CMA Foundation · Fundamentals of Financial and Cost Accounting · Joint Venture
A and B enter a joint venture sharing profits 3:2. A buys goods for ₹60,000 and incurs expenses of ₹4,000. B sells all the goods for ₹1,00,000 and incurs expenses of ₹6,000. Separate books are not kept. What is A's share of the profit, and what is the profit on the venture?
The venture profit is ₹30,000 and A's share is ₹18,000. Sales of ₹1,00,000 less goods of ₹60,000 and total expenses of ₹10,000 give ₹30,000, which is shared 3:2, so A gets three-fifths.
- AProfit ₹30,000; A's share ₹18,000Correct
- BProfit ₹40,000; A's share ₹16,000
- CProfit ₹30,000; A's share ₹12,000
- DProfit ₹36,000; A's share ₹21,600
Explanation
Total expenses = 60,000 + 4,000 + 6,000 = 70,000. Profit = 1,00,000 - 70,000 = 30,000. A's share = 30,000 x 3/5 = 18,000. Using 2/5 gives 12,000 (wrong ratio). Ignoring expenses gives 40,000.
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