Joint Venture

Joint Venture

Introduction

Joint venture can be defined as a business in which two or more individuals agree to contribute in the business to form an enterprise where each individual shares the profits and losses that may occur as a result of business activity. A joint venture business may be resolved once the business has been terminated. Accounting for joint ventures is mostly done in cash, liabilities of the company are paid in cash and simultaneously all the assets are received in cash. Although many would define joint venture similar to that of partnership business however there are significant differences between the two enterprises. Unlike partnership businesses joint ventures may not necessarily be given any name, a joint venture may also not account for going concern like a partnership business (www.accounting4management.com).

Discussion

Bing ltd., Mo ltd. and Tiffany's ltd have decided to form a joint venture business, the operations of the enterprise will be explored and extract gold from mines in Western Australia. A venture may be formed for the purpose of completion of one project or might be continued for a longer time period method for treating their accounts would vary accordingly. The venture that has been formed will however be continued for ten year. Thus the transactions that will be incurred will be recorded in the books of accounts of the venturers (Briendra, 2010). Each venture will be responsible for maintaining a capital account, joint cash account and joint venture account to analyze the financials of the company. Joint venture account of the company would serve the purpose of being profit and loss account; the balance recorded on this account would be profit or loss for the venture and will be shared according to the ratios of venturers. Joint venture enterprises also maintain a joint cash account where the cash receipts ...