3 share		2,116.67
To Tahir & Co. - share of profit		1,058.33

		12,500		12,500

Tahir & Co.

Debit Side		Debit Side
	$			$
To Joint venture a/c - sales1	12500	By Bill receivable account		3,000
		By Joint venture account
		Dock & Storage	300
		Sales expenses	250
		Commission	625
				1,175
		By Joint venture account		1,058.33
		By Cash - sight draft		7,266.67

	12,500			12,500

Tahir & Co. Books

Joint Venture Account

Debit Side			Credit Side
		$		$
To Salim & Co. - cost of goods		7,500	By Cash - sales proceeds	12,500
To Salim & Co. - expenses		550
To Salim & Co. - Discount on bill		100
To Cash.
Dock, dues & storage	300
Sales expenses	250
		1,175
Commission		625
To Profit and loss - 1/3 share		1,058.33
To Salim & Co. - share of profit		2,116.67

		12,500		12,500

Salim & Sons

Debit Side		Credit Side
	$		$
To Bills payable a/c	3,000	By Joint venture account	7,500
To Cash - sight draft	7,266.67	By Joint venture account	550
		By Discount account	100
		By Joint venture account - 2/3	2,116.67

	10,266.67		10,266.67

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■	Process Costing System - Addition of Materials & Beginning Inventory
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■	Standard Costing and Variance Analysis
■	Gross Profit Analysis
■	Linear Programming Technique
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■	Service Department Costing
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Financial Accounting


■	Bookkeeping and Bookkeeping Terms
■	Accounting Principles and Accounting Equation
■	Journal
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■	Subdivision of Journal
■	Final Accounts
■	Capital and Revenue Items
■	Single Entry System/Accounting From Incomplete Records
■	Accounting For Non-Trading Concerns
■	Accounting for Consignment / Consignment Accounts
■	Accounting for Joint Ventures
■	Accounting for Depreciation

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