Joint Venture Principles

A joint venture refers to two or more people coming together to realize a business plan. In a broader perspective it refers to a great deal of shared creativity between a number of business partners in trying to put together a set of ideas in place and practice them. It does not necessarily mean that this will lead to a long term partnership. It merely refers to a set of agreements that can be put in place to smoothen a business venture. There is no official registration involved. Construction is one industry where the joint venture project has worked best to facilitate the short term ramifications of the projects undertaken by businesses.

Accounts are maintained in two ways in a joint account venture:

•    Different book accounts: The concerned parties use separate book accounts to keep track of what is going on in individual transactions and come to tally them after the deal is made and carried through.

•    Same set of accounts: Both parties involved in these transactions set a joint book keeping table to tally their accounts together. This may be done in a ledger form for the sake of convenience.

The goal of the joint venture is to smoothen the whole transaction process. If one of the sides live closer to the transportation area then this side has to facilitate the delivery of products to the other party. The other party claims the responsibility of the transaction on receiving the goods. This is how a joint account venture works. Proper book keeping accounts are to be maintained by both the parties together or separately to see that the financial process is in order.

Joint Venture with X

A separate joint venture accounting book needs to be maintained by each party involved in the venture. This would facilitate a special ledger account by comparing the two books to understand the transactions made. This analysis will help both the parties keep track of their debit and credit situation, and help decide who owes how much to whom.

This will help in preparing a memorandum statement for the joint venture which in turn can serve as the guide to prepare the final joint venture account for each of the parties involved to assess their individual profit and loss situation.

The final account should reflect equal balances in both the venturers' accounts (though on different sides of the ledger) if all the transactions undertaken are recorded accurately, and clearly indicate the exact amount that each party owes to the other and thereby the final balance.

It is important to clarify here however, that the memorandum for the joint venture is merely for the sake of convenience, to arrive at the final accounts. It cannot thus be categorized under any specific books of account or accounting treatment per se. It is only a statement that helps the parties keep track of their expenses and earnings, and to keep track of their mutual transactions to arrive at a consolidated account of their credit or debit situation.

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