BOOK KEEPING FORM FOUR – JOINT VENTURE

Is a temporary partnership, it is formed when two or more people undertaken a certain business acting together instead of doing it separately, e.g. Road constructing

Each person will set up Joint Venture with; payment made for the venture will be credited to the cash book and debited to the Joint Venture A/C.

Any money received will be debited to the cash book and credited to the Joint Venture.

DOUBLE ENTRY TRANSACTION.

(i)         When payment is made.

                    DR:  Joint Venture

                    CR:  Cash Book

(ii)        When good are supplied.

                       DR:  Joint Venture A/C

                       CR:  Purchases A/C

NB:     This is for all Ventures, at the end of Venture each partner will make a copy of his own A/C and sent it to his co – partner.

A combined statement showing profit and loss will be prepared.  This statement is known as  MEMORANDUM JOINT VENTURE A/C

The memorandum joint venture A/C is not a double entry A/C.

It is drawn up only to find out:-

            (a)  The share of Net Profit or loss.

(b)   To help to calculate the amount payable and renewable to close the venture.

Double entry transactions for profit obtained.

(iii).       Share profit

      DR:  Joint Venture

      CR:  Venture profit and loss

(iv)   After that entry the Joint Venture A/C is balanced down. Thus will show:-

(a)    If the balance is  CREDIT BALANCE the person has receive more from the Joint Venture then have to pay that amount to the other person to close the Venture.

(b)   If the balance of  DEBIT BALANCE the person has receive less from the Joint Venture than he should get.  He will need to receive each from other person to close the Venture.

EXAMPLE:-

Juma and Othman entered into Joint Venture agreed to share  profit and loss equally:-

The following transactions are made:-

January 5:    Juma purchase goods worth                                        180,000/=

                     Juma paid expenses                                                         2,800/=

January 22:   Juma sold 1/3 of goods for                                        750,000/=

January 24:   Othman sold 2/3 of goods for                                    240,000/=

January 25:   Juma bought goods for                                                70,000/=

January 29:  Othman bought goods for                                          100,000/=

Required:-

Joint Venture A/C together with memorandum.

Solution:-

–          In the books of Juma.

     DR                           JOINT VENTURE WITH OTHMAN                                                   CR

–          In the books of Othman.

      DR                           JOINT VENTURE WITH JUMA                                                CR

 
 

                                                                      JUMA AND OTHMAN

                DR             MEMORANDUM JOINT VENTURE     CR

EXERCISE;-

Ponda and Rajab enter into joint venture to buy a lot of damaged cars, and to release them after repair.  They agreed to share profit and lose equally after all owing 10% commission on sales made by the individual and an allowance of 2,500 each for services rendered.

The following summary of their transactions:-

                                                                           Ponda                                       Rajab

Damaged car bought                                        10,400/=                                     9,600/=

Towing change                                                  1,100/=

Spare                                                                 3,800/=                                       4,500/=

Mechanics wages paid                                      9,300/=                                       6,200/=

Advertising change paid                                                                                         200/=

Other expenses paid                                          2,100/=                                       3,300/=

Proceeds of sales                                              33,000/=                                    34,000/=

Ponda took over one car at agreed value of 8,000 and Rajab took over some spare parts at agreed value of 6,000.

Required:-

Show the following A/C:-

(a)        Joint Venture account in the books of individual partner.

(b)        Memorandum Joint Venture A/C assuming that settlement between partner was made by cheque:

Solution:-–          In the books of Ponda   
 DR                                JOINT VENTURE WITH JUMA                                   CR

 
 

–          In the books of RAJAB.

     DR                                     JOINT VENTURE WITH PONDA                                         CR

                                                             PONDA AND OTHMAN

     DR                                       MEMORANDUM JOINT VENTURE A/C                             CR

 EXERCISE 1

Sara   and   Jane   entered into   venture   of timber   cargo   from   Mbeya   all   profit   and   losses   are shared     equally . it was agreed     that   Jane   purchases   the goods   and   Sara sell   them. The cost of   the venture   was   50,000/=   which was paid by   Jane

          Sara   refunded     half   of   the   cost   price   immediately     Jane     incurred   the following expenses

          Loading     expenses   Tshs 1000/=

          Transport   expenses 3000/=

        Sara   undertook   the following expenses  

                   Unloading   Tshs 1000/=

                    Selling   expenses Tshs 2000/=

Sara sold   the goods   at   sh 80,000/=   payable   by a bill at 3 months

              The bill   was   discounted   immediately   at   5%   per annum

 Prepare   the joint venture   and the person   account   as   they   would   appear   in the books   of Sara  and Jane

EXERCISE 2

THOMAS ,WILLIAM ,and MARTIN   entered in joint venture     for dealing   in carrot. The transaction   connected   with joint venture   were   1992

 January 8   MARTIN   rented   land cost   Tsh 156/=  

January 10 WILLIAM supplied   seeds     cost Tshs   48/=

January 17 THOMAS employed labor for planting   Tshs 105/=

January 19   WILLIAM   charged motor expense   Tshs     17/=

 January 30   THOMAS   employed   labor for   fertilizing     Tshs     36/=

 January 28   THOMAS paid the following expenses  

 Sundry expenses Tshs 10/= labor Tshs 18/= fertilizer account Tshs 29/=

March 17   MARTIN employed   labor     for lifting   carrots     Tshs   73/=

 March 30   sales expenses paid by MARTIN   Tshs   39/=

 March 31   MARTIN received   cash from sales   proceeds gross   Tshs   987/=

 Required

Show   the joint venture account   in the   books   of THOMAS ,WILLIAM ,and MARTIN    also show in full   the method   of   arriving   at the profit of the venture   which is to   be apportioned THOMAS  ⁷/₁₂ , WILLIAM

 ¹/₄ ,   MARTIN ¹/4

Solutions qn1

                                         IN THE BOOKS OF SARA

     DR         JOINT VENTURE   WITH JANE    ACCOUNT                                                                       Cr          
     

                             IN THE BOOKS OF JANE
    DR     JOINT VENTURE WITH SARA ACCOUNT  CR

 
 

                                              SARA AND JANE

DR                 MEMORANDUM   JOINT   VENTURE   ACCOUNT     CR     

Solution qn2
                                                         THOMAS

  DR    JOINT   VENTURE WITH WILLIAM AND MARTIN ACCOUNT             CR

                          WILLIAM

    DR   JOINT VENTURE WITH THOMAS AND MARTIN        CR

                                                           MARTIN

      DR   JOINT VENTURE   WITH HOE, PLANT  CR

                                            THOMAS , WILLIAM   AND MARTIN

       DR           MEMORANDUM   JOINT VENTURE       ACCOUNT    CR