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AS & A Level Accounting (9706)

Consignment and joint ventures Rare

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2022

  • 2022 Oct/Nov · Paper 32 · Q1 (a(i), a(ii), b, c, d)21 marksJoint ventures

References only, not question text. Open Official paper ↗ where Cambridge publishes the paper, or see the official Cambridge past-papers page; for other papers, ask your school. “Paper 42” means Paper 4, variant 2.

Practice questions

Original questions written by HomiLabs in the style of the exam, with answers and mark schemes. They are not Cambridge past paper questions and have not been reviewed by Cambridge. Try each one before opening the answer.

Q1Joint ventures · Core · Paper 3 style · 4 marks

Two traders in Karachi, one selling dried fruit and one with a shop in Dubai, agree to work together for one shipment only and share the profit.

  1. (a) Explain the term 'joint venture'. [2]
  2. (b) State two differences between a joint venture and a partnership. [2]
Show answer
  1. (a) A short-term business arrangement in which two or more parties combine resources for a single, specific project and share the resulting profit or loss in an agreed ratio.
    1 mark: two or more parties for a specific/single project. 1 mark: temporary, sharing profit or loss in agreed ratio.
  2. (b) A joint venture ends when the project is completed, whereas a partnership continues indefinitely; joint venturers usually carry on their own separate businesses and there is usually no firm name or separate continuing set of books.
    1 mark each for any two: duration (temporary vs continuing); scope (one project vs ongoing business); venturers keep own businesses; no firm name / records often kept in venturers' own books.
Q2Joint ventures · Core · Paper 3 style · 4 marks

A Pakistani rice mill is considering a joint venture with a packaging company in Malaysia to supply a large supermarket order.

  1. (a) State two reasons why the rice mill might enter into the joint venture. [2]
  2. (b) State two risks for the rice mill of entering into the joint venture. [2]
Show answer
  1. (a) To share the cost and risk of the order; to use the partner's skills, contacts and packaging facilities.
    1 mark each: share risk/finance; access to expertise, contacts or market; complete an order too large alone.
  2. (b) Disagreements over how profit and costs are shared; the other venturer may fail to meet its obligations or may mishandle the money received.
    1 mark each: disputes; dependence on partner's performance; loss of control; unlimited liability for shared losses; delays in settlement.
Q3Joint ventures · Core · Paper 3 style · 4 marks

Ikram keeps a 'Joint venture with Salma' account in his own books. The venture has made a profit and Ikram's share is $4,600.

  1. (a) State the double entry in Ikram's books to record his share of the profit. [2]
  2. (b) After his share of profit is recorded, Ikram's 'Joint venture with Salma' account has a debit balance of $9,300. Explain what this balance shows and how it will be cleared. [2]
Show answer
  1. (a) Debit Joint venture with Salma account $4,600; credit statement of profit or loss (profit on joint venture) $4,600.
    1 mark debit; 1 mark credit.
  2. (b) Salma owes Ikram $9,300 (she has received more from the venture than her costs plus her share of profit); it is cleared when Salma pays Ikram $9,300 (debit bank, credit the joint venture account).
    1 mark: Salma owes Ikram / receivable. 1 mark: cleared by cash received from Salma.
Q4Joint ventures · Core · Paper 3 style · 5 marks

Sialkot Leather sends handbags to an agent in Doha. The agent sells them for a commission and returns the money. A competitor instead works with a Doha trader who shares the profit on the goods equally.

  1. (a) Identify which arrangement is a consignment and which is a joint venture. [1]
  2. (b) Explain two differences between a consignment and a joint venture. [4]
Show answer
  1. (a) Sialkot Leather and its agent: consignment. The competitor and the Doha trader: joint venture.
    B1 both correct.
  2. (b) In a consignment the consignor owns the goods until they are sold and bears all the profit or loss; the agent earns only commission. In a joint venture the venturers are co-owners for the project and share profit or loss in an agreed ratio. Also, a consignee acts for the consignor as agent, whereas joint venturers are like temporary partners with equal standing.
    Up to 2 marks per difference: ownership of goods; who bears profit/loss (commission vs share of profit); relationship (principal–agent vs co-venturers).
Q5Joint ventures · Core · Paper 3 style · 5 marks

Asif (Lahore) and Bano (Karachi) agree a joint venture to sell 2,000 cricket bats, sharing profits equally. Asif bought the bats for $36,000 and paid carriage of $1,500. Bano paid advertising of $2,800 and sold all the bats for $52,000, keeping the cash.

  1. (a) Calculate the profit on the joint venture. [2]
  2. (b) State each venturer's share of the profit. [1]
  3. (c) Calculate the amount that must be paid in settlement, and state who pays whom. [2]
Show answer
  1. (a) $11,700
    52,000 − (36,000 + 1,500 + 2,800) (M1) = 11,700 (A1).
  2. (b) $5,850 each
    B1.
  3. (c) Bano pays Asif $43,350.
    Asif: 37,500 + 5,850 = 43,350 due to him (M1); Bano pays Asif 43,350 (A1).
Q6Joint ventures · Core · Paper 3 style · 5 marks

Chaudhry and Daniyal entered a joint venture to trade in basmati rice, sharing profits and losses 3:2. Each recorded his own transactions.Chaudhry: bought rice $64,000; paid transport $3,200; sold rice for $30,000.Daniyal: paid storage $2,400; paid packing $1,900; sold rice for $52,000.

  1. (a) Prepare the memorandum joint venture account. [5]
Show answer
  1. (a) Memorandum joint venture account $DrPurchases of rice (Chaudhry) 64,000Transport (Chaudhry) 3,200Storage (Daniyal) 2,400Packing (Daniyal) 1,900Share of profit – Chaudhry 6,300Share of profit – Daniyal 4,200 82,000CrSales (Chaudhry) 30,000Sales (Daniyal) 52,000 82,000
    B1 purchases and transport; B1 storage and packing; B1 sales 82,000; B1 profit 10,500; B1 shares Chaudhry 6,300, Daniyal 4,200.
Q7Joint ventures · Core · Paper 3 style · 5 marks

Kashif and Lubna share joint venture profits 2:3. A summary of their joint venture records: Kashif $ Lubna $Costs paid 21,500 4,700Sales proceeds received 9,000 30,200

  1. (a) Calculate the joint venture profit. [1]
  2. (b) Calculate each venturer's share of the profit. [2]
  3. (c) Calculate the settlement payment and state who pays whom. [2]
Show answer
  1. (a) $13,000
    39,200 − 26,200 = 13,000 (B1).
  2. (b) Kashif $5,200; Lubna $7,800.
    B1 each.
  3. (c) Lubna pays Kashif $17,700.
    Kashif: 21,500 + 5,200 − 9,000 = 17,700 (M1); paid by Lubna (A1).
Q8Joint ventures · Core · Paper 3 style · 4 marks

Usama and Wardah contributed $30,000 and $50,000 respectively to a joint venture importing tiles. They agreed to share the profit in the ratio of their contributions. The profit was $48,000.

  1. (a) Calculate each venturer's share of the profit. [2]
  2. (b) Explain why venturers might agree to share profit in the ratio of the money contributed rather than equally. [2]
Show answer
  1. (a) Usama $18,000; Wardah $30,000.
    48,000 × 3/8 = 18,000 (B1); × 5/8 = 30,000 (B1).
  2. (b) The venturer who puts in more money takes more risk and gives up the use of more funds, so a larger share rewards that contribution fairly.
    1 mark: reflects risk/finance provided. 1 mark: fairness / equal sharing would favour the smaller contributor.
Q9Joint ventures · Core · Paper 3 style · 5 marks

Waseem and Yumna are in a joint venture. In Waseem's books the following took place:1 Waseem paid $15,000 by bank for goods for the venture2 Waseem received $9,000 by bank from sales of venture goods3 Waseem's share of the venture profit was $2,7504 Yumna paid Waseem the amount due to settle the venture.

  1. (a) Prepare journal entries in Waseem's books for items 1 to 4. Narratives are not required. [4]
  2. (b) State where the balance on the 'Joint venture with Yumna' account would appear in Waseem's statement of financial position if Yumna had not yet paid. [1]
Show answer
  1. (a) Dr $ Cr $1 Joint venture with Yumna 15,000 Bank 15,0002 Bank 9,000 Joint venture with Yumna 9,0003 Joint venture with Yumna 2,750 Statement of profit or loss (JV profit) 2,7504 Bank 8,750 Joint venture with Yumna 8,750
    1 mark for each correct entry; settlement 15,000 − 9,000 + 2,750 = 8,750.
  2. (b) As a current asset (receivable: amount due from Yumna).
    B1.
Q10Joint ventures · Core · Paper 3 style · 5 marks

Arif and Bina share joint venture profits equally. Arif paid costs of $12,000. Bina paid costs of $3,000 and received all the sales proceeds of $20,000.

  1. (a) Calculate the joint venture profit. [1]
  2. (b) Calculate the settlement payment and state who pays whom. [2]
  3. (c) Before settlement, state whether the 'Joint venture with Bina' account in Arif's books has a debit or a credit balance, and what it represents. [2]
Show answer
  1. (a) $5,000
    20,000 − 15,000 (B1).
  2. (b) Bina pays Arif $14,500.
    Arif: 12,000 + 2,500 = 14,500 (M1); Bina pays (A1).
  3. (c) A debit balance of $14,500, representing the amount Bina owes Arif (an asset/receivable).
    1 mark: debit. 1 mark: amount owed by Bina.
Q11Joint ventures · Standard · Paper 3 style · 4 marks

Two venturers each record their own joint venture transactions in their own books. At the end of the venture a memorandum joint venture account is prepared.

  1. (a) Explain the purpose of the memorandum joint venture account. [2]
  2. (b) Explain why the memorandum joint venture account is not part of the double-entry system. [2]
Show answer
  1. (a) It brings together the transactions of all venturers to calculate the profit or loss of the whole venture, so that it can be shared in the agreed ratio.
    1 mark: combines all venturers' transactions. 1 mark: to find total profit/loss to be shared.
  2. (b) Each transaction has already been recorded in a venturer's own 'Joint venture with …' account; the memorandum account is a working statement prepared from copies of those records, so no entries are posted from it.
    1 mark: transactions already recorded in venturers' own books. 1 mark: it is only a statement/memorandum, no double entry.
Q12Joint ventures · Standard · Paper 3 style · 4 marks

Joint venture transactions may be recorded either in a separate set of books with a joint bank account, or in each venturer's own books.

  1. (a) Explain one advantage and one disadvantage of keeping a separate set of books with a joint bank account. [4]
Show answer
  1. (a) Advantage: all receipts and payments pass through one account, so the venture's records are complete and transparent and the profit is easy to calculate. Disadvantage: it costs more time and money to open an account and keep extra books, which may not be worthwhile for a small, short venture.
    Up to 2 marks for an advantage (identify + explain) and up to 2 marks for a disadvantage (identify + explain).
Q13Joint ventures · Standard · Paper 3 style · 4 marks

At 31 December 2025, Amjad's joint venture with Bushra had been completed, but Bushra had not yet paid Amjad the $12,400 owed to him. Amjad's share of the venture profit was $5,100.

  1. (a) State how the $5,100 should be shown in Amjad's statement of profit or loss for the year ended 31 December 2025. [1]
  2. (b) State how the $12,400 should be shown in Amjad's statement of financial position at 31 December 2025, and explain why. [2]
  3. (c) Identify the accounting concept that requires the profit to be recognised in 2025 even though the cash has not been received. [1]
Show answer
  1. (a) As income: 'share of profit on joint venture' $5,100.
    B1.
  2. (b) As a current asset (other receivable – amount due from Bushra), because it is money owed to Amjad that he expects to receive within a year.
    1 mark: current asset/receivable. 1 mark: reason.
  3. (c) Accruals (matching) concept.
    B1 accruals (also accept realisation).
Q14Joint ventures · Standard · Paper 3 style · 7 marks

Ejaz and Fatima share joint venture profits equally. Ejaz sent goods from his own inventory costing $24,000 and paid freight of $1,100. He sold some of the goods for $18,000. Fatima paid selling expenses of $2,500 and sold the rest of the goods for $22,000. The venture was then completed and settled in cash.

  1. (a) Calculate the profit on the joint venture. [2]
  2. (b) Prepare the 'Joint venture with Fatima' account in Ejaz's books, including the settlement. [5]
Show answer
  1. (a) $12,400
    40,000 − 27,600 (M1) = 12,400 (A1).
  2. (b) Joint venture with Fatima (Ejaz's books) $DrGoods from own inventory 24,000Freight 1,100Share of profit 6,200 31,300CrSales 18,000Bank – received from Fatima 13,300 31,300
    B1 goods and freight debited; B1 sales credited; B1 share of profit 6,200 debited; B1 settlement received from Fatima 13,300 credited; B1 account balances (totals 31,300).
Q15Joint ventures · Standard · Paper 3 style · 6 marks

Ghulam and Hassan bought and resold used cars in Rawalpindi as a joint venture, sharing profits 2:1. Ghulam bought the cars for $45,000 and paid repairs of $3,600. Hassan paid advertising of $1,200 and registration fees of $900, and sold all the cars for $58,500. The venture made a profit of $7,800 and was settled in cash.

  1. (a) Prepare the 'Joint venture with Hassan' account in Ghulam's books. [3]
  2. (b) Prepare the 'Joint venture with Ghulam' account in Hassan's books. [3]
Show answer
  1. (a) Joint venture with Hassan (Ghulam's books) $DrPurchase of cars 45,000Repairs 3,600Share of profit 5,200 53,800CrBank – received from Hassan 53,800 53,800
    B1 cars and repairs; B1 share of profit 5,200; B1 cash received from Hassan 53,800.
  2. (b) Joint venture with Ghulam (Hassan's books) $DrAdvertising 1,200Registration fees 900Share of profit 2,600Bank – paid to Ghulam 53,800 58,500CrSales 58,500 58,500
    B1 expenses and share of profit 2,600 debited; B1 sales 58,500 credited; B1 cash paid to Ghulam 53,800.
Q16Joint ventures · Standard · Paper 3 style · 7 marks

Mehdi and Nida ran a summer camp in Murree as a joint venture, sharing profits equally. They opened a joint bank account: Mehdi paid in $25,000 and Nida $15,000. From the joint bank account they paid: venue hire $18,000; food $12,500; staff $7,300; transport $4,200. Camp fees of $52,000 were paid into the account. At the end, the venturers were paid what was due to them and the account was closed.

  1. (a) Prepare the joint bank account. [3]
  2. (b) Calculate the profit on the joint venture. [2]
  3. (c) Explain why the amounts paid to Mehdi and Nida at the end are different although they share profit equally. [2]
Show answer
  1. (a) Joint bank account $DrMehdi – capital 25,000Nida – capital 15,000Camp fees 52,000 92,000CrVenue hire 18,000Food 12,500Staff 7,300Transport 4,200Mehdi – final payment 30,000Nida – final payment 20,000 92,000
    B1 capital paid in; B1 fees and payments; B1 final payments 30,000 and 20,000.
  2. (b) $10,000
    52,000 − 42,000 (M1) = 10,000 (A1).
  3. (c) Each receives his or her own capital back plus a $5,000 share of profit; Mehdi contributed $10,000 more capital, so he receives $30,000 and Nida $20,000.
    1 mark: capital returned plus share. 1 mark: figures.
Q17Joint ventures · Standard · Paper 3 style · 7 marks

Usman and Vikram organised a one-night music concert in Dubai as a joint venture, sharing profits 3:2. Usman paid venue hire of $28,000 and sound equipment hire of $6,500, and received all ticket sales of $92,000. Vikram paid the artist's fee of $40,000 and advertising of $5,500, and received sponsorship of $8,000.

  1. (a) Prepare the memorandum joint venture account. [4]
  2. (b) Prepare the 'Joint venture with Vikram' account in Usman's books, including the settlement. [3]
Show answer
  1. (a) Memorandum joint venture account $DrVenue hire (Usman) 28,000Sound equipment hire (Usman) 6,500Artist fee (Vikram) 40,000Advertising (Vikram) 5,500Share of profit – Usman 12,000Share of profit – Vikram 8,000 100,000CrTicket sales (Usman) 92,000Sponsorship (Vikram) 8,000 100,000
    B1 costs 80,000; B1 income 100,000; B1 profit 20,000; B1 shares 12,000 / 8,000.
  2. (b) Joint venture with Vikram (Usman's books) $DrVenue hire (Usman) 28,000Sound equipment hire (Usman) 6,500Share of profit 12,000Bank – paid to Vikram 45,500 92,000CrTicket sales (Usman) 92,000 92,000
    B1 costs and share of profit debited; B1 ticket sales credited; B1 cash paid to Vikram 45,500.
Q18Joint ventures · Standard · Paper 3 style · 7 marks

Xenia (Dubai) and Yasir (Karachi) imported a consignment of dates as a joint venture, sharing profits and losses equally. Xenia bought the dates for $32,000 and paid shipping of $4,400. Yasir paid customs duty of $2,100 and warehousing of $1,500. Part of the shipment was damaged and Yasir sold all the dates for only $36,800.

  1. (a) Prepare the memorandum joint venture account. [4]
  2. (b) Prepare the 'Joint venture with Xenia' account in Yasir's books, including the settlement. [3]
Show answer
  1. (a) Memorandum joint venture account $DrPurchase of dates (Xenia) 32,000Shipping (Xenia) 4,400Customs duty (Yasir) 2,100Warehousing (Yasir) 1,500 40,000CrSales (Yasir) 36,800Loss – Xenia 1,600Loss – Yasir 1,600 40,000
    B1 costs 40,000; B1 sales; B1 loss 3,200 shown on credit side; B1 shared 1,600 each.
  2. (b) Joint venture with Xenia (Yasir's books) $DrCustoms duty (Yasir) 2,100Warehousing (Yasir) 1,500Bank – paid to Xenia 34,800 38,400CrSales (Yasir) 36,800Share of loss 1,600 38,400
    B1 customs and warehousing debited; B1 sales and share of loss 1,600 credited; B1 cash paid to Xenia 34,800.
Q19Joint ventures · Standard · Paper 3 style · 7 marks

Daud and Eman share joint venture profits 3:2. Daud supplied goods from his own inventory at cost, $30,000. Eman paid delivery costs of $1,700 and sold all the goods on credit for $45,000. She allowed cash discounts of $600, and one customer owing $1,500 became bankrupt and paid nothing. Eman collected the rest of the money.

  1. (a) Prepare the memorandum joint venture account. [4]
  2. (b) Calculate the amount Eman must pay Daud in settlement. [1]
  3. (c) Explain why the irrecoverable debt is charged to the joint venture rather than borne by Eman alone. [2]
Show answer
  1. (a) Memorandum joint venture account $DrGoods supplied (Daud) 30,000Delivery (Eman) 1,700Discounts allowed (Eman) 600Irrecoverable debt (Eman) 1,500Share of profit – Daud 6,720Share of profit – Eman 4,480 45,000CrSales (Eman) 45,000 45,000
    B1 goods and delivery; B1 discount and irrecoverable debt debited; B1 profit 11,200; B1 shares 6,720 / 4,480.
  2. (b) $36,720
    30,000 + 6,720 = 36,720 (B1).
  3. (c) The sale was made on behalf of the venture, so the risk of non-payment is a cost of the venture shared by both venturers, unless the agreement makes Eman responsible (e.g. through a del credere commission).
    1 mark: sale made for the joint venture. 1 mark: losses shared in agreed ratio unless agreement says otherwise.
Q20Joint ventures · Standard · Paper 3 style · 7 marks

Jamal and Kinza share joint venture profits 2:1. Jamal bought goods for $33,000 and sent Kinza a cash advance of $8,000 to help her pay the venture's expenses. Kinza paid expenses of $6,700 and sold all the goods for $52,000.

  1. (a) Calculate the profit on the joint venture. [2]
  2. (b) Prepare the 'Joint venture with Kinza' account in Jamal's books, including the settlement. [3]
  3. (c) Explain why the $8,000 advance does not appear in the memorandum joint venture account. [2]
Show answer
  1. (a) $12,300
    52,000 − 33,000 − 6,700 (M1) = 12,300 (A1).
  2. (b) Joint venture with Kinza (Jamal's books) $DrGoods 33,000Bank – advance to Kinza 8,000Share of profit 8,200 49,200CrBank – received from Kinza 49,200 49,200
    B1 goods and advance debited; B1 share of profit 8,200; B1 cash received from Kinza 49,200.
  3. (c) The advance is only a transfer of cash between the two venturers; it is not income or a cost of the venture, so it does not affect the profit. It is cancelled out in the settlement.
    1 mark: transfer between venturers. 1 mark: no effect on profit.
Q21Joint ventures · Challenge · Paper 3 style · 8 marks

Haider Builders, Lahore, wants to bid for a bridge contract worth $2,400,000.Option 1: bid alone. Haider would have to hire specialist equipment and engineers; total costs are estimated at $2,280,000.Option 2: form a joint venture with a foreign engineering company. Total costs of the venture are estimated at $1,950,000 and Haider would receive 40% of the profit.

  1. (a) Calculate Haider's expected profit under each option. [2]
  2. (b) Advise Haider Builders which option to choose. Justify your answer. [6]
Show answer
  1. (a) Option 1 $120,000; Option 2 $180,000.
    Option 1: 2,400,000 − 2,280,000 = 120,000 (B1). Option 2: (2,400,000 − 1,950,000) × 40% = 180,000 (B1).
  2. (b) For the joint venture: higher expected profit ($60,000 more); the foreign partner's expertise lowers the risk of cost overruns and delays; Haider gains experience for future bridge contracts; less finance needed. Against: Haider loses control over decisions; profit depends on the partner's performance; disputes over sharing; Haider builds less of its own reputation. Bidding alone keeps all profit but the margin is only 5% of contract value, so a small overrun would cause a loss. Decision: choose the joint venture, provided a clear written agreement sets out duties, profit sharing and settlement.
    Up to 2 marks for points for the joint venture; up to 2 marks for points against / for bidding alone; 1 mark for use of the calculated figures (e.g. 60,000 difference, 5% margin); 1 mark for a justified decision.
Q22Joint ventures · Challenge · Paper 3 style · 6 marks

Rashid and Tahir share joint venture profits equally. At the end of their venture in garden furniture, unsold goods that cost $6,000 are taken over by Rashid at an agreed value of $4,000, their net realisable value. Before this item, the memorandum joint venture account showed a profit of $15,000 (all goods counted as sold or taken over at cost).

  1. (a) Calculate the revised joint venture profit. [2]
  2. (b) Calculate each venturer's share of the revised profit. [1]
  3. (c) Discuss whether the goods should be taken over at net realisable value rather than cost. [3]
Show answer
  1. (a) $13,000
    Taking over at 4,000 rather than cost 6,000 reduces the credit by 2,000 (M1); 15,000 − 2,000 = 13,000 (A1).
  2. (b) $6,500 each
    13,000 ÷ 2 (B1).
  3. (c) Prudence: goods should not be valued above what they can be sold for, so $4,000 is appropriate if NRV is reliable. However, Rashid benefits if he later sells them for more, so the value must be agreed fairly and independently; Tahir bears half the $2,000 reduction. Conclusion: NRV is acceptable if it is agreed by both venturers or set by an independent valuation.
    1 mark: prudence / IAS 2 lower of cost and NRV. 1 mark: conflict of interest – taker benefits from low value. 1 mark: conclusion/agreement needed.
Q23Joint ventures · Challenge · Paper 3 style · 8 marks

Iqbal and Javeria entered a joint venture to make and sell embroidered garments in Faisalabad. Profits after commission are shared Iqbal 3, Javeria 1.Iqbal bought fabric for $40,000 and paid dyeing costs of $6,000.Javeria paid stitching costs of $9,000 and sold garments for $68,000. She is entitled to a commission of 5% on her sales.At the end of the venture Iqbal took over the unsold garments at an agreed value of $4,500.

  1. (a) Prepare the memorandum joint venture account. [5]
  2. (b) Calculate the amount paid in settlement and state who pays whom. [2]
  3. (c) Explain why Javeria's commission is charged before the profit is shared. [1]
Show answer
  1. (a) Memorandum joint venture account $DrFabric (Iqbal) 40,000Dyeing (Iqbal) 6,000Stitching (Javeria) 9,000Commission – Javeria (5% × 68,000) 3,400Share of profit – Iqbal 10,575Share of profit – Javeria 3,525 72,500CrSales (Javeria) 68,000Unsold garments taken over (Iqbal) 4,500 72,500
    B1 costs; B1 commission 3,400 debited; B1 sales and goods taken over credited; B1 profit 14,100; B1 shares 10,575 / 3,525.
  2. (b) Javeria pays Iqbal $52,075.
    Iqbal: 46,000 + 10,575 − 4,500 = 52,075 (M1); Javeria pays Iqbal (A1).
  3. (c) The commission rewards Javeria for the extra work of selling; it is a cost of the venture, so it is deducted to find the profit that both share.
    B1.
Q24Joint ventures · Challenge · Paper 3 style · 8 marks

Omer and Parveen set up a joint venture to sell solar panels in rural Sindh, sharing profits 3:2. They opened a joint bank account into which Omer paid $30,000 and Parveen $20,000.From the joint bank account: a generator for the venture was bought for $12,000; solar panels were bought for $48,000; wages of $6,000 were paid. Sales of $70,000 were banked.At the end of the venture Omer took over the generator at an agreed value of $9,000 and Parveen took over the unsold panels at $5,500. The bank balance was then paid out to the venturers.

  1. (a) Prepare the joint venture account (in the separate set of books) showing the profit and its division. [4]
  2. (b) Calculate the amount paid from the joint bank account to each venturer at the end. [3]
  3. (c) Suggest why the generator was taken over at less than its cost. [1]
Show answer
  1. (a) Joint venture account $DrGenerator 12,000Solar panels 48,000Wages 6,000Profit – Omer (3/5) 11,100Profit – Parveen (2/5) 7,400 84,500CrSales 70,000Generator taken over – Omer 9,000Panels taken over – Parveen 5,500 84,500
    B1 costs debited; B1 sales and items taken over credited; B1 profit 18,500; B1 shares 11,100 / 7,400.
  2. (b) Omer $32,100; Parveen $21,900.
    Omer: 30,000 + 11,100 − 9,000 = 32,100 (B1). Parveen: 20,000 + 7,400 − 5,500 = 21,900 (B1). Check: bank balance 50,000 + 70,000 − 66,000 = 54,000 (B1).
  3. (c) It had been used during the venture and had lost value (depreciation/wear).
    B1.
Q25Joint ventures · Challenge · Paper 3 style · 7 marks

Qadir and Rizwan built a block of flats in Islamabad as a joint venture. They agreed that each venturer would receive interest at 10% per annum on money he contributed, from the date of payment until the venture ended on 31 December 2025, and that the remaining profit would be shared equally.Qadir paid $120,000 for the land on 1 January 2025. Rizwan paid $180,000 for construction on 1 April 2025. On 31 December 2025 all the flats were sold and Qadir received the proceeds of $360,000.

  1. (a) Calculate the interest due to each venturer. [2]
  2. (b) Calculate the profit to be shared and each venturer's share. [3]
  3. (c) Calculate the settlement payment and state who pays whom. [2]
Show answer
  1. (a) Qadir $12,000; Rizwan $13,500.
    Qadir 120,000 × 10% = 12,000 (B1); Rizwan 180,000 × 10% × 9/12 = 13,500 (B1).
  2. (b) Profit $34,500; $17,250 each.
    360,000 − 120,000 − 180,000 − 12,000 − 13,500 (M1) = 34,500 (A1); 17,250 each (A1).
  3. (c) Qadir pays Rizwan $210,750.
    Rizwan is due 180,000 + 13,500 + 17,250 = 210,750 (M1); Qadir holds the proceeds and pays him (A1).
Q26Joint ventures · Challenge · Paper 3 style · 6 marks

Sohail and Tania share joint venture profits equally. Sohail's 'Joint venture with Tania' account showed: goods supplied $26,000; expenses paid by Sohail $3,400; sales made by Sohail $15,000; his share of the profit (figure missing); cash received from Tania in settlement $22,600. Tania paid expenses of $4,800 and made all the other sales.

  1. (a) Calculate Sohail's share of the profit. [2]
  2. (b) Calculate the total joint venture profit. [1]
  3. (c) Calculate the value of the sales made by Tania. [3]
Show answer
  1. (a) $8,200
    26,000 + 3,400 + share − 15,000 = 22,600 (M1); share = 8,200 (A1).
  2. (b) $16,400
    8,200 × 2 = 16,400 (B1).
  3. (c) $35,600
    Total sales = total costs 34,200 + profit 16,400 = 50,600 (M1 M1); Tania's sales = 50,600 − 15,000 = 35,600 (A1). Check: 4,800 + 8,200 − 35,600 = −22,600.
Q27Joint ventures · Challenge · Paper 3 style · 7 marks

Zahid, Amna and Basit traded in carved wooden furniture from Chiniot as a joint venture, sharing profits 2:2:1.Zahid bought furniture for $50,000.Amna paid polishing costs of $6,000 and showroom rent of $4,500, and sold furniture for $46,000.Basit paid advertising of $3,500 and sold furniture for $34,000.Zahid took over the remaining furniture at an agreed value of $2,000.

  1. (a) Prepare the memorandum joint venture account. [4]
  2. (b) Calculate the amount due to or from each venturer, and explain how the venture will be settled. [3]
Show answer
  1. (a) Memorandum joint venture account $DrFurniture (Zahid) 50,000Polishing (Amna) 6,000Showroom rent (Amna) 4,500Advertising (Basit) 3,500Share of profit – Zahid 7,200Share of profit – Amna 7,200Share of profit – Basit 3,600 82,000CrSales (Amna) 46,000Sales (Basit) 34,000Unsold furniture taken over (Zahid) 2,000 82,000
    B1 costs 64,000; B1 sales and takeover 82,000; B1 profit 18,000; B1 shares 7,200 / 7,200 / 3,600.
  2. (b) Zahid $ Amna $ Basit $Costs paid 50,000 10,500 3,500Share of profit 7,200 7,200 3,600Less sales / goods taken (2,000) (46,000) (34,000)Balance 55,200 (28,300) (26,900)Amna pays Zahid $28,300 and Basit pays Zahid $26,900.
    B1 Zahid due 55,200; B1 Amna owes 28,300 and Basit owes 26,900; B1 settlement stated (both pay Zahid).
Q28Joint ventures · Challenge · Paper 3 style · 8 marks

Farhan and Ghazal ran wedding catering for one season in Lahore as a joint venture, sharing profits equally. Farhan bought catering equipment for the venture for $24,000 and received all catering fees of $96,000. Ghazal paid for food, $38,000, and staff wages, $15,000. At the end of the season Ghazal took over the equipment at an agreed value of $17,500.

  1. (a) Prepare the memorandum joint venture account. [4]
  2. (b) Prepare the 'Joint venture with Ghazal' account in Farhan's books, including the settlement. [3]
  3. (c) Explain how the agreed value of the equipment affects the venture profit. [1]
Show answer
  1. (a) Memorandum joint venture account $DrCatering equipment (Farhan) 24,000Food (Ghazal) 38,000Staff wages (Ghazal) 15,000Share of profit – Farhan 18,250Share of profit – Ghazal 18,250 113,500CrCatering fees (Farhan) 96,000Equipment taken over (Ghazal) 17,500 113,500
    B1 costs; B1 fees and equipment taken over credited; B1 profit 36,500; B1 shares 18,250 each.
  2. (b) Joint venture with Ghazal (Farhan's books) $DrCatering equipment (Farhan) 24,000Share of profit 18,250Bank – paid to Ghazal 53,750 96,000CrCatering fees (Farhan) 96,000 96,000
    B1 equipment and share of profit debited; B1 fees credited; B1 cash paid to Ghazal 53,750.
  3. (c) The $6,500 difference between cost and takeover value is in effect depreciation, a cost of the venture; a higher agreed value would raise the profit by the same amount.
    B1.
Q29Joint ventures · Challenge · Paper 3 style · 7 marks

Hamza and Irum entered a joint venture to trade in surgical instruments from Sialkot, sharing the profit after commissions equally. Irum arranged and paid for purchases of $50,000 and receives 4% commission on purchases. Hamza paid shipping and insurance of $3,000, sold all the instruments for $72,000 and receives 6% commission on sales.

  1. (a) Calculate the commission due to each venturer. [2]
  2. (b) Calculate the profit to be shared and each venturer's share. [2]
  3. (c) Calculate each venturer's total return from the venture. [1]
  4. (d) Calculate the settlement payment and state who pays whom. [2]
Show answer
  1. (a) Irum $2,000; Hamza $4,320.
    4% × 50,000 = 2,000 (B1); 6% × 72,000 = 4,320 (B1).
  2. (b) Profit $12,680; $6,340 each.
    72,000 − 50,000 − 3,000 − 6,320 = 12,680 (M1 A1 with 6,340 each).
  3. (c) Irum $8,340; Hamza $10,660.
    Commission + share (B1).
  4. (d) Hamza pays Irum $58,340.
    Irum due 50,000 + 2,000 + 6,340 = 58,340 (M1); Hamza holds the sales proceeds and pays her (A1).
Q30Joint ventures · Challenge · Paper 3 style · 8 marks

Latif, a football maker in Sialkot, and Mason, a sports retailer in Manchester, agreed a joint venture for one shipment of match footballs. Profits after commission are shared Latif 3, Mason 2.Latif supplied footballs from his factory at a cost of $38,000 and paid freight of $5,200.Mason paid import duty of $3,800 and warehouse charges of $1,600. He sold two-thirds of the footballs for $54,000, on which he receives a commission of 5%. He took over the remaining footballs at an agreed value of $18,500.

  1. (a) Prepare the memorandum joint venture account. [4]
  2. (b) Prepare the 'Joint venture with Latif' account in Mason's books, including the settlement. [3]
  3. (c) Suggest one reason why Latif receives the larger share of profit. [1]
Show answer
  1. (a) Memorandum joint venture account $DrFootballs from own factory (Latif) 38,000Freight (Latif) 5,200Import duty (Mason) 3,800Warehouse charges (Mason) 1,600Commission – Mason (5% × 54,000) 2,700Share of profit – Latif 12,720Share of profit – Mason 8,480 72,500CrSales (Mason) 54,000Footballs taken over (Mason) 18,500 72,500
    B1 costs incl. commission 2,700; B1 sales and takeover credited; B1 profit 21,200; B1 shares 12,720 / 8,480.
  2. (b) Joint venture with Latif (Mason's books) $DrImport duty (Mason) 3,800Warehouse charges (Mason) 1,600Commission – Mason (5% × 54,000) 2,700Share of profit 8,480Bank – paid to Latif 55,920 72,500CrSales (Mason) 54,000Footballs taken over (Mason) 18,500 72,500
    B1 costs, commission and share of profit debited; B1 sales and footballs taken over credited; B1 cash paid to Latif 55,920.
  3. (c) He provided most of the finance/goods ($43,200 of costs) and so bore more risk.
    B1.

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