CMA Intermediate · Financial Accounting · Joint Venture
In the books of a co-venturer who keeps a Memorandum Joint Venture Account (not a separate set of books for the venture), what is the main purpose of this account?
The Memorandum Joint Venture Account is prepared to find the overall profit or loss of the venture by collecting revenues and expenses of all co-venturers, while dealings with co-venturers are recorded separately in personal accounts. It is a memorandum record, not a cash account or balance sheet.
- ATo record cash received from outsiders as the venture's bank account
- BTo determine the overall profit or loss of the venture by collecting the venture's revenues and expenses, while personal dealings with co-venturers are kept in a Joint Venture with Co-venturer AccountCorrect
- CTo record only the partners' capital contributions in the venture
- DTo show the venture's assets and liabilities as a balance sheet
Explanation
The Memorandum JV Account is a statistical account that gathers all venture expenses and revenues from all co-venturers to find the net profit or loss. Settlement dealings with co-venturers go to the Joint Venture with Co-venturer's Account. It is not a bank account or a balance sheet.
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