CMA Foundation · Fundamentals of Financial and Cost Accounting · Joint Venture
In a joint venture where the co-venturers are to be treated as separate from each other, which statement about the venture's profit or loss is correct?
The profit or loss is shared among the co-venturers in the ratio they agreed. If they made no agreement, it is shared equally, following the partnership approach, and it does not depend on who manages the venture or who supplies more goods.
- AIt is borne entirely by the co-venturer who manages the venture
- BIt is shared by the co-venturers in the agreed ratio, or equally if no ratio is agreedCorrect
- CIt is shared in proportion to the goods each supplied, regardless of any agreement
- DIt is borne by the co-venturer with the larger capital
Explanation
Profit or loss of a joint venture is shared in the agreed ratio. If there is no agreement, the sharing is equal, as in a partnership. The other options impose bases that no standard rule supports.
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