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Joint Venture Accounting – Introduction

March 7, 2019 by admin Leave a Comment

MEANING OF JOINT VENTURE

Ajoint venture is an association of two or more than two persons who have combined for the execution ofa specific transaction and divide the profit orloss thereof in the agreed ratio. For example if A and B undertake the job of construction of a school building for a sum of Rs 1,00,000 their coming together for this specific job will be termeci as ajoint venture and each one of them will be termed as a co-venturer. The venture will be over as soon as this transaction is over i.e., the school building is completed. Joint venture agreements can be made for similar other transactions, e.g. joint consignment of goods, underwriting of the shares or debentures issued by a particular company, purchasing and selling of a specific property etc.

The essential features of a joint venture agreement can be put as follows:

(I) There is an agreement between two or more than two persons.

(ii) The agreement is made for the execution of a specific venture.

(ill) The proflt or loss on account of the venture is shared by the venturers in the agreed ratio. However, in the absence of any agreement between the. venturers, the profit. and losses are to he shared equally.

(iv) The agreement regarding the venture is automatically over as soon as the tiansaction is completed.

Filed Under: Accounting Tagged With: Joint Venture Accounting, Joint Venture Accounting - Introduction

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