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Financial
Accounting Coach
Welcome to Financial Accounting Coach blog. This blog
created by Puan Normala and Puan Norizah purposely
dedicated to our beloved student at PMK to get through
their journey in learning about Financial Accounting to get
their Diploma Certificate. Hopefully this blog really helps
them to get the notes, discussing the topic... and to
understand the topic very well.
CHAPTER 4
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4/19/2019 Financial Accounting Coach: TOPIC 8 : JOINT-VENTURE ACCOUNT
Joint-Venture Accounts
NORMALA SALIMIN
Joint venture is a collabora on of a business which is not permanent. It only runs one economic
ac vity in one period un l the objec ve is met. The collabora on will end once the objec ve /
mo ve is implemented.
It is also a partnership limited to a par cular venture. It does not make use of a firm’s name and
the par es concerned will agree among themselves to contribute capital towards the venture
and to share all profits or losses. For example a merchant trading might provide the ship,
another goods and another capital, any profits or losses would be divided in accordance to an
agreed ra o.
One system of Joint Venture is where a separate set of books is opened and the transac ons are
recorded in a similar manner as that of a partnership.
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4/19/2019 Financial Accounting Coach: TOPIC 8 : JOINT-VENTURE ACCOUNT
The other system is that no separate set of books is opened to record the transac ons. Each
party will record his own transac ons in his own books.
For this purposes, the party will open up account known as Joint Venture with __________
account. Provided that each investor recorded their own transac on only, the other party has to
prepare the details of transac on which is already prepared in order to determine the profit or
loss. All the transac ons will be combined in the Memorandum Joint Venture Account. The
memorandum is not a double entry system.
The memorandum joint venture account effects a profit and loss, each venturer calculates his
share of profit or losses. This share is then entered in the double entry being completed
between the profit and loss account and joint venture accounts.
A er all this is completed, the balance on each party’s joint venture account represents the cash
transfer required to close the venture. Naturally in total the debit and credit balances are either
carried down into the next accoun ng period or se led by the appropriate bank/cash payment
or receipt. The transfer is recorded in the books of each venture, double entry being completed
between the cash/bank account and joint venture account.
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4/19/2019 Financial Accounting Coach: TOPIC 8 : JOINT-VENTURE ACCOUNT
Debit Anything the ventures put into the enterprise (e.g. Cash, purchases, expenses paid
etc).
Credit Anything the ventures take out of the enterprise (e.g. Sales and cash withdrawal,
assets withdrawal etc.
In the book of P
In the book of Q
The memorandum joint venture account is not a double entry account. It is drawn up only to
find out
b) to help calculate the amounts payable and receivable to close joint venture
Purchases a/c – total purchases by P & Q X Sales a/c – total receipt by P & Q X
Expenses a/c – total expenses by P & Q X Debtors – credit sales by P & Q X
Commission received by P & Q X Assets taken over by P & Q X
Profit and loss: Assets a/c - Stock withdrawal X
P’s profit X X
Q’s profit X
XX XX
Example 1 :
Filza Pvt Ltd and DYN Pvt Ltd are suppliers of instant seasoning in Selangor. Both companies have agreed to
undertake a joint venture to introduce new products. Filza will supply the product and bear any expenses
incurred. DYN will sell the product and receive cash, and also cover any relevant expenses. Profit and losses
were to be shared equally. The followings are the relevant informa on regarding the transac ons occurred:
RM
Filza borne the cost of the product 1,800
Filza paid wages 200
Filza paid storage cost 160
DYN paid cost of carriage 120
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4/19/2019 Financial Accounting Coach: TOPIC 8 : JOINT-VENTURE ACCOUNT
Workings:
Step 1
Filza and DYN will prepare their own Joint Venture Account respec vely. Filza will open the “Joint Venture
Account with DYN” and vice versa. The double entry for this transac on was as follow:
In the book of Filza Pvt Ltd Payment Dt Joint Venture Account with DYN
Ct Cash Account
Ct Purchases
In the book of DYN Pvt Ltd Payment Dt Joint Venture Account with Filza
Ct Cash Account
RM RM
Purchases 1,80
0
Cash: Wages 200
Cash: Storage cost 160
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4/19/2019 Financial Accounting Coach: TOPIC 8 : JOINT-VENTURE ACCOUNT
RM RM
Cash: carriage 120 Cash: Sales 3,20
0
Cash: selling expenses 320
Step 2
The Memorandum Joint Venture Account is prepared in order to determine whether the company gains
profit or suffer a loss. The distribu on of profit or loss is made based on the agreed ra o which is to be
shared equally. The details in the memorandum are the combina on of every Joint Venture Account.
RM RM RM
Purchases 1,800 Sales 3,200
Wages 200
Storage expenses 160
Carriage expenses 120
Selling expenses 320
Profit:
Filza (½) 300
DYN (½) 300 600
3,200 3,200
Step 3
The profit obtained by Filza and DYN will be distributed in their accounts.
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4/19/2019 Financial Accounting Coach: TOPIC 8 : JOINT-VENTURE ACCOUNT
Ct P&L
Ct P&L
RM RM
Purchases 1,80 Balance c/d 2,46
0 0
Cash: Wages 200
Cash: Storage cost 160
P&L 300
2,46 2,46
0 0
Balance b/d 2,46 Cash from DYN 2,46
0 0
RM RM
Cash: carriage 120 Cash: Sales 3,20
0
Cash: selling expenses 320
P&L 300
Balance c/d 2,46
0
3,20 3,20
0 0
Cash paid to Filza 2,46 Balance b/d 2,46
0 0
EXERCISES
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4/19/2019 Financial Accounting Coach: TOPIC 8 : JOINT-VENTURE ACCOUNT
QUESTION 1
Haniz and Wandy, run the business together on the basis that the transac on gains and losses be divided
equally. They do not have bank accounts and do not have any books that open a special account to record
these transac ons. Each of them will do the record transac on respec vely. The following are the
transac ons:
Year 2010
They had decided to discon nue the joint venture on 30 September 2010. You are required to prepare a
joint venture statement (memorandum with the transac on) and show the ledger accounts in respect of
the books Haniz and Wandy.
QUESTION 2
Fauzi and Syamsul are iron merchants who each have their own business. They have agreed to work
together and share profits or losses equally. The following are transac ons carried out by both the 2013
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At the end of the transac on, it was found that there is unsold iron by Fauzi worth RM3,100 and RM1,090
by Syamsul. Both par es have agreed to take over the iron-steel and will be credited to their accounts.
Fauzi and Syamsul also agreed to impose a charge of 5% on the overall profitability of their business for
service charges and they run their business equally.
Required:
a. Account for transac ons with the both par es
b. Memorandum account transac ons with Fauzi and Syamsul with regard to all ma ers agreed
QUESTION 3
Tria and Elisa conduct joint ventures on the basis that profits and losses will be shared equally. Each party
had a par cular transac on in their books. Here are the transac ons involved in the collabora on:
Year 2010
Tria and Elisa agreed to terminate the joint venture business on 30 November 2010. You are required to
prepare a Statement of Joint Ventures (Memorandum of Joint Ventures) and show the ledger accounts in
respect of the books Elisa and Tria.
QUESTION 4
Yee and Tee were business venture to buy and sell the bricks. They started the business on 2nd January
2011. They agreed to divide the profits or losses in propor on to the contribu on of RM12,500. On April
4th, Tee has been taken brick to repair the house with an agreed amount of RM800. Because Yee has
requested to know the development of their business, they agreed to calculate the amount of profits
earned up to 30th June 2011. On closing date, the total number of bricks that were not been sold worth
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RM3, 800.
amoun ng to RM285
(iv) Interest on the agreed capital of 4% per year
(v) Cash payments on loans : Yee of RM5, 000
Tee of RM3, 000
(vi) They want to open a set of books for recording transac ons and joint ventures.
Required to prepare a Memorandum of Joint Ventures and Joint Ventures account with Yee and Tee.
QUESTION 5
Upin and Ipin, run the business together on the basis that the transac on gains and losses be divided
equally. They do not have bank accounts and do not have any books that open a special account to record
these transac ons. Each of them will do the record transac on respec vely. The following are the
transac ons during year 2012 :
They had decided to discon nue the joint venture on 30 September 2012. You are required to prepare a
joint venture statement (memorandum with the transac on) and show the ledger accounts in respect of
the books Upin and Ipin.
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4/19/2019 Financial Accounting Coach: TOPIC 8 : JOINT-VENTURE ACCOUNT
QUESTION 6
Faris and Adib entered into a join venture for dealing in tropical fruit. They have agreed to work together
and share profits or losses equally. The following are transac ons connected with this venture :
At the end of the transac on, it was found that there is stock unsold worth RM560 and both agreed to take
over the stock equally. They also agreed to take over the machine that had been bought by them a er
reduce 10% deprecia on.
Required:
a. Account for transac ons with the both par es
b. Memorandum account transac ons with Faris and Adib with regard to all ma ers agreed
28 comments:
….How to free up time, save headaches and make your life easier!
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4/19/2019 Financial Accounting Coach: TOPIC 8 : JOINT-VENTURE ACCOUNT
Thanks again
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4/19/2019 Financial Accounting Coach: TOPIC 8 : JOINT-VENTURE ACCOUNT
Business organizations needs to write and prepare ledger account wherein all the transactions of are recorded
permanently under different heads of accounts.
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Tally Training
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4/19/2019 Financial Accounting Coach: TOPIC 8 : JOINT-VENTURE ACCOUNT
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