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Joint Venture Journal Entries:

Learning Objectives:

1. What is accounting treatment of joint ventures?

2. Prepare journal entries in the books of parties doing joint venture business.

There are two methods in which joint venture accounts can be kept These are:

1. Where no separate books are kept to record joint venture transactions.
2. Where as separate set of books is kept to record the transactions.

When Separate Books Are Not Kept:

When it is not possible to maintain a separate set of books for joint venture transactions, each party will use his ordinary business books for recording such transactions. Each party will open a joint venture account and the accounts of other parties in his books. Suppose A and B enter into a joint venture. Then A will open a joint venture account and also an account of B in his books. Similarly, B will open in his books, a joint venture account and the account of A. The following journal entries are made:

When Separate Books Are Kept:

Under this method a separate joint bank account is opened. The amount contributed by each partner as his share of investment is deposited into a joint bank account. accounts of the parties concerned are also opened. The system of accounting then is as follows:

1. The amount contributed by each partner is debited to a joint bank account and credited to the personal account of each partner.
2. Goods bought on joint venture as well as expenses incurred in connection with the business are debited to the joint venture account and credited to the seller's account or the joint bank account.
3. When the goods are sold, the amount thereof is debited to the partner's account or the joint bank account and credited to the joint venture account.
4. If the parties have taken over plant or materials etc., the value will be debited to the account of the party concerned and credited to the joint venture account.
5. The joint venture account will now show profit or loss which will be transferred to the personal accounts of the respective parties in their profit sharing ratio.
6. The joint bank account will then be closed by making payment to each partner of what is due to him in respect of his personal account.

For better understanding of these two methods of joint venture accounting please visit our joint venture accounting problems and exercises page.

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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