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JV or partnership deed

rakesh (student) (457 Points)

17 February 2022

should an organisation dealing in construction business proposing to carry on new project having other partners. Should we go for Joint venture agreement or partnership deed for new project and how accounting is done for new project in our organization books i.e., as a new project or should maintain new project accounts separately

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5 Replies

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 18 February 2022

Construction contract standard must be followed firat during revenue recognition. Then partnership or jv method of profit sharing techniques must be used. AS standards must be there for jv. If you can't find it then let me know. Because jv, associates treatments are different in business combinations. Please folow that.

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yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 18 February 2022

I believe, if the expected profit is 500 you calculate stage of completion besed on your profit, say, 250. This is for joint ventures since partnerships have the statements. Jv uses equity method of consolidation as an investment. It's bettwr to follow the standard

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 18 February 2022

Wait for few more days, I'm publishing consolidation of subsidiaries, associates, JV, J operations in a single model with all statements

Mohanraj J (1178 Points)
Replied 21 February 2022

Hi Friends,

I need your answers with explanation for below questions ;

Q1;
ABC LTD has recently sold two hydraulic components to long-known local customer. The hydraulic components were sold for an amount of INR 1.200.000. Contribution margin on sale were 40%. Unfortunately, the included metal hoses were filled with rust, and the customer therefore could not accept the components. It was agreed to credit the sale. Please book the credit invoice.

Q2;
ABC LTD ordered goods that amounts to INR 50.000.000 from our owner, ABC LTD A/S in Germany. ABC LTD A/S has made three shipments each covering one third of the total amount. Only two of three shipments have been received. The third shipment is currently at sea. Expected arrival is May 5, 2022. The purchase will be paid upon receipt of all goods. Please explain how to present in the monthly report of April 2022.

Q3;
ABC LTD has an old overdue receivable of INR 1.000.000 from a customer, for which a provision for bad debts of INR 1.000.000 have been made some months ago. The customer has now been declared bankrupt, and half a year later ABC LTD receives INR 400.000 from the estate. Please explain how to present this in the monthly report.

Q4;
Every month inventory must be calculated and presented in the monthly report. Please explain all relevant steps in calculating the correct inventory value to be presented in the monthly report.

Kindly help me Friends.

Thanks in advance

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 24 February 2022

If it is JV, like you said, one has to maintain project account in both the companies. Because only profit of JV is accounted for under equity method. It is easier if it is partnership as the statements clearly show all project Spenser at one place and profits can be apportioned. I will be glad if others give their opinion,