[Commerce Class Notes] on Features of Joint Venture Accounts Pdf for Exam

A Joint Venture Account is an agreement where two or more parties join to create a partnership for a specific business venture or purpose for a particular period.

Two individuals or firms join to create a partnership for a specific purpose for a short duration or it might be temporary also. This partnership does not use the name of the company. The profits or losses are shared in the agreed ration. Some of the features of Joint Ventures are discussed in this article.

What is a Consignment Agreement?

If goods are sent by their owner to the dealer or the agent who accepts to sell the goods, it is done under a consignment agreement. Here the owner is referred to as the consignor and the other party is referred to as the consignee. The consignee has the right to return the goods without any obligation, in case they are not sold. The consigner remains to be the owner until the goods are sold.

Features of Joint Venture Agreement

The features of the joint venture are discussed below:

1. Duration: This venture is formed for a short duration and so, it is termed as a temporary partnership.

2. Parties: The parties or the individuals who join to form this venture are called the co-venturers.

3. Funds: The funds used for each business are brought to the joint venture account.

4. Sharing of Profits or Losses: The profits or losses are shared as per the terms agreed between the co-venturers. If there is no such agreement, it is shared equally.

5. Computation of Profits or Losses: The profit or loss is computed by the co-venturers on the completion of their business or venture.

Difference Between Consignment and Joint Venture

There are a lot of differences between consignment and joint venture accounts. Some of the differences between a joint venture and consignment are explained below.

1. Meaning: Joint venture is a temporary partnership between two or more parties for a specific business whereas Consignment is just an act of sending the goods by the owner to the seller to sell the goods. 

2. Parties: The parties in a joint venture are called co-venturers whereas in a consignment act they are referred to as the consignor and the consignee.

3. Relationship: In a joint venture, the relationship between the parties are like partners whereas in a consignment it is that of a principal and agent. 

4. Rights: The co-venturers in a joint venture have equal rights whereas in a consignment, the consignor has the rights of the owner or the principal and the consignee has the rights of a seller or an agent. 

5. Share of Profit/Loss: In a joint venture, the profit or loss is shared as per the agreement whereas in a consignment the consignee receives a commission based on the sale of goods. 

6. Ownership: In a joint venture, the co-ventures are the owners whereas in a consignment only the consignor remains the owner. 

7. Communication: In a joint venture, the parties keep sharing the information regularly whereas in a consignment the consignee just sends an account to the consignor.

8. Maintenance of Accounts: The co-venturers maintain accounts in various methods as agreed in their venture, whereas the parties of the consignment have only one method of accounts maintenance. 

9. Continuity: In a joint venture, the business comes to an end once the purpose is completed whereas it depends on the consignor and the consignee to decide on the continuity.

10.  Basis of Accounting: In a joint venture, they follow the cash basis of accounting whereas in a consignment they follow the accrual basis of accounting.

Difference between the Joint Venture and Consignment Chart

Joint Ventures’ Purpose:

The number of joint ventures that can be formed is limitless. Joint ventures can be formed by two or more companies from the same industry, or by two companies from different industries, or by two companies from separate countries, or by two companies from different industries and countries. As a result, the scope of organizing a joint venture is limitless, and they can be formed and profited anywhere mutual collaboration is required.

Joint ventures are particularly widespread in the oil business, and they frequently involve a local and a foreign company. In the oil industry, JVs are frequently considered as a feasible business strategy because the firms can complement their capabilities while the JV provides the foreign company with a geographic presence. The most well-known company is Fuji-Xerox. P&G chose a joint venture with Godrej primarily to gain access to the company’s distribution network and manufacturing facilities.