CMA Foundation · Fundamentals of Financial and Cost Accounting · Joint Venture
In the separate set of books method, co-venturer Anil pays ₹6,000 of venture expenses directly from his own pocket. What entry is made in the books of the joint venture?
The entry in the joint venture books is Joint Venture Account debit and Anil's Account credit for ₹6,000. The expense is a venture cost, and since Anil paid it personally, the venture becomes liable to him. The Joint Bank Account is not affected because no venture cash was used.
- AJoint Bank Account Dr ₹6,000 to Anil's Account
- BJoint Venture Account Dr ₹6,000 to Anil's AccountCorrect
- CJoint Venture Account Dr ₹6,000 to Joint Bank Account
- DAnil's Account Dr ₹6,000 to Joint Venture Account
Explanation
The expense belongs to the venture, so Joint Venture Account is debited. Because no cash left the Joint Bank Account, the credit goes to Anil's account, which shows the venture now owes him ₹6,000. Crediting the Joint Bank Account would wrongly reduce the bank balance.
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