Fundamentals of Accounting Joint Venture Meaning CMA Foundation

JOINT VENTURE MEANING

A joint venture is an agreement between two or more parties to combine their resources for the goal of completing a certain job or transaction. This task could be a new project or a different type of commercial activity. Each partner of a joint venture is liable for the earnings, losses, and expenditures associated with it. The enterprise, on the other hand, is a separate entity from its participants.

JOINT-VENTURE ACCOUNTING

Coming to the Joint-Venture accounting, the parties can maintain the records of the joint venture business transactions in different ways, such as:

1) Entities maintain the records of the joint business transactions, in their own business entity books, and reconcile them with other ventures as and when required, including at the end for final settlement.

2) SEPARATE SET OF BOOKS OF ACCOUNTS is maintained for and by the joint venture business including a profit loss account to arrive at the profit. At the time of closure of business, all the books of accounts are closed after the distribution of profits and assets left out in an agreed manner. In this case, it may be necessary to open a joint bank account to operate the financial transactions of the business. Apart from this, a joint venture account is prepared on the lines of a profit & loss Account and also individual accounts of partners in the venture.

Read about Theory of Demand & The Law Of Demand

JOINT VENTURE EXAMPLE

A joint Venture business is like a partnership business with a major difference that joint venture businesses are for specific business activity and/or for a specific time frame. Hence, unlike a partnership firm, a joint venture is not registered under the Partnership Act. And it is fully based on the legal agreement entered into between the co-ventures. Remember the joint venture can be between any two business entities. Joining entities may be sole-trader, partnership, or even a registered company.

For More Examples on Joint Venture or Learn more about Joint Venture Accounting here.

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