CMA Foundation · Fundamentals of Financial and Cost Accounting · Joint Venture
A and B undertake a joint venture sharing profit 3:2. A purchased goods for ₹80,000 and incurred expenses of ₹4,000. B sold the goods for ₹1,00,000 and incurred expenses of ₹6,000. Neither is entitled to commission. In the books of A, what is the profit of the venture, and how much is B's share of profit?
Total cost is ₹80,000 purchases plus ₹10,000 expenses, which is ₹90,000. Sales are ₹1,00,000, so the profit is ₹10,000. B's share at 2/5 is ₹4,000, with the remaining ₹6,000 going to A.
- AProfit ₹10,000; B's share ₹4,000Correct
- BProfit ₹10,000; B's share ₹6,000
- CProfit ₹20,000; B's share ₹8,000
- DProfit ₹16,000; B's share ₹6,400
Explanation
Total expenses = 80,000 + 4,000 + 6,000 = 90,000. Profit = 1,00,000 − 90,000 = 10,000. B's share = 10,000 × 2/5 = 4,000, and A's share is 6,000. Giving B ₹6,000 reverses the ratio, and ₹20,000 ignores the purchase cost.
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