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CMA Foundation · Fundamentals of Financial and Cost Accounting · Joint Venture

Anil and Bhaskar run a joint venture and share profits 3:2. Each keeps records of all transactions. Anil bought goods for Rs 40,000 and paid freight of Rs 2,000. Bhaskar sold all the goods for Rs 60,000, received the cash himself and paid selling expenses of Rs 3,000. In Anil's books, what is the balance on Bhaskar's account, which Bhaskar must settle?

Bhaskar owes Rs 51,000. He holds the Rs 60,000 sale proceeds but is entitled to his Rs 3,000 expenses and his Rs 6,000 profit share. The balance of Rs 51,000 equals Anil's outlay of Rs 42,000 plus Anil's Rs 9,000 profit share.

  1. ARs 51,000 due from BhaskarCorrect
  2. BRs 57,000 due from Bhaskar
  3. CRs 42,000 due from Bhaskar
  4. DRs 60,000 due from Bhaskar

Explanation

Profit = 60,000 - 40,000 - 2,000 - 3,000 = 15,000. Anil's share is 9,000 and Bhaskar's is 6,000. In Anil's books Bhaskar's account is debited with sale proceeds of 60,000 and credited with his expenses of 3,000 and his profit share of 6,000. The balance is 60,000 - 9,000 = 51,000 due from Bhaskar. Rs 57,000 ignores Bhaskar's profit share.

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