CMA Foundation · Fundamentals of Financial and Cost Accounting · Joint Venture
Which of the following best describes a joint venture in accounting?
A joint venture is a temporary association of persons who join to carry out a specific business project and share the profit or loss in an agreed ratio. It ends once the project is completed and accounts are settled, unlike a continuing partnership.
- AA permanent partnership formed to carry on business for an indefinite period
- BA temporary association of persons who combine to carry out a specific business project and share profits or losses as agreedCorrect
- CA company formed under the Companies Act with limited liability for its members
- DA branch opened by a principal in a distant city to sell goods
Explanation
A joint venture is a temporary arrangement for a particular project or adventure, with profit or loss shared in an agreed ratio. A partnership is meant for continuing business, so the first option is wrong. The venture ends when the project is completed and accounts are settled.
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