JOINT VENTURE ACCOUNTING

Joint venture accounting with 2 or more than two partners. The partners get into agreement.

These partners get into a agreement which details on the % share of each partner.

IN SAP

Types of ventures:

1. Operated
2. Non Operated
3. Corporate

Master data:

A joint venture is an arrangement in which two or more parties agree to

pool their resources for the purpose of a specific task or transaction.
This task may be a fresh project or any other business activity. In a joint
venture, each of the members is responsible for profits, losses and costs
associated with it. However, the venture is an entity separate from its
participants. Here, we will discuss the Joint Venture Accounting with
Separate Books.

Joint Venture Accounting with Separate Books

The joint venture accounting can be done in any of the following two
ways:

1. When the separate set of books are maintained

2. When the separate set of books are not maintained
We will here deal with the situation when the separate set of books are
maintained. Thus, the following accounts are made:

 Joint bank account

 Joint venture account
 Co-venturers account
(1) Joint Bank Account

The co-venturers open a separate bank account for the venture

transactions. They make initial contributions to this account. The bank
account is normally operated jointly. Expenses are met from this Joint
Bank Account. Sales or collections from transactions are deposited into
this account.

However, if any co-venturers make direct payments and direct

collections; in such a case their Personal Accounts will be credited/
debited for the transactions done. On completion of the venture, the
Joint Bank Account is closed by paying the balance to co-ventures.

(2) Joint Venture Account

This account is prepared for measurement of venture profit. This

account is debited with all venture expenses and credited with all sales
or collections. The excess balance of credit side over the debit side
shows the profit on joint venture and vice versa. Profit /Loss are
transferred to co-venturers’ accounts in the profit-sharing ratio.

(3) Co-venturers’ Accounts

Personal accounts of the venturers are maintained to keep a record of

their contributions of cash, goods. Expenditure directly paid and
payments directly received by co-venturers are also recorded in this
account. The profit or loss so made on the venture is transferred to this
account in the agreed profit sharing ratio. This account is also closed on
completion of the venture.