Question on Joint Ventures.


  1. X and Y enter into a joint venture sharing profits and losses in the ratio of 3:2.

  2. X Is entitled to get 1% commission on purchase and Y is entitled to get 5% commission on sales

  3. X purchased goods for Rs 4, 00,000 and sent the same  to Y. Supplier allowed a cash discount of 5%.

  4. X drew a bill on Y for an amount equivalent to 80% of the original cost of goods. X got it discounted for 3, 00,000.

  5. Y sold 50% goods for Rs 5,00,000 and paid Rs 4,000 towards selling and admin expenses and insurance and Rs1,000 still outstanding. Y allowed a cash discount of 5% to a customer to whom goods were sold for Rs 2, 00,000. Bad debts amounted to Rs16, 000.

  6. 50% of the balance goods are taken over by Y at 60% of cost.

  7. Remaining goods were destroyed by fire and insurance claim was received by Y to the extent of 60%.


Q1. The profit on joint venture is: ---

A) 1, 80,000

B) 1, 60,000

C) 1, 40,000

D) None of the above

Q2. The final remittance is:

  1. Rs 1,90,000 by X to Y

  2. Rs 1,90,000 by Y to X

  3. Rs 1,80,000 by Y to X

  4. Rs 1, 80,000 by X to Y.





And one more doubt how do we treat bad debts in joint venture accounting ??? were do we record bad debts ???


and how do we treat this 4th point of the question???

asked Apr 24, 2014 in Joint Ventures by alishaad (4 points) 5,101 views
edited Apr 24, 2014 by alishaad

1 Answer

+1 vote
Joint Venture A/c

Purchases                         380000                 Sales (Y)                                500000

Commission X                      4000                  Y (stock taken over)               60000

Commission Y                    25000                  Y (Insurance money)            60000

Y (Expenses)                         5000

Discounting Charges BR 20000

Bad Debts                            16000

Discount Allowed                10000

X   Profit                                96000

Y Profit                                  64000

Total                                   620000                    Total                                      620000

                                                           Account of X

B/R  Discounted                300000                  Purchases                            380000

Cash received                   180000                  Commission                             4000

                                                                              Profit                                         96000

Total                                    480000                  Total                                        480000

                                                        Account of Y

Cash (Sales)                    474000                   Bill Payable                            320000

Cash (from Insurance)     60000                   Commission                            25000

Stock taken over                60000                    Expenses                                   5000

                                                                             Profit from J.V                           64000.

                                                                             Cash paid to X                        180000   

Total                                  594000                    Total                                         594000
answered Apr 24, 2014 by jbsclasses (3,971 points)
edited Apr 25, 2014 by jbsclasses
one more thing i need to ask u sir :)
1) sir y are v taking  B/R discount as joint venture expense ???. that expense belongs to X ??
2) commission to Y 25000???
    commission to X 4000????
Unless stated otherwise in the question bill discounting charges are borne by joint venture.  If you look at this question X bought goods with his own money but Y did not invest any money except on expenses.  So to bring both of them at parity X should get money immediately and the charges for getting money should be borne by joint venture.  This is a kind of finance charge of joint venture so should be borne by joint venture.
Y get commission of 5% on total sales of Rs.500000 and not on the amount after discount of Rs.10000.  Similar X get commission on total purchases of Rs.400000 i.e. before getting discount of Rs.20000.  Discount given or received is financial charge/income but commission to joint ventures will given on the actual amount of purchase/sales.
thank u so much sir :) now i understood.. so in every problem like this  the bill discounting charges are always borne by the joint venture a/c :) and if the books are maintained under memorandum joint venture account then the charges are recorded in memorandum JV a/c. am i rite sir :) :)
And if the B/R discounting charges are to be borne by any of the co-venturers wat will be the entries sir ??
You are right, In that case Memorandum Joint-Venture A/c will be debited by bill discounting charges.
For example if in the above case, X was to bear the charges, entry would have been: X Debited with Rs.320000 and Y Credited with Rs.320000.  In case if Y was to bear these charges then same entry with Rs.300000 would have been carried out
Thank u very much sir :) :)
well explained !!!