Skip to content

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

Two firms run a joint venture and each keeps a full record of every venture transaction in its own books. Co-venturer Beta pays Rs 3,000 of carriage on the venture's goods. In the books of Alpha, which entry records this?

Alpha debits Joint Venture A/c and credits Beta's A/c with Rs 3,000. The carriage is a venture expense, and Beta paid it, so Beta becomes a creditor in Alpha's books. Alpha's own bank is not affected because Alpha paid no cash.

  1. ADebit Joint Venture A/c and credit Beta's A/c with Rs 3,000Correct
  2. BDebit Beta's A/c and credit Joint Venture A/c with Rs 3,000
  3. CDebit Joint Venture A/c and credit Bank A/c with Rs 3,000
  4. DDebit Profit and Loss A/c and credit Beta's A/c with Rs 3,000

Explanation

Under this method each venturer records all venture transactions. Alpha debits the cost to Joint Venture A/c because it is a venture expense. Alpha credits Beta's personal account because Beta paid it and Alpha owes Beta. Crediting Bank is wrong because Alpha paid nothing from its own bank.

Did you get it right without looking?

One question tells you little. A timed set on Joint Venture shows your real accuracy, how long you take and where you lose marks.

Practise Joint VentureFree diagnostic mock

More Joint Venture questions