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Fundamentals of Financial and Cost Accounting · Joint Venture

Joint Venture When Each Venturer Maintains Records of All Transactions

Updated 10 October 2026 · Fact-checked

When each co-venturer records all transactions, every venturer's books show the whole venture. You debit the Joint Venture account for all costs and credit it for all sales and unsold stock. Co-venturers' personal accounts carry their dealings. Find profit, share it in the agreed ratio, then settle the balances in cash.

Understand Joint Venture: Each Venturer Maintains Records of All Transactions

A joint venture is a temporary partnership for one project, such as selling a lot of goods or completing a contract. The partners are called co-venturers. They share profit or loss in an agreed ratio. When the venture ends, the accounts are closed and settled.

In this method there is no separate set of books for the venture. Instead, each venturer records all the venture's transactions in his own books, including those done by the other venturers. So every venturer's books show the same total profit. Only the personal accounts differ, because each book shows the other venturers as debtors or creditors.

Two kinds of accounts are used. The Joint Venture account is a nominal-type account that collects all costs on the debit side and all sales and stock values on the credit side. The co-venturers' personal accounts show what each other venturer owes you or you owe him. A cash or bank entry is made only for your own payments and receipts. Anything done by another venturer goes through his personal account.

The rule is simple. If you pay, credit Cash or Bank. If another venturer pays or receives, credit or debit his personal account. The other side is always the Joint Venture account. Your own goods or stock sent to the venture are credited to Purchases, not to cash.

The balance on the Joint Venture account is the profit or loss. You transfer your share to your Profit and Loss account and the other venturers' shares to their personal accounts. Finally, the balance on each personal account is settled by cash or bank. A memorandum joint venture account can also be drawn up as a statement to collect all the transactions and show the total profit. It is not part of the double entry.

Key formulas to remember

Profit on joint venture
Profit = Sales + Value of unsold stock − Purchases − Expenses − Commission
Use all venturers' figures. A negative result is a loss.
Your own payment
Dr Joint Venture A/c ; Cr Cash/Bank A/c
Also use this for expenses you pay. Use Cr Purchases for goods you supply from your own stock.
Another venturer's payment
Dr Joint Venture A/c ; Cr Co-venturer's A/c
This applies to goods supplied, expenses paid and commission due to him.
Sales received by you
Dr Cash/Bank A/c ; Cr Joint Venture A/c
If another venturer receives the sales, debit his personal account instead.
Unsold stock taken over by a venturer
Dr Venturer's A/c (or Stock A/c if you take it) ; Cr Joint Venture A/c
Take it at the agreed value. It is treated like a sale.
Profit transfer
Dr Joint Venture A/c ; Cr P&L A/c (your share) ; Cr Co-venturers' A/cs (their shares)
For a loss, reverse the entries.
Settlement check
Closing balance of a co-venturer's A/c = Cash he holds − what he paid − commission due to him − his profit share
A debit balance means he pays you. A credit balance means you pay him.

How to solve Joint Venture: Each Venturer Maintains Records of All Transactions questions

Follow the same routine for every question. It keeps the Joint Venture account complete and the settlement correct.

  1. 1Identify whose books you are asked for. Everything is written from that venturer's point of view.
  2. 2List each transaction and note who paid or received it: you or the co-venturer.
  3. 3Debit the Joint Venture account for goods, expenses and commission. Credit Cash, Bank, Purchases or the co-venturer's account, depending on who paid.
  4. 4Credit the Joint Venture account for sales and for unsold stock taken over. Debit Cash or the co-venturer's account, depending on who received.
  5. 5Balance the Joint Venture account. The balancing figure is profit or loss.
  6. 6Share the profit in the agreed ratio. Credit your own share to P&L and the others' shares to their personal accounts.
  7. 7Balance each co-venturer's account. The balance is the amount to be settled.
  8. 8Check: your total outlay plus your profit share should equal what you receive (or pay) in settlement.

Quickest way: Memorandum column method

When to use it: Use it when the question lists many transactions by two venturers and you only need profit or the settlement amount.

  1. Make two columns, one for each venturer, and list what each paid and each received.
  2. Add up all costs: goods, expenses and commission. Add up all sales and unsold stock value.
  3. Profit = total credits − total costs. Split it in the ratio.
  4. Settlement for a venturer = what he paid + commission due + his profit share − what he received. If it is positive, he is to receive that amount. If it is negative, he is to pay it.
  5. Check that the amounts to be paid and received by the two venturers are equal and opposite.

Common mistakes in Joint Venture: Each Venturer Maintains Records of All Transactions

  • Crediting cash for expenses that the co-venturer paid.

    You forget that your books record all transactions, but your cash moves only for your own payments.

    Fix: Ask who paid. If not you, credit his personal account, never cash.

  • Leaving out the unsold stock when finding profit.

    The stock does not look like a sale because no money is received.

    Fix: Credit the Joint Venture account with the stock value, and debit the venturer who takes it. Treat it as a sale.

  • Treating a venturer's commission as an expense of the other venturer only.

    The commission is thought to be a private matter between the two.

    Fix: Debit the Joint Venture account and credit the venturer's account. Do this before dividing profit. In his own books it is his income.

  • Applying the wrong profit ratio to the whole profit.

    Students split by capital or by cash paid instead of the agreed ratio.

    Fix: Use only the ratio stated in the question. If none is given, assume equal sharing.

  • Debiting a venturer for sales he received, then forgetting to credit them to the Joint Venture account.

    Only one side of the entry is remembered.

    Fix: Write both sides. Dr the venturer who holds the cash, Cr Joint Venture A/c.

  • Getting the direction of settlement wrong.

    Debit and credit balances on personal accounts are confused.

    Fix: A debit balance means he owes you. A credit balance means you owe him. Check with the closing proof.

Worked examples

Example 1

A and B start a joint venture, sharing profit in the ratio 3 : 2. A buys goods for ₹1,00,000 and pays expenses of ₹5,000. B pays expenses of ₹3,000 and sells all the goods for ₹1,50,000, receiving the cash. Prepare the Joint Venture account and B's account in the books of A, and find the final settlement.

Show the solution
  1. Debit side of the Joint Venture account: Purchases ₹1,00,000 + A's expenses ₹5,000 + B's expenses ₹3,000 = ₹1,08,000.
  2. Credit side: sales received by B = ₹1,50,000.
  3. Profit = ₹1,50,000 − ₹1,08,000 = ₹42,000.
  4. A's share = 3/5 × ₹42,000 = ₹25,200. B's share = 2/5 × ₹42,000 = ₹16,800.
  5. Entries in A's books: Dr JV A/c ₹1,00,000 and Cr Purchases ₹1,00,000. Dr JV A/c ₹5,000 and Cr Cash ₹5,000. Dr JV A/c ₹3,000 and Cr B ₹3,000. Dr B ₹1,50,000 and Cr JV A/c ₹1,50,000. Dr JV A/c ₹42,000, Cr P&L A/c ₹25,200 and Cr B ₹16,800.
  6. B's account in A's books: Dr ₹1,50,000 (sales). Cr ₹3,000 (expenses) and ₹16,800 (profit share), total ₹19,800.
  7. Closing balance = ₹1,50,000 − ₹19,800 = ₹1,30,200 debit.
  8. Check: A's outlay ₹1,05,000 + profit share ₹25,200 = ₹1,30,200.

Answer: Profit is ₹42,000 (A ₹25,200, B ₹16,800). B pays ₹1,30,200 to A in final settlement.

Example 2

X and Y share profits equally in a joint venture. X supplies goods costing ₹80,000 and pays expenses of ₹6,000. Y pays expenses of ₹4,000 and sells goods for ₹1,20,000 cash. Y takes the unsold stock at ₹10,000. Y is entitled to a commission of ₹2,000 before profit is divided. In the books of X, find the profit and the amount of settlement.

Show the solution
  1. Debits to the Joint Venture account: goods ₹80,000 + X's expenses ₹6,000 + Y's expenses ₹4,000 + Y's commission ₹2,000 = ₹92,000.
  2. Credits: sales ₹1,20,000 + stock taken by Y ₹10,000 = ₹1,30,000.
  3. Profit = ₹1,30,000 − ₹92,000 = ₹38,000. Each share = ₹19,000.
  4. Y's account in X's books: Dr sales ₹1,20,000 and stock taken ₹10,000, total ₹1,30,000.
  5. Cr expenses ₹4,000, commission ₹2,000 and profit share ₹19,000, total ₹25,000.
  6. Closing balance = ₹1,30,000 − ₹25,000 = ₹1,05,000 debit.
  7. Check: X's outlay ₹86,000 + profit share ₹19,000 = ₹1,05,000.

Answer: Profit is ₹38,000, and each venturer gets ₹19,000. Y pays ₹1,05,000 to X.

Exam tips

  • Read who paid and who received each item first. Most wrong options come from putting an item on the wrong venturer.
  • Always compute profit as total credits minus total costs, including commission and unsold stock. Then test each option against it.
  • In MCQs on settlement, use the check: venturer's outlay + profit share = amount he should get back. This takes only a few seconds.
  • Look for the words 'before sharing profit' or 'after sharing profit' when a commission is mentioned. They change the profit figure.
  • Unsold stock taken over at a given value counts as a credit to the venture. Do not skip it, because it changes both profit and settlement.

Practice questions from Joint Venture

Joint Venture: Each Venturer Maintains Records of All Transactions: frequently asked questions

What is the difference between this method and the method where each venturer records only own transactions?

Here, every venturer records all transactions, including the others', so each set of books shows the full venture and the total profit. In the other method, each records only his own and a memorandum account is used to find the total profit. This method is more complete but has more entries.

What is a memorandum joint venture account?

It is a statement that collects the transactions of all venturers in one place to show the overall profit or loss. It is not part of the double-entry books. It is mainly useful when venturers keep only their own transactions.

How is profit shared in a joint venture?

Profit or loss is divided in the ratio agreed between the venturers. If the question gives no ratio, share equally. Your own share is credited to your P&L account and the others' shares to their personal accounts.

How do I decide who pays whom at the end?

Balance the co-venturer's personal account. A debit balance means he owes you and pays you. A credit balance means you owe him. The amount is settled by cash or bank.