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Fundamentals of Financial and Cost Accounting · Joint Venture

Joint Venture: Unsold Stock, Commission and Final Settlement

Updated 10 October 2026 · Fact-checked

In a joint venture, unsold stock taken over by a venturer is credited to the joint venture account at the agreed value and debited to that venturer. Commission, interest and expenses are charged to the joint venture account. After profit is shared, each venturer's net balance decides who pays whom in final settlement.

Understand Joint Venture: Stock Unsold, Commission and Settlement

A joint venture is a temporary business undertaking by two or more persons (co-venturers) who share its profit or loss in an agreed ratio. When it ends, you must close the books and settle accounts between them.

The joint venture (JV) account collects every cost and every benefit of the venture. Costs go on the debit side: goods purchased, expenses, commission and interest. Benefits go on the credit side: sales and the value of unsold stock. The balancing figure is the profit or loss.

Unsold stock at the end is a benefit, because it still has value. If it is left with a venturer, it is credited to the JV account as closing stock. If a venturer takes it over for himself, it is credited to the JV account at the agreed value, and that venturer is debited, because he now owes the venture for it.

Commission to a venturer for managing the work, and interest on his advances, are expenses of the JV. You debit the JV account and credit the venturer. The same applies to expenses he paid on the venture's behalf. These are extra amounts the venture owes him.

For final settlement, work out what each venturer has put in (goods, expenses, commission, interest, profit share) and what he has taken out (cash collected, stock taken over). The venturer who has taken out more pays the other. The two net amounts always match.

Key formulas to remember

Unsold stock taken over by a venturer
Debit: Venturer's A/c; Credit: Joint Venture A/c (at agreed value)
If the stock is only held unsold and not taken over, credit JV A/c and debit Stock in hand A/c instead.
Commission, expenses and interest
Debit: Joint Venture A/c; Credit: Venturer's A/c
Applies to commission for services, interest on advances and expenses paid by the venturer.
Commission on profit, before charging it
Commission = Profit before commission × Rate ÷ 100
Use when the question says commission on profit before charging such commission.
Commission on profit, after charging it
Commission = Profit before commission × Rate ÷ (100 + Rate)
Use when the question says commission on net profit after charging such commission.
Profit or loss of the venture
Profit = Credit side of JV A/c − Debit side of JV A/c (before profit)
A negative figure is a loss, shared in the same ratio unless told otherwise.
Final settlement
Net due to venturer = Amount contributed + commission + interest + profit share − cash collected − stock taken over
A positive result means he receives money. A negative result means he pays. Totals of both venturers must match.

How to solve Joint Venture: Stock Unsold, Commission and Settlement questions

Follow this order for any numerical on unsold stock, commission and settlement between two venturers.

  1. 1Read the question and list who bought goods, who sold, who paid which expenses, and who got any commission or interest.
  2. 2Open the JV account. On the debit side, put goods purchased, all expenses, commission and interest.
  3. 3On the credit side, put total sales and the value of unsold stock, either taken over by a venturer or left as closing stock.
  4. 4If commission is on profit, first find profit before commission. Then apply the rate on the correct base, before or after charging it.
  5. 5Find the balancing figure, which is the net profit or loss, and share it in the agreed ratio.
  6. 6Prepare each venturer's account. Show the goods and expenses he paid, commission, interest and profit share on one side, and cash collected and stock taken on the other.
  7. 7Settle by finding the net balance. The venturer with a debit balance pays the one with a credit balance. Check that both balances are equal.

Quickest way: Net position check without full ledgers

When to use it: Use this in MCQs where you only need the final amount paid between two venturers, or the profit. The payable formula below holds when one venturer made all the purchases and the other collected all the cash.

  1. Total the credits: sales plus value of unsold stock.
  2. Total the debits: purchases, all expenses, commission and interest.
  3. Subtract to get profit. Find commission first if it depends on profit.
  4. The cash-collecting venturer pays = cash collected + stock taken over − his own expenses − his commission or interest − his profit share. This is valid when the other venturer made all the purchases.
  5. Compare your figure with the options. Pick the option that matches it. If none match, recheck that you included every expense, commission and interest item.

Common mistakes in Joint Venture: Stock Unsold, Commission and Settlement

  • Crediting the venturer instead of debiting when he takes over unsold stock

    Students think stock is a gain for him and credit his account.

    Fix: He is buying the stock from the venture. Debit him and credit the JV account.

  • Using the wrong base for commission on profit

    The words before and after charging such commission are overlooked.

    Fix: Before: Profit × Rate ÷ 100. After: Profit × Rate ÷ (100 + Rate). Underline the phrase in the question.

  • Treating interest on advances as income of the JV

    Students confuse interest earned with interest paid.

    Fix: Interest on a venturer's advance is a cost to the JV. Debit JV and credit the venturer.

  • Leaving commission or expenses out of the venturer's settlement

    They are charged in the JV account and then forgotten in the personal account.

    Fix: Every item that appears in the JV account against a venturer must also appear in his account.

  • Showing unsold stock at cost instead of agreed value

    Students default to the purchase price.

    Fix: Use the value the question gives for stock taken over. Use cost only when no other value is given.

  • Paying the wrong way in settlement

    The direction of the balance is not checked.

    Fix: Debit balance in a venturer's account means he must pay. Credit balance means he receives.

Worked examples

Example 1

A and B start a joint venture and share profit equally. A buys goods for ₹2,00,000 and pays expenses of ₹10,000. B sells goods for ₹2,60,000 and pays expenses of ₹6,000. B takes over unsold goods at ₹20,000. A is entitled to commission of 5% on sales. Find the profit and the amount B pays A on final settlement.

Show the solution
  1. Debit side of JV A/c: goods ₹2,00,000 + A's expenses ₹10,000 + B's expenses ₹6,000 = ₹2,16,000.
  2. Commission to A = 5% of ₹2,60,000 = ₹13,000. Total debits = ₹2,29,000.
  3. Credit side: sales ₹2,60,000 + stock taken by B ₹20,000 = ₹2,80,000.
  4. Profit = ₹2,80,000 − ₹2,29,000 = ₹51,000. Each share = ₹25,500.
  5. A is due: ₹2,00,000 + ₹10,000 + ₹13,000 + ₹25,500 = ₹2,48,500 (he received no cash).
  6. B owes: cash collected ₹2,60,000 + stock ₹20,000 − expenses ₹6,000 − profit share ₹25,500 = ₹2,48,500.
  7. Both figures match, so B pays A ₹2,48,500.

Answer: Profit is ₹51,000, and B pays A ₹2,48,500.

Example 2

X and Y share profit in the ratio 3:2. X buys goods for ₹1,50,000, pays expenses of ₹5,000 and is allowed interest of ₹3,000 on his advances to the venture. Y sells goods for ₹2,00,000, pays expenses of ₹7,000 and takes over unsold goods at ₹10,000. Y gets commission of 20% on net profit after charging such commission. Find the commission and the amount Y pays X.

Show the solution
  1. Debits before commission: ₹1,50,000 + ₹5,000 + ₹7,000 + ₹3,000 = ₹1,65,000.
  2. Credits: ₹2,00,000 + ₹10,000 = ₹2,10,000.
  3. Profit before commission = ₹2,10,000 − ₹1,65,000 = ₹45,000.
  4. Commission after charging itself = ₹45,000 × 20 ÷ 120 = ₹7,500.
  5. Net profit = ₹45,000 − ₹7,500 = ₹37,500. X's share = ₹22,500 and Y's share = ₹15,000.
  6. X is due: ₹1,50,000 + ₹5,000 + ₹3,000 + ₹22,500 = ₹1,80,500.
  7. Y owes: ₹2,00,000 + ₹10,000 − ₹7,000 − ₹7,500 − ₹15,000 = ₹1,80,500.
  8. The figures match, so Y pays X ₹1,80,500.

Answer: Commission is ₹7,500, and Y pays X ₹1,80,500.

Exam tips

  • Underline the phrase before or after charging such commission. It changes the answer.
  • In MCQs, check that unsold stock appears on the credit side of the JV account. A wrong side usually gives a tempting wrong option.
  • Interest on advances and commission are JV costs, so they reduce profit.
  • Use the matching-balance check: if the two venturers' net amounts differ, you have missed an item.
  • There is no negative marking, so always mark an option, but eliminate any option that gives the payment in the wrong direction.

Practice questions from Joint Venture

Joint Venture: Stock Unsold, Commission and Settlement in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Joint Venture: Stock Unsold, Commission and Settlement: frequently asked questions

How do you record unsold stock taken over by a venturer in a joint venture?

Debit the venturer's account and credit the joint venture account at the agreed value. The venturer is now buying the stock from the venture. It is then included in what he owes at final settlement.

Is commission to a co-venturer an expense of the joint venture?

Yes. If a venturer is entitled to commission for managing the venture, you debit the JV account and credit his account. It reduces the profit before sharing and increases what he is due at settlement.

How do you calculate commission on profit in a joint venture?

If it is on profit before charging commission, multiply profit by rate and divide by 100. If it is on profit after charging such commission, multiply by rate and divide by (100 + rate). Read the wording carefully.

How is final settlement between venturers done?

Find each venturer's net balance after adding what he contributed, commission, interest and profit share, and subtracting cash collected and stock taken over. The venturer who has taken out more pays the other until the balances match.