Joint venture case study ppt

joint venture proposal ppt and licensing and joint venture ppt
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Published Date:25-07-2017
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CPT Section A Fundamentals of Accounting Unit 2 CA.Gautam Chawla  Joint Venture Sham Coventurer Ram coventurer They both enter into a Ram has his Sham has his own venture which is known own work work as joint venture 2 A Joint Venture is a very short duration “business” (generally, confined to a single transaction, like, buying some surplus stores and selling them) entered into by two or more persons jointly. Joint Venture may be described as a temporary partnership between two or more persons without the use of the firm name, for a limited purpose. 3 Venture may be for the construction of a building or a bridge, for the supply of certain quantity of materials or labour and even for the supply of technical services. The persons who have so agreed to undertake a Joint Venture are known as ‘Joint Venturers’ or ‘Co-Venturers’. 4 Understand special features of Joint Venture transactions, Learn the techniques of preparing Joint Venture Account and also the settlement of accounts with the co-venturer(s), Familiarise with the use of Memorandum Joint Venture Account, Learn the technique of deriving venture profit and its allocation among the venturers, Distinguish joint venture with partnership. 5 Some important features of joint venture business are as follows: It is short duration special purpose partnership. Parties in venture are called co-venturers. Co-venturers may contribute funds for running the venture or supply stock from their regular business Co-venturers share profit/loss of the venture at an agreed ratio likewise partnership. Generally profit/loss of the venture is computed on completion of the venture. 6 (v) Going concern assumption of accounting is not appropriate for joint venture accounting. There does not arise problem of distinction between capital and revenue expenditure. Plant, machinery and other fixed assets when used in venture are first charged to venture account at cost. On completion of venture such assets are revalued and shown as revenue of the venture. Thus accounting approach for measurement of venture profit is totally different. 7 Joint Venture differs from Partnership in the following respects. Basis of Joint Venture Partnership Distinction 1. Scope It is limited to a It is not limited to specific Venture. specific venture. 2. Persons The persons The persons carrying involved carrying on on business are business are called individually called co- venturers . partners. 8 3. Ascertainment T he pr of it s/ l osses are The of profit/loss ascertained at the profits/losses end of specific are ascertained venture (if venture on an annual continues for a short basis period) or on interim basis annually (if venture continues for a longer period). 4. Act governing No specific Act is Partnership there. firms are 9 Governed by Indian Partnership Act, 1932. 5. Name There is no need for firm A partnership name firm always has a name. 6. Separate There is no need for a Separate set of set of separate set of books. books have to Books The accounts can be be maintained. maintained even in one of the Co- venturer’s books only. 10 7. Admission of A minor cannot be a co- A minor can be Minor venturer as he is admitted to the incompetent to contract. benefits of the firm. 8. Accounting Accounting for joint Accounting for venturer is done on partnership is liquidation basis. done on going concern basis. 11 9. Competition It is a rule rather than Partners exception that chances of generally do not co- venturers in the involve in competing business are competing very high. business. 12  How the books of accounts will be maintained When no When no separate When separate set of books of set of books is accounts is maintained separate maintained & there set books of but with proper is NO accounts are sharing of sharing of maintained information information 13 In This case one of the co-venturer is appointed with the responsibility of maintaining the transactions relating to J.V Instead of having separate books he instructs the accountant of his own business to record the transactions relating to the joint venture in the same books which he is maintaining for his own business. He (Accountant) records the transaction of J.V. For full disclosure proper sharing of information is required from the other co-venturer 14 when the size of venture is BIG co- venturer decide to have separate books Following accounts are opened 1. Joint Venture A/C 2.Co-Venturer A/C 3. Joint Bank A/C 15 Each Co-venturer maintains record of his transactions only . There is no sharing of information on regular basis Memorandum Joint Venture Account is prepared to calculate the profit earned or loss suffered 16 Co-venturers can maintain the accounts for joint venture in the manner that suits them in a particular situation. Generally there are two ways to keep records of joint venture: • When separate set of books are maintained. • When no separate set of books are maintained. 17 Maintenance of Joint Venture Accounts rd 3 nd th 2 & 4 Separate set of No separate set of books books are maintained are maintained nd th 2 4 When each When each Joint bank Joint Venture Personal accounts co-venturer co-venturer keeps account account of co-venturers keeps record record of own of all transactions transactions only Memorandum Joint venture joint venture account account Joint venture Co-venturer’s with co-venturer account account 18 When size of the venture is fairly big, the co- venturers keep separate set of books of account for the joint venture. Joint venture transactions are separate from their regular business activities. In the books of Joint Venture the following accounts are opened. Personal Accounts of the Joint Bank Joint Venture Co-venturers or Account. Account. Co-venturers’ Accounts. 19 (i) Joint Bank Account: the co-venturers open a separate bank account for the venture transactions by making initial contributions. The bank account is generally operated jointly. Expenses are met from this Joint Bank Account. Also sales or collections from transactions are deposited to this account. However, sometimes the co-venturers may make direct payments and direct collections. on completion of the venture the Joint Bank Account is closed by paying the balance to co-venturers. 20

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