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

Ravi and Kiran are co-venturers, and each records all venture transactions in his own books. Kiran pays Rs 25,000 for goods bought for the venture. What entry does Ravi pass in his books?

Ravi debits Joint Venture A/c and credits Kiran's A/c with Rs 25,000. The purchase is a venture cost, and since Kiran paid from his own funds, Ravi's books show him as a creditor of Ravi for that amount. Ravi's bank is not affected.

  1. AJoint Venture A/c Dr 25,000 To Kiran's A/c 25,000Correct
  2. BKiran's A/c Dr 25,000 To Joint Venture A/c 25,000
  3. CPurchases A/c Dr 25,000 To Kiran's A/c 25,000
  4. DJoint Venture A/c Dr 25,000 To Bank A/c 25,000

Explanation

The purchase is a cost of the venture, so Joint Venture A/c is debited. Kiran paid the money, so Ravi owes him that amount and Kiran's personal account is credited. Ravi's own bank is not involved, so the bank credit is wrong. Reversing the entry would show Kiran as owing Ravi.

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