A Joint Venture account will be prepared but not as part of accounts. The name of such an account is Memorandum Joint Venture Account. In the books, only one account is opened as “Joint Venture with…..Account” or “Joint Venture Investment Account”. This account is prepared through the following methods:-
image source: clbusiness.files.wordpress.com/2013/02/slide16.jpg
- Goods sent or cash spent on Joint venture is debited to this accounts.
- No account is taken of goods used or a cash spent on Joint Venture by the other part.
- If any cash or acceptance is received on account of Joint Venture, or from other party this account is credited.
The account is then debited with own share of profit, the credit being given to Profit and Loss Account. If the memorandum Joint Venture Account shows a loss, the Profit and Loss Account is debited and this account will be credited with own share of loss. The balance in this account will now show the amount owing to the other party.