NOTES


CA-Foundation > Principles and Practice of Accounting > Accounting for Special Transactions - Joint Ventures (Old Syllabus)

Arjuna and Bheema entered into a Joint Venture for the production and sale of “Mahabharat” CDs during a festival season. Arjuna contributed Rs. 3,00,000 and Bheema contributed Rs. 2,00,000 to the venture. They incurred the following expenses towards Joint Venture - (a) Payment to Artists and Technicians - Rs. 2,80,000, (b) Hire Charges for Equipment, Lab Fees, etc. - Rs. 1,20,000, (c) CD Making, Packing and Promotion Expenses - Rs. 75,000.

They made 20,000 CDs and sold 16,000 CDs during the festival season at Rs.45 per CD. Bheema directly received the sale proceeds of 2,500 CDs out of the above 16,000 CDs.

Arjuna took over 3,000 CDs at an agreed cost of Rs. 25 per CD. 1,000 CDs were found defective at the end of the season and had to be scrapped.

Separate books were maintained for the Venture, and the profits were divided in the ratio 3:2.

Give Journal Entries and Ledger Accounts in the books of the Joint Venture.



Ans.

Journal Entries

 

Particulars

 

Dr.

Cr.

1.

Joint Bank Account

Dr.

5,00,000

 

      To Arjuna A/c

 

 

3,00,000

      To Bheema A/c

 

 

 

(Being Initial Contribution by Co-Venturers in Joint Bank Account)

 

 

2,00,000

2.

Joint Venture A/c

Dr.

4,75,000

 

      To Joint Bank A/c

 

 

4,75,000

(Being Expenses paid out of Joint Bank A/c - (a) Payment

 

 

 

to Artists, etc. Rs. 2,80,000, (b) Hire Charges etc. -

 

 

 

Rs.1,20,000, (c) CD Making, Packing & Promotion - Rs. 75,000)

 

 

 

3.

Joint Bank Account

Dr.

6,07,500

 

     To Joint Venture A/c

 

 

6,07,500

(Being Sales made = 16000 - 2500 = 13,500 CDs at Rs.45 per CD)

 

 

 

4.

Bheema A/c

Dr.

1,12,500

 

      To Joint Venture A/c

 

 

1,12,500

(Being collections directly received by Bheema 2500 CDs at Rs.45)

 

 

 

5.

Arjuna A/c

Dr.

75,000

 

        To Joint Venture A/c

 

 

75,000

(Being 3,000 CDs taken over at agreed cost of Rs.25)

 

 

 

6.

Joint Venture A/c

Dr.

3,20,000

 

         To Arjuna A/c

 

 

1,92,000

         To Bheema A/c

 

 

1,28,000

(Being profit on JV distributed in ratio of 3:2)

 

 

 

7.

Arjuna A/c

Dr.

4,17,000

 

Bheema A/c

Dr.

2,15,500

 

          To Joint Bank Account

 

 

6,32,500

(Being final settlement to Co-Venturers, on closure of Joint Bank A/c)

 

 

 

2. Joint Bank Account

Particulars

Rs.

Particulars

Rs.

To Arjuna A/c (Capital)

3,00, 000

By Joint Venture A/c - Exps incurred

4,75,000

To Bheema A/c (Capital)

2,00, 000

By Bheema A/c (final settlement)

2,15,500

To Joint Venture A/c (Sales Collections)

6,07,500

By Arjuna A/c (final settlement)

4,17,000

Total

11,07,500

Total

11,07,500

3. Joint Venture Account

Particulars

Rs.

Particulars

Rs.

To Joint Bank A/c (Expenses incurred)

4,75,000

By Joint Bank A/c (Sales Collections)

6,07,500

To Co-Venturers' Accounts - Profit

 

By Bheema A/c (Direct Collections)

1,12,500

Arjuna (3/5)                   1,92,000

 

By Arjuna A/c (CDs taken over)

75,000

Bheema (2/5)                1,28,000

3,20,000

 

 

Total

7,95,000

Total

7,95,000

4. Co-Venturer's Accounts

Particulars

Aijuna

Bheema

Particulars

Aijuna

Bheema

To Joint Venture (direct coll.)

-

1,12,500

By Joint Bank A/c (Capital)

3,00,000

2,00,000

To Joint Venture (taken over)

75,000

2,15,500

By Joint Venture (Profit)

1,92,000

1,28,000

To Joint Bank (settlement)

4,17,000

 

 

 

 

Total

4,92,000

3,28,000

Total

4,92,000

3,28,000

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Notes of Accounting for Special Transactions - Joint Ventures (Old Syllabus)



  1. Consignment and Joint Venture.
    see in detail

  2. Joint venture and partnership.
    see in detail

  3. A of Delhi and B of Bangalore entered into a joint venture for purchase and sale of one lot of mopeds.The cost of each moped was Rs.3,600 and the fixed retail selling price; Rs.4,500. The following were the recorded transactions:

    2016

    Jan 1     A purchased 100 mopeds paying Rs.72,000 in cash on account

               A raised a loan from X Bank for Rs.50,000 at 18% p.a., interest repayable with loan amount on1.3.2016.

                 A forwarded 80 mopeds to B incurring Rs.2,880 as forwarding and insurance      charges.     

    Jan. 7  B received the consignment and paid Rs.720 as clearing charges.

                A sold 5 mopeds for cash.

                B sold 20 mopeds for cash.

    Feb. 1 B raised a loan of Rs.1,50,000 from Y Bank, repayable with interest at 18% p.a on  1.3.2016.

               B telegraphically transferred Rs.1,50,000 to A incurring charges of Rs.50. A paid balance due for the mopeds.

     Feb. 26  A sold the balance mopeds for cash.    

                   B sold balance mopeds for cash.

                   A paid selling expenses Rs.5,000. 

                   B paid selling expenses Rs.20,000.  

    Mar. 1 Accounts settled between the venturer and loans repaid, profit being appropriated equally.

    You are required to show Memorandum Joint Venture A/c. You are also required to show

    (1) Joint Venture with B A/c in A’s books; and

    (2) Joint Venture with A A/c in B’s books.

    Assume each venturer recorded only such transactions as concluded by him


    see in detail

  4. K and A of Nagpur entered into a joint venture to trade in silk goods in the ratio 2:1. On June 1, 2016, K bought goods worth Rs.7,200 and handed over half of the goods to A. On July 1, 2016, K bought another lot of goods costing Rs.2,400 and paid Rs.180 as expenses. On September 1, A purchased goods for Rs.4,500 and on the same day he sent to K a part of these goods costing Rs.1,800 and paid Rs.240 towards expenses.On the same day K remitted Rs.1,800 to A. The goods were invariably sold by the venturers at a uniform price of 33.33% above cost price excluding expenses. Each of the venturers collected cash proceeds on sales excepting an amount of Rs.250 owing to K by a customer and this was written off as a loss relating to the venture. In addition, goods costing Rs.600 in possession of A were destroyed by fire and an amount of  Rs.500 was realized by him as compensation from the Insurance Company. On December 20, unsold goods costing Rs.1,500 (at cost) were lying with K. Of these, goods costing Rs.600 were taken by K for personal use and the balance was purchased by him at an agreed value of Rs.1,000. A disposed of all the goods with him on December 31, excepting some damaged goods costing Rs.300 which were written off as unsaleable. You are required to prepare a Memorandum Joint Venture Account to find the amount of profit or loss
    see in detail

  5. Arjuna and Bheema entered into a Joint Venture for the production and sale of “Mahabharat” CDs during a festival season. Arjuna contributed Rs. 3,00,000 and Bheema contributed Rs. 2,00,000 to the venture. They incurred the following expenses towards Joint Venture - (a) Payment to Artists and Technicians - Rs. 2,80,000, (b) Hire Charges for Equipment, Lab Fees, etc. - Rs. 1,20,000, (c) CD Making, Packing and Promotion Expenses - Rs. 75,000.

    They made 20,000 CDs and sold 16,000 CDs during the festival season at Rs.45 per CD. Bheema directly received the sale proceeds of 2,500 CDs out of the above 16,000 CDs.

    Arjuna took over 3,000 CDs at an agreed cost of Rs. 25 per CD. 1,000 CDs were found defective at the end of the season and had to be scrapped.

    Separate books were maintained for the Venture, and the profits were divided in the ratio 3:2.

    Give Journal Entries and Ledger Accounts in the books of the Joint Venture.


    see in detail


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