Question

For purchase of plant from Joint Bank A/c. in case separate sets of books are maintained, the correct journal entry will be _____________________.

• A. Plant A/c will be debited and Joint Bank A/c will be credited
• B. Joint Venture A/c will be debited and Joint Bank A/c will be credited
• C. Plant A/c will be debited and Ventures Capital A/c will be credited
• D. Joint Venture A/c will be debited and Plant A/c will be credited

Answer 1

Answer: (B)

Joint Venture A/c will be debited and Joint Bank A/c will be credited

This account is prepared for measurement of venture profit. This account is debited with all venture expenses and credited with all sales or collections. The excess balance of credit side over the debit side shows the profit on joint venture and vice versa. Profit /Loss are transferred to co-venturers’ accounts in the profit-sharing ratio.

However, if any co-venturers make direct payments and direct collections; in such a case their Personal Accounts will be credited/ debited for the transactions done. On completion of the venture, the Joint Bank Account is closed by paying the balance to co-ventures.