Memorandum Joint Venture Account 📝
Why 'Memorandum'? Because it is NOT part of the official double-entry books. It is a combined statement prepared by the partners just to calculate Profit/Loss.
Scenario:
- A records his expenses. B records his expenses.
- They sit together and merge their lists into one "Memorandum Account".
Format 📊
It looks exactly like a P&L Account.
| Particulars (Expenses) | ₹ | Particulars (Income) | ₹ |
|---|---|---|---|
| To Expenses (Paid by A) | 10,000 | By Sales (Received by A) | 50,000 |
| To Expenses (Paid by B) | 5,000 | By Sales (Received by B) | 20,000 |
| To Purchases (Paid by A) | 20,000 | By Stock Taken over (by B) | 5,000 |
| To Profit (Balancing Fig) | 40,000 | ||
| Total | 75,000 | Total | 75,000 |
Distribution of Profit:
- Total Profit = 40,000.
- If Ratio is 1:1, A gets 20,000, B gets 20,000.
Journal Entries (In Individual Books) 📝
In A's Books:
- Own Exp: Joint Venture with B A/c Dr. | To Cash
- Own Sales: Cash Dr. | To Joint Venture with B A/c
- Share of Profit: Joint Venture with B A/c Dr. | To P&L A/c
- Final Settlement: Bank Dr. | To Joint Venture with B A/c (If receiving money).
Important
In Memorandum Method, A does NOT record B's expenses in his journal. He only uses B's expenses in the Memorandum Account to find the profit.
Quiz Time! 🎯
Test Your Knowledge
Question 1 of 5
1. Memorandum Joint Venture Account is prepared to:
💡 Final Wisdom: "Memorandum JV is like a potluck dinner. Everyone brings a dish (expenses), and at the end, we check if there is enough food (profit) for everyone!" 🍲
Next up: Practical Problems - Solving a Memorandum JV sum! 🧮