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Purpose of jv & meaning of recurring jv with examples

Sivakumar (Articled Student) (199 Points)

25 March 2015

Pls anyone can explain the real purpose of journal voucher and also pls explain the meaning of recurring JV with examples.

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Jagannath (Internal Auditor) (36 Points)
Replied 25 March 2015

1) JV's are posted for adjustments.

For all the processes undertaken in an enterprise, there are respective transaction types such as purchase voucher, sales invoicing, debit memos etc. The general transactions are processed under respective transaction types. However sometimes, they may need adjustments. For example, a sales invoice has been prepared and sent on a month end but the vehicle has not moved out of the factory by the day end due to some technical issues. Hence the risk and reward attached with the goods have not been transfered yet to the buyer - this calls for adjustment to the sales value reported by us. So instead of reversing the sales invoice, you can pass a JV debiting the sales account and you can reverse the JV later when the vehicle leaves the factory.Another example where JV will be passed will be the reinstatement of the foreign transaction balances at the end of the reporting period and which will be subsequently reversed. Then there are some provision JV's which you pass with respect to the services incurred by you for which supplier has not issued invoice yet - this is done to comply with the matching concept of accounting. Similarly JV's are passed for lots of events involving adjustments.

2) Concept of recurring JV's

Recurring JVs in ERP is to simplify the work of accountants. In case an employee wants to create a same JV across a time period, these would be helpful. An example would be the insurance premium. Assume you have paid premium for the whole year in the month of Jan XX. Going by matching principle, you need to distribute the amount of insurance throughout the year. Hence at the time of payment, you will debit prepaid insurance ac for 11 months premium amount, debit insurance expense account for 1 month premium amount and credit bank account. On each month, you will debit the insurance expense account for 1 month and credit the prepaid insurance account. This JV - you can do it at one shot with the help of recurring JV by stating a specified account to be debited and credited with such an amount each month till Dec.

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