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Separate Set of Books Method 🏦

Scenario: A and B want to build a building. They contribute ₹10 Lakhs each. They open a new bank account: "A & B Joint Venture A/c".

Accounts to Open 📂

  1. Joint Bank A/c: Real Account. (Cash in / Cash out).
  2. Joint Venture A/c: Nominal Account. (Expenses Dr. / Income Cr.).
  3. Co-Venturers' A/c: Personal Account. (Capital contributed / Profit share).

Journal Entries 📝

1. Contribution of Capital:

Joint Bank A/c ...Dr.
    To A's A/c
    To B's A/c

2. Buying Materials / Expenses:

Joint Venture A/c ...Dr.
    To Joint Bank A/c

3. Sales / Contract Price Received:

Joint Bank A/c ...Dr.
    To Joint Venture A/c

4. Profit on Venture:

Joint Venture A/c ...Dr.
    To A's A/c (Share)
    To B's A/c (Share)

5. Final Settlement (Closing the books):

A's A/c ...Dr.
B's A/c ...Dr.
    To Joint Bank A/c
(Paying back their capital + profit)
The Check

At the end, Joint Bank A/c must tally automatically (Balance becomes Zero). This proves the arithmetic accuracy.

Quiz Time! 🎯

Test Your Knowledge

Question 1 of 5

1. Under Separate Books method, capital contribution is credited to:

Joint Bank A/c
Joint Venture A/c
Co-Venturers' A/c
Sales A/c

💡 Final Wisdom: "It's the cleanest method. Put money in a pot (Joint Bank), spend from the pot, put earnings in the pot, and finally empty the pot." 🍯

Next up: Memorandum Joint Venture - The shortcut method! 📝

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