Joint venture

Example

X and Y are partners in a joint venture sharing profits and losses in the proportion of four-fifth
and one-fifth respectively. X supplies goods to the value of $15,000 and incurs expenses
amounting to $1200. Y supplies goods to the value of $12,000 and his expenses amounting to
$1200. Y sells goods on behalf of the joint venture and realizes $36,000. Y is entitled to a
commission of 5 percent on sales. Y settles his accounts by bank draft.

Required: Give journal entries and necessary ledger accounts in the books of both the parties.

Example in the Books of X, Try on your own in the books of Y

Journal Entries

Joint venture account 15,000

To Cash account 15,000
(Being Goods sent to Y)

Joint venture account 1200

To Cash account 1200
(Expenses incurred on goods sent to Y)

Joint venture account 12,000

To Y account 12,000
(Goods supplied by Y)

Joint venture account 1200

To Y account 1200
(Expenses incurred by Y on joint venture)

Y account 36,000
To Joint venture account 36,000
(Sales proceeds received by Y)

Joint venture account 1800

To Y account 1800
(Commission due to Y on sales at the rate of 5%)

Joint venture account 5100

To Y 1020
 To Statement of Comprehensive Income 4080
(Profit $5100 divided as 1/5 to Y and 4/5 to self)

Cash account 20280

To Y 20280
(The draft received from Y in settlement)

Joint Venture Account

Debit Side Credit Side

To Cash a/c – Goods 15,000 Received By Y - Sales 36,000
To Cash a/c - Expenses 1200
To Y a/c – Goods 12,000
To Y a/c – Expenses 900
To Y a/c - Commission 1800
To Y - Share of profit 1020
To Statement of Comprehensive Incm 4080
36,000 36,000

Y Account

Debit Side Credit Side

To Joint venture account 36,000 Joint venture a/c - Goods 12,000
Joint venture a/c - Expenses 900
Joint venture a/c- Commission 1800
Joint venture a/c – Income Statemnt 1020
By Cash 20280
36,000 36,000