Skip to content

Financial Accounting · Joint Venture

Joint Venture Accounts When Separate Books Are Maintained

Updated 10 October 2026 · Fact-checked

In the separate books method, the joint venture keeps its own double-entry books. You open a Joint Bank Account, a Joint Venture Account and an account for each venturer. Record contributions, purchases, expenses and sales, share the profit in the agreed ratio, then settle each venturer's balance from the joint bank.

Understand Joint Venture Accounts When Separate Books Are Maintained

A joint venture is a temporary business of two or more persons (venturers) for a specific purpose. They share profit or loss in an agreed ratio. When the venture is big enough, the venturers open a separate set of books just for it. The venture is then treated like a small business with its own bank account.

Three kinds of accounts do the work. The Joint Bank Account records all cash the venture receives and pays. The Joint Venture Account collects the venture's income and costs, so its balance is the profit or loss. Each venturer's account (A's A/c, B's A/c) records what that person put in, took out and earns from the venture.

The key idea is that the venturer is the venture's creditor or debtor. If A puts money into the joint bank, the venture owes A. So A's account is credited. If A pays an expense from his own pocket, or supplies goods from his own stock, the venture again owes A. The Joint Venture Account is debited and A's account is credited. If B takes over unsold stock, B owes the venture. B's account is debited and the Joint Venture Account is credited.

At the end, the Joint Venture Account is balanced. Its profit or loss is split between the venturers in the profit-sharing ratio and moved to their accounts. After that, the only asset left is the joint bank balance. It must equal the total of the venturers' closing balances. The venturers settle by paying out of the joint bank, or by paying in if any venturer owes money.

In the memorandum joint venture method, no separate books are kept for the venture. Each venturer records only his own transactions in his own books. A memorandum Joint Venture account is prepared only to find the total profit. This is different from the separate books method, where every transaction is journalised in the joint venture's own books.

Key rules to remember

Contribution to the venture
Joint Bank A/c Dr; To Venturer's A/c
Use this when a venturer puts cash into the joint bank. Credit the venturer, as the venture now owes him.
Payment from the joint bank
Joint Venture A/c Dr; To Joint Bank A/c
Use this for purchases and expenses paid by cheque or cash from the joint bank.
Expense paid or goods supplied by a venturer
Joint Venture A/c Dr; To Venturer's A/c
The venturer paid personally or gave goods from his own stock. Nothing goes through the joint bank.
Sales realised
Joint Bank A/c Dr; To Joint Venture A/c
For credit sales, debit Debtors A/c first and then bring in the cash when received.
Unsold stock taken over by a venturer
Venturer's A/c Dr; To Joint Venture A/c
Use the agreed value. Unsold stock left at the end of the venture is credited to the Joint Venture A/c in the same way.
Venturer's remuneration or commission
Joint Venture A/c Dr; To Venturer's A/c
Charge it before finding the profit to be shared. Work it out on the base given in the question.
Profit or loss on the venture
Profit = Total credits − Total debits of the Joint Venture A/c
If debits exceed credits, it is a loss. Transfer the profit to the venturers' accounts, or the loss from them.
Transfer of profit
Joint Venture A/c Dr; To Venturers' A/cs (in profit-sharing ratio)
For a loss, reverse the entry: Venturers' A/cs Dr; To Joint Venture A/c.
Final settlement check
Joint bank balance = Sum of venturers' closing balances
Treat credit balances as positive and debit balances as negative. A mismatch means an error.

How to solve Joint Venture Accounts When Separate Books Are Maintained questions

Follow the same order for any separate-books problem. It keeps the entries clean and lets you check your answer at the end.

  1. 1Read the question and note the profit-sharing ratio, each venturer's contribution and any commission or special terms.
  2. 2Open the ledger accounts you need: Joint Bank A/c, Joint Venture A/c and one account per venturer. Add Debtors, Creditors or Stock accounts only if the question needs them.
  3. 3Post each transaction by asking two questions: did cash move through the joint bank, and did a venturer pay or supply something personally? Use the right entry from the key rules.
  4. 4Record the closing items: unsold stock taken over or valued, commission to venturers and any outstanding expenses.
  5. 5Balance the Joint Venture A/c. The balancing figure is the profit or loss. Share it in the profit-sharing ratio and post it to the venturers' accounts.
  6. 6Balance each venturer's account and the Joint Bank A/c.
  7. 7Check that the joint bank balance equals the net of the venturers' closing balances.
  8. 8Show the final settlement. Venturers with credit balances are paid from the joint bank. Venturers with debit balances pay into it.

Quickest way: Three-column shortcut for the profit and the settlement

When to use it: Use it when the question has many transactions and you have little time. Always still show the ledger accounts if the question asks for them.

  1. Sort every item into three lists: paid from the joint bank, paid or supplied by venturers, and receipts or stock taken over.
  2. Add the joint bank debits (contributions plus receipts) and credits (payments). The difference is the closing bank balance.
  3. Add all debits of the Joint Venture A/c (bank payments plus venturers' items plus commission). Subtract them from the total credits (sales plus stock taken over). The result is the profit.
  4. For each venturer: contribution + personal payments and supplies + commission + profit share − stock taken over = closing balance.
  5. Add the venturers' closing balances. If the total equals the joint bank balance, the answer is right.

Common mistakes in Joint Venture Accounts When Separate Books Are Maintained

  • Debiting the venturer's account when he contributes cash to the joint bank.

    Students think of the venturer as receiving something, when in fact he is giving money to the venture.

    Fix: A contribution makes the venture the debtor. Debit Joint Bank A/c and credit the venturer's account.

  • Passing an expense paid by a venturer personally through the Joint Bank Account.

    Students assume all expenses are paid from the joint bank.

    Fix: If the joint bank did not pay, it has no entry. Debit Joint Venture A/c and credit the venturer's account.

  • Forgetting to credit the Joint Venture A/c for unsold stock taken over by a venturer.

    The stock is not sold for cash, so students leave it out of the venture's income.

    Fix: Treat it as a sale to the venturer. Debit his account and credit the Joint Venture A/c at the agreed value.

  • Sharing profit before charging a venturer's commission.

    Students rush to the profit-sharing step.

    Fix: Commission is an expense of the venture. Debit it to the Joint Venture A/c and credit the venturer's account before finding the profit.

  • Sharing the profit in capital ratio instead of the profit-sharing ratio.

    Contribution amounts look like the obvious basis for sharing.

    Fix: Use the ratio stated in the agreement or question. If none is given, the ratio is equal.

  • Ignoring the check between the joint bank balance and the venturers' balances.

    Students stop once the accounts are balanced.

    Fix: Always compare the two figures. If they differ, look for a missed entry or a wrongly posted side.

Worked examples

Example 1

A and B start a joint venture and share profit in the ratio 3:2. A contributes ₹2,00,000 and B contributes ₹1,00,000 to the joint bank. Goods of ₹2,40,000 are purchased by cheque. Expenses of ₹10,000 are paid from the joint bank. A pays ₹6,000 of expenses personally. Sales of ₹3,50,000 are deposited in the joint bank. B takes over unsold goods for ₹20,000. Prepare the Joint Venture A/c, Joint Bank A/c and the venturers' accounts, and show the final settlement.

Show the solution
  1. Joint Venture A/c debits: Purchases ₹2,40,000; Expenses paid by bank ₹10,000; Expenses paid by A ₹6,000. Total = ₹2,56,000.
  2. Joint Venture A/c credits: Sales ₹3,50,000; Stock taken by B ₹20,000. Total = ₹3,70,000.
  3. Profit = ₹3,70,000 − ₹2,56,000 = ₹1,14,000. A's share (3/5) = ₹68,400. B's share (2/5) = ₹45,600.
  4. Joint Bank A/c debits: A ₹2,00,000; B ₹1,00,000; Sales ₹3,50,000. Total = ₹6,50,000. Credits: Purchases ₹2,40,000; Expenses ₹10,000. Total = ₹2,50,000. Closing balance = ₹4,00,000.
  5. A's A/c credits: Bank ₹2,00,000; Expenses ₹6,000; Profit ₹68,400. Closing balance = ₹2,74,400 (credit).
  6. B's A/c credits: Bank ₹1,00,000; Profit ₹45,600. Total = ₹1,45,600. Debit: Stock taken ₹20,000. Closing balance = ₹1,25,600 (credit).
  7. Check: ₹2,74,400 + ₹1,25,600 = ₹4,00,000, which equals the joint bank balance.
  8. Settlement entries: A's A/c Dr ₹2,74,400 and B's A/c Dr ₹1,25,600; To Joint Bank A/c ₹4,00,000.

Answer: Profit on joint venture = ₹1,14,000 (A ₹68,400; B ₹45,600). Closing joint bank balance = ₹4,00,000. A is paid ₹2,74,400 and B is paid ₹1,25,600.

Example 2

X and Y undertake a joint venture and share profit equally. X contributes ₹1,50,000 and Y contributes ₹1,00,000 to the joint bank. Y supplies goods from his own stock worth ₹80,000. Goods of ₹1,60,000 are purchased by cheque. Expenses of ₹12,000 are paid by cheque. All sales of ₹3,20,000 are deposited in the joint bank. X takes over unsold stock at ₹15,000. Y is entitled to a commission of 5% on sales. Prepare the ledger accounts and show the settlement.

Show the solution
  1. Commission to Y = 5% × ₹3,20,000 = ₹16,000.
  2. Joint Venture A/c debits: Goods from Y ₹80,000; Purchases ₹1,60,000; Expenses ₹12,000; Commission to Y ₹16,000. Total = ₹2,68,000.
  3. Joint Venture A/c credits: Sales ₹3,20,000; Stock taken by X ₹15,000. Total = ₹3,35,000.
  4. Profit = ₹3,35,000 − ₹2,68,000 = ₹67,000. Each venturer's share = ₹33,500.
  5. Joint Bank A/c debits: X ₹1,50,000; Y ₹1,00,000; Sales ₹3,20,000. Total = ₹5,70,000. Credits: Purchases ₹1,60,000; Expenses ₹12,000. Total = ₹1,72,000. Closing balance = ₹3,98,000.
  6. X's A/c credits: Bank ₹1,50,000; Profit ₹33,500. Total = ₹1,83,500. Debit: Stock taken ₹15,000. Closing balance = ₹1,68,500 (credit).
  7. Y's A/c credits: Bank ₹1,00,000; Goods supplied ₹80,000; Commission ₹16,000; Profit ₹33,500. Closing balance = ₹2,29,500 (credit).
  8. Check: ₹1,68,500 + ₹2,29,500 = ₹3,98,000, which equals the joint bank balance.
  9. Settlement entries: X's A/c Dr ₹1,68,500 and Y's A/c Dr ₹2,29,500; To Joint Bank A/c ₹3,98,000.

Answer: Profit on joint venture = ₹67,000 (₹33,500 each). Closing joint bank balance = ₹3,98,000. X is paid ₹1,68,500 and Y is paid ₹2,29,500.

Exam tips

  • Write the account headings first, then post line by line. Step marks usually go to the Joint Venture A/c, the Joint Bank A/c and each venturer's account.
  • In the MCQs, read the entry carefully. Many options differ only in which account is debited, so decide whether the venture owes the venturer or the venturer owes the venture.
  • Look for commission, interest or stock taken over in the question. These are the usual hidden items that change the profit.
  • Show the settlement entry and the final check between the joint bank and venturers' balances. It earns marks and catches errors.
  • Write the profit-sharing ratio clearly and show each venturer's share of profit as a separate line.

Practice questions from Joint Venture

Joint Venture Accounts When Separate Books Are Maintained 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 Accounts When Separate Books Are Maintained: frequently asked questions

What is the difference between separate books and memorandum joint venture?

In the separate books method, the joint venture has its own double-entry books with a Joint Bank A/c, Joint Venture A/c and venturers' accounts. In the memorandum method, each venturer records only his own transactions and a memorandum account is prepared to find the total profit. Read the question to see which method is asked.

Which side of the venturer's account does a contribution go to?

It goes to the credit side. The venture receives the money, so the venture owes it to the venturer. The matching debit goes to the Joint Bank A/c.

How is the final settlement made in the separate books method?

After the profit is shared, each venturer's account shows a closing balance. Venturers with credit balances are paid from the joint bank. If a venturer has a debit balance, he pays that amount into the joint bank first. The joint bank account then closes to nil.

Is commission to a venturer charged before or after finding the profit?

It is charged before. It is an expense of the venture, so debit the Joint Venture A/c and credit the venturer's account. Only the remaining profit is shared in the profit-sharing ratio.