Discuss the various methods of recording Joint Venture transactions.?
The main methods of recording the Joint Venture Transactions are: Method one Separate Set of Book Under this method, separate, books are kept dealing with Joint Venture transactions. Generally, the following accounts are opened in a separate set of books :
- Joint Bank Account: A separate bank account is opened. This account is used for recording Cash Transactions. Contributions by the co-adventurers are deposited in this account. Payments on account of Joint Venture are made out of this books.
- Accounts of Co-venture: Account of each co-venture is opened in the same manner as partners capital account.
- Joint Venture Account: This account is nominal account in nature. It is prepared to ascertain Profit and Loss made on Joint Venture.
Method two Recording in the Books of one co-venture only. Under this method, all the joint venture transactions are recorded by one of the co-venture’s. Following two accounts are opened, in the books of co-venture who is authorized to record Joint Venture transaction, under this method
- Joint Venture Account. It is a nominal account. It is prepared to find out the profit or loss on joint venture. Personal Accounts of other co-venture’s to record the Joint Venture transactions effected by other co-ventures and to ascertain the amount due to/for in other co-venture’s.
Method Three : Recording in the Books of All Co-Venture’s: Under this method, each, co-venturer will record in his own books of accounts all transactions relating to the Joint Venture. Each co-venturer will prepare the following two accounts in his books:
- Joint Venture Account: It is a nominal account. It is prepared to find out the profit or loss on Joint venture. Venture’s own share of profit or loss is transferred to the Profit and Loss Account, Whereas, the other Venture’s or Venture’s share of profit or loss is transferred to his/their personal accounts.
- Personal Accounts of other co-ventures: These accounts. are prepared to find-out the amount payable to or receivable from them.
There is not much of a difference in the recording of transaction between the second and third method. Same accounting entries will be used under this method also.
Method Four Memorandum Joint Venture Account Method: Under this method, each co-venture records only those Joint Venture transactions which are effected by him. Profit or Loss on Joint Venture is ascertained by, a memorandum Joint Venture Account. Thus the following two accounts are prepared under this system.