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Joint Venture Accounts

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					S5 Accounts/Joint Venture/LWL                                                              1


Joint Venture Accounts (                   )

A. Nature of Joint Ventures

      A Joint Venture is a short-term partnership. Two or more partners arrange to carry
     out a business to earn profit. When the business is completed, the joint venture will
     terminate.

B.   Accounting Treatment

     For F5 examinations, only small joint ventures are examined. In smaller joint
     ventures, each of the Buenos will record only those transactions carried out by them.

     Procedures in keeping joint venture accounts:

     Example : A and B are in joint venture selling flowers in Lunar New Year.

     Step 1 : Record individual expenses and revenue in the partner’s own
              Joint Venture Account.


       A’s Record
                                      Joint Venture with B
       Expenses paid by A                          Revenue earned by A




       B’s Record
                                      Joint Venture with A
       Expenses paid by B                          Revenue earned by B




       •   A Joint Venture Account has two natures, it is a “Profit and Loss Account”
           relating to the Joint Venture; it also acts as a “Debtor/Creditor” Account.
           Therefore, for a Debit entry, it is an expenses as well as a debtor. For a Credit
           entry, it is a revenue as well as a creditor.

Step 2 : Prepare a Memorandum (Total) Joint Venture Account to calculate
         Profit/Loss for the whole Joint Venture.

                                   A and B
                        Memorandum Joint Venture Account
Total Expenses of the J.V.             Total Revenue of the J.V.
(Add the expenses paid by A & B)       (Add the revenue received by A & B)



Net Profit on Joint Venture:                   Loss on Joint Venture:
  A (1/2)                                        A (1/2)
  B (1/2)                                       B (1/2)
S5 Accounts/Joint Venture/LWL                                                          2


Step 3 : Record the Net Profit/Loss back in the individual Joint Venture Account, i.e.
         A’s Joint Venture Account and B’s Joint Venture Account. If it is Profit,
         Debit individual Joint Venture Account; if it is Loss, Credit the individual
         Joint Venture Account.


       A’s Record
                                    Joint Venture with B
       Expenses paid by A                         Revenue earned by A



       (Net Profit earned by A)                   (Net Loss suffered by A)




       B’s Record
                                    Joint Venture with A
       Expenses paid by B                         Revenue earned by B



       (Net Profit earned by B)                   (Net Loss suffered by B)



Step 4 : In the individual Joint Venture Account, carry down the balances.
          Balances b/d show indebtedness of one of the parties to the other parties.


       A’s Record
                                    Joint Venture with B
       Expenses paid by A                         Revenue earned by A



       (Net Profit earned by A)                   (Net Loss suffered by A)

       Balance c/d                                Cash in settlement from B
                                  =====                                       =====




       B’s Record
                                    Joint Venture with A
       Expenses paid by B                         Revenue earned by B




       (Net Profit earned by B)                   (Net Loss suffered by B)

       Cash in settlement to A                    Balance c/d
                                    =====                                    =====
S5 Accounts/Joint Venture/LWL                                                    3




Points to Note :

1.    Goods Taken Over by Partner:
      Debit _____________________________________

       Credit ___________________________________

2.   Insurance Compensation paid for loss of goods:

     Debit _________________________________

         Credit ______________________________

3.   Goods Damaged, Lost, Destroyed by Fire

 (a) If the stock is uninsured, NO ENTRY is needed to be made in the Joint Venture
     Account.

 (b) If the stock is insured, the treatment is the same as in (2) above.

4.   Unsold Stock upon completion of the Joint Venture.

     Example : A and B are in joint venture with equal sharing. Upon completion of
               the Joint Venture, stock of $5,000 with carriage $1,000 paid were
               unsold. The partners agreed to take back the stock as their own.


     Solution:

       A’s Record
                                     Joint Venture with B
       Expenses paid by A                         Revenue earned by A




       B’s Record
                                     Joint Venture with A
       Expenses paid by B                         Revenue earned by B




                                  A and B
                       Memorandum Joint Venture Account
Total Expenses of the J.V.            Total Revenue of the J.V.

				
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Description: While referring to the joint venture investment company with the two parties, involving the Fund's limited partners, this word has special meaning. If the fund's limited partners have co-investment rights, he can direct support to the private equity funds invest in companies. Such a partner in the company has two separate shares, in part indirectly through the Fund, and the other part of direct investment received. Some private equity firms in order to encourage institutional investors to invest in funds, to provide co-investment rights.