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If any Inventories is taken over by the venturer, it will be treated as an:
- a)Income of the Joint venture, hence credited to Joint Venture Account
- b)Expenses of Joint Venture, hence debited to Joint Venture Account
- c)To be ignored from Joint Venture Transaction
- d)It will be treated in the personal book of the venturer and not in the books of joint Venture.
Correct answer is option 'A'. Can you explain this answer?
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If any Inventories is taken over by the venturer, it will be treated a...
Inventories taken over by the venturer in a joint venture are treated as income of the joint venture and credited to the Joint Venture Account.
Explanation:
In a joint venture, two or more parties come together to carry out a specific business activity for a limited period of time. Each party contributes resources and shares the profits and losses of the venture. Inventories are one of the resources that can be contributed by the parties involved.
When one of the venturers takes over inventories from the joint venture, it means that the venturer is acquiring the inventories for their own use or for sale in their own business. In this case, the inventories are removed from the joint venture and become the personal property of the venturer.
The treatment of this transaction is as follows:
1. Income of the Joint Venture: Since the inventories were originally contributed to the joint venture and formed a part of its assets, their transfer to the venturer's personal use or business is considered as a realization of the joint venture's assets. Therefore, it is treated as income of the joint venture.
2. Credited to Joint Venture Account: The income arising from the transfer of inventories is recorded in the Joint Venture Account, which is a nominal account used to record all the revenues and expenses of the joint venture. The credit entry in the Joint Venture Account represents the increase in income for the joint venture.
3. Effect on Profit Sharing: As the inventories are treated as income of the joint venture, they will be taken into consideration while determining the profits or losses to be shared among the venturers. The venturer who took over the inventories may need to share a portion of the income with the other venturers, based on the profit-sharing agreement.
It is important to note that the treatment may vary depending on the specific terms and conditions of the joint venture agreement. However, in general, when inventories are taken over by the venturer, they are treated as income of the joint venture and credited to the Joint Venture Account.
Explanation:
In a joint venture, two or more parties come together to carry out a specific business activity for a limited period of time. Each party contributes resources and shares the profits and losses of the venture. Inventories are one of the resources that can be contributed by the parties involved.
When one of the venturers takes over inventories from the joint venture, it means that the venturer is acquiring the inventories for their own use or for sale in their own business. In this case, the inventories are removed from the joint venture and become the personal property of the venturer.
The treatment of this transaction is as follows:
1. Income of the Joint Venture: Since the inventories were originally contributed to the joint venture and formed a part of its assets, their transfer to the venturer's personal use or business is considered as a realization of the joint venture's assets. Therefore, it is treated as income of the joint venture.
2. Credited to Joint Venture Account: The income arising from the transfer of inventories is recorded in the Joint Venture Account, which is a nominal account used to record all the revenues and expenses of the joint venture. The credit entry in the Joint Venture Account represents the increase in income for the joint venture.
3. Effect on Profit Sharing: As the inventories are treated as income of the joint venture, they will be taken into consideration while determining the profits or losses to be shared among the venturers. The venturer who took over the inventories may need to share a portion of the income with the other venturers, based on the profit-sharing agreement.
It is important to note that the treatment may vary depending on the specific terms and conditions of the joint venture agreement. However, in general, when inventories are taken over by the venturer, they are treated as income of the joint venture and credited to the Joint Venture Account.
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If any Inventories is taken over by the venturer, it will be treated as an:a)Income of the Joint venture, hence credited to Joint Venture Accountb)Expenses of Joint Venture, hence debited to Joint Venture Accountc)To be ignored from Joint Venture Transactiond)It will be treated in the personal book of the venturer and not in the books of joint Venture.Correct answer is option 'A'. Can you explain this answer?
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