CMA Intermediate · Financial Accounting · Joint Venture
Raman and Sethi run a joint venture and keep a separate set of books for it. Raman contributes Rs 50,000 in cash to the venture's bank account. What entry is made in the joint venture books?
Debit Joint Venture Bank A/c and credit Raman's A/c. The venture's bank gains Rs 50,000, and Raman becomes a creditor of the venture for the amount contributed. Treating the contribution as a profit or as a withdrawal would misstate the venturer's position.
- ADebit Joint Venture Bank A/c and credit Raman's A/cCorrect
- BDebit Raman's A/c and credit Joint Venture Bank A/c
- CDebit Joint Venture A/c and credit Joint Venture Bank A/c
- DDebit Joint Venture Bank A/c and credit Joint Venture Profit and Loss A/c
Explanation
The venture's books treat each venturer as a personal account. The bank account of the venture receives the cash, so it is debited. The contributing venturer is a creditor of the venture, so Raman's A/c is credited. Reversing the entry would show Raman as owing money to the venture.
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