CMA Intermediate · Financial Accounting · Joint Venture
A and B enter into a joint venture sharing profits and losses equally. A purchases goods worth ₹80,000 and incurs expenses of ₹4,000. B sells goods for ₹1,10,000 and incurs expenses of ₹6,000. No separate books are kept for the venture, and each venturer records the venture in a Joint Venture with B account (or A account) in his own books. In A's books, what is the profit on the venture?
The venture profit is ₹20,000. Sales of ₹1,10,000 less goods purchased of ₹80,000 and total expenses of ₹10,000 (₹4,000 by A and ₹6,000 by B) leave ₹20,000, which is shared equally between the venturers.
- A₹20,000Correct
- B₹26,000
- C₹30,000
- D₹10,000
Explanation
Total income = 1,10,000. Total expenses = 80,000 + 4,000 + 6,000 = 90,000. Profit = 20,000. Distractor ₹30,000 ignores all expenses and takes only 1,10,000 - 80,000. Distractor ₹26,000 ignores only A's expense of ₹4,000 and deducts... in effect misses an adjustment.
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