Business Accounting ProjectJoint Venture

Fion- Fong Ching Shuen (6)Betty- Leung Ka Yan(15)Irene- Pai Chi Ling(20)

Introduction

A special type of partnership which two or more people joined together to form a business venture for a short period

Small joint ventures – no separate set of books or separate bank account are kept.

Background

As we know, women like bracelets and others decorations. Thus we choose to form a small joint venture to sell the above goods.

Our leased stall is located in Maritime Square

Features of our joint venture Our target customers are female All the venturers are female, so we

can understand the taste of women Our products are hand-made and

diversified, so we can attract different kinds of customers

We hire the leased stall, so we need not pay water and electricity bills

Details of our joint venture Fion,Betty and Irene entered into a

joint venture(FBI Shop) to buy and sell bracelets and others decorations. It was agreed that Irene would be entitled to a commission of 5% on all gross sales made by her, and that the joint venture profits and losses be shared equally.

The following transactions took place in 2002

January 1 Fion purchased decorations at a cost of $13800, paying $7000 in cash and accepting a bill of exchange for two months for the balance.

January 2 Fion sent to Betty decorations which had cost $8800 and paid delivery charges of $1300

January 18 Irene paid $40000 for rent for the five months ending 31 May 2002

January 25 Sales proceeds of $28000 were kept by Betty

February 4 Credit sales of $23500 were made by Irene. A bill of $6000 was accepted by a debtor and was then discounted at $5560

February 10 Goods costing $3500 were stolen in the shop. The loss was to be borne by Fion.

February 15 Fion returned decorations costing $700 to the supplier and full allowance on the returned goods was given.

February 16 Irene purchased decorations at a cost of $12800

February 22 Cash sales of $18000 were made by Irene and half of the sales proceeds were collected by Betty

March 1 The bill payable was honoured by Fion

March 4 The bill receivable was dishonoured and was renewed with an extended maturity of one month. Interest at 10% per annum was charged on the renewed bill.

March 30 Betty sold the remaining stock for $33400 on credit

April 1 Some of the goods sold on 30 March were returned and a credit note of $1000 was sent to the customer

April 4 The bill receivable was honoured on maturity

April 20 Fion agreed to take over the returned goods at a value of $800

May 6 Betty sent a cheque for $10,000 to Irene to provide her with funds.

May 16 Irene paid traveling expenses of $3000

May 30 $1600 of the unsettled debts in Betty’s books was written off

May 31 Fion , Betty and Irene decided to terminate the joint venture and settle their accounts

In the books of FionJoint Venture with Betty and Irene

2002 $ 2002 $Jan 1 Bank:

Purchases

7,000 Feb 10

Profit and Loss:Stock stolen

3,500

Jan 1 Bills payable Purchases

6,800 Feb 15

Bank: Return Outwards

700

Jan 2 Bank: Delivery Charges

1,300 Apr 20

Stock taken over

800

May31

Profit and Loss: Profit on venture

10,645 May31

Bank: settlement

19,745

25,745     25745

In the books of Betty Joint Venture with Fion and Irene

2002 $ 2002 $Apr 1 Debtor :

returns inwards

1,000 Jan 25 Bank: Sales

28,000

May 6 Bank: Irene 10,000 Feb 22

Bank: Sales by Irene

9,000

May30

Debtors: Bad debts

1,600 Mar30

Debtors: Credit Sales

33,400

May31

Profit and Loss: Profit on venture

10,645

May31

Bank: Settlement

47,155

70,400 70,400

In the books of Irene Joint Venture with Betty and Fion

2002 $ 2002 $Jan 18 Bank: Rent 40,000 Feb 4 Debtors: Sales 17,500Feb 4 Bank:

Discounting charges

440 Feb 4 Bills Receivables -Sales

6,000

Feb 16 Bank: Purchases

12,800 Feb 22 Bank: Sales 9,000

Apr 1 Debtors: Returns Inwards

1,000 Mar 4 Bills Receivables -Interests

50

May 16 Bank: Traveling expenses

3,000 May 6 Bank: Betty 10,000

May 31 Profit and Loss: Commission

2,075 May 1 Bank: Settlement

27,410

May 31 Profit and Loss: Profit on venture

10,645

69,960 69,960

Fion , Betty and Irene(FBI Shop)Memorandum Joint Venture Account

$ $

Purchases 26,600 Cash: Sales 46,000

Less:Returns Outwards

700 25,900 Debtors:Sales 56,900

Rent 40,000 102,900

Traveling expenses

3,000 Less: Return Inwards

1,000 101,900

Delivery charges 1,300 Stock taken by Fion

800

Discounting charges

440 Stock stolen borne by Fion

3500

Bad debt 1,600 Interest on bill 50Commission 2,075Share of profit 31,935

106,250 106,250

Question 1 Which of the following are

expenses?

1. Delivery Charges 2. Commission 3. SalesAnswer. A. 1 B. 1, 2 &3 C. 1 & 2 The answer is

Question 1 the answer is...

C Delivery charges and Commission

Question 2 What is the amount of net profit

in FBI Company?A $31,935

B $39,135

C $31,539 The answer is

Question 2 the answer is...

A $31,935

Question 3What are the sources of goods?

A. Man-made

B. Finished Goods

C. Both of them The answer is

Question 3 the answer is...

C Both of them

Question 4Which of the following transaction should not be recorded in the joint

venture account? A. Venturers sent goods to each other

B. Venturers sent cheques to each other

C. Venturers sell goods in cash

The answer is

Question 4 the answer is…

A.

Venturers sent goods to each other

Question 5 Do you think that memorandum joint venture account is a double

entry? A. Yes

B. No

C. I don’t know

The answer is

Question 5 the answer is...

B. No