Enforcement Officer / Accounts Officer (EO/AO) 2017 recruitment test. Transcribed from the Commission's own booklet (series A, GRS-A-TNS); answer as per the official UPSC final answer key. This question is in Part B. Answer last reviewed 24 August 2026.

When goods are purchased for the Joint Venture, the amount is debited to

(a)Purchase Account
(b)Joint Venture Account
(c)Venturer’s Capital Account
(d)Profit and Loss Account

Answer

Why

Correct — B, (b) Joint Venture Account. A joint venture is a temporary partnership formed by two or more persons for one specific undertaking, which ends when the undertaking is finished. The whole purpose of the book-keeping is to isolate that undertaking from each participant's own trade, so that the venture's profit or loss can be found and divided in the agreed ratio. The Joint Venture Account is the nominal account that does the isolating: every cost of the venture goes on its debit side and every receipt on its credit side, and the balance is the venture's profit or loss.

Goods bought for the venture are a cost of the venture, so the Joint Venture Account is debited. What is credited depends on who paid and on the method of recording, and that is worth holding separately in the mind. Where the venturers keep a separate set of books with a Joint Bank Account, the entry is Joint Venture Account debit, Joint Bank Account credit. Where one of the co-venturers pays for the goods out of his own pocket, or supplies goods out of his own stock, it is Joint Venture Account debit and that co-venturer's account credit. Where each venturer keeps a record only of his own transactions and a memorandum joint venture account is used to work out the profit, the entry in his own ledger is Joint Venture with the other party account debit, Bank or Cash credit. The debit is the same in every case; only the credit moves.

The symmetry with the preceding question in this paper is deliberate and is the thing to carry away. On a consignment, an abnormal loss is credited to the Consignment Account, because a loss must be lifted out of an account that is measuring trading results. On a joint venture, a purchase is debited to the Joint Venture Account, because a cost must be put into the account that is measuring the venture's results. Both accounts are nominal accounts opened for one purpose and closed when that purpose is over; what decides the side is simply whether the item is a cost of the venture or something that must be taken out of it.

Why the others are wrong

(a)Purchase Account — A Purchase Account records goods bought for the concern's own trade, and it is closed into the Trading Account at the year end. Routing joint venture purchases through it would sweep the venture's goods into the venturer's own trading results, and the profit on the venture — which has to be divided with the other co-venturers in an agreed ratio — could no longer be identified. The separation is the point of the exercise. Where a co-venturer transfers goods out of his own existing stock into the venture, the entry works the other way round: the Joint Venture Account is debited and his own Purchases or Goods Sent to Joint Venture account is credited, so that the goods leave his trade and enter the venture.
(c)Venturer’s Capital Account — A co-venturer's account is a personal account recording what that person has put into the venture and what he has taken out of it. It is credited when he brings in cash, supplies goods or pays an expense, and debited when he draws money, takes over unsold stock or receives his final settlement. So on this transaction that account may well be involved — but on the credit side, as the source of the money, not the debit side. The option states the correct account with the wrong direction, which is exactly the confusion the pairing of this item with the preceding one is designed to produce. It is also worth noting that a joint venture has no capital in the partnership sense; the co-venturers' accounts record contributions and the final settlement, and the venture is wound up rather than continued.
(d)Profit and Loss Account — A venturer's own Profit and Loss Account receives one figure only from the venture: his agreed share of its profit or loss, transferred when the venture is complete and the Joint Venture Account is closed. Individual costs never touch it. Debiting a purchase there would charge one participant with the whole cost of goods that belong to the venture jointly, and would leave nothing in the Joint Venture Account against which to set the sale proceeds.

Concept

A joint venture differs from a partnership in that it is formed for a single, defined undertaking — a consignment of goods to a distant market, an underwriting, a construction contract, the purchase and resale of a property — and dissolves when that undertaking is complete. There is no firm name, no continuing business and no capital account of the partnership kind. Three recording methods are used. Under the separate set of books method the venturers open a Joint Bank Account, a Joint Venture Account and a personal account for each co-venturer; contributions are paid into the joint bank, all costs are debited and all receipts credited to the Joint Venture Account, and the balance is divided among the co-venturers' accounts before the joint bank is emptied in final settlement. Under the second method one venturer records everything in his own books. Under the memorandum joint venture account method each venturer records only his own transactions in an account headed Joint Venture with the other party, and a memorandum joint venture account — outside the double entry of either ledger — collects both sides' figures to arrive at the venture's profit, each party then bringing in only his own share. Unsold stock taken over by a venturer is credited to the Joint Venture Account and debited to him at the agreed value.

Joint venture and consignment are set together in accountancy papers because they share a vocabulary and differ in their entries, and this paper sets them in consecutive questions with opposite direction words that are given no typographical emphasis at all. The examiner is testing reading as much as accounting. The practical defence is to learn each topic as a complete journal, from the first contribution to the final settlement, so that any single line can be produced on demand along with its opposite side. A candidate who can write out the six or seven entries of a joint venture under the separate books method will answer any one-line question the topic can generate.

Key facts

Goods purchased for a joint venture: Joint Venture Account debit; the credit goes to Joint Bank Account, to the co-venturer who paid, or to Bank in his own books.
The Joint Venture Account is a nominal account whose balance is the profit or loss on the venture, divided in the agreed ratio.
A joint venture is a temporary partnership for one specific undertaking and ends when that undertaking is complete.
Under the separate set of books method the accounts opened are the Joint Venture Account, the Joint Bank Account and a personal account for each co-venturer.
Under the memorandum joint venture account method, each venturer records only his own transactions and the memorandum account sits outside the double entry.
A co-venturer's account is credited when he contributes cash, goods or expenses, and debited when he draws or takes over unsold stock.
Unsold stock taken over by a venturer is credited to the Joint Venture Account at the agreed value and debited to him.
Only a venturer's share of the venture profit or loss reaches his own Profit and Loss Account.

The debit is the same under every method; only the credit moves

(b) Joint Venture Account→The nominal account that isolates the undertaking from each participant's own trade: every cost of the venture on its debit side, every receipt on its credit side, and the balance is the venture's profit or loss, divided in the agreed ratio. Goods bought for the venture are a cost of the venture, so this account is debited.

What is credited depends on who paid→Separate set of books with a Joint Bank Account — Joint Bank Account credited. One co-venturer paying out of his own pocket or supplying out of his own stock — that co-venturer's account credited. Memorandum method, each keeping only his own record — Bank or Cash credited in his own ledger.

(a) Purchase Account→Records goods bought for the concern's own trade and is closed into the Trading Account. Routing venture purchases through it would sweep the venture's goods into the venturer's own trading results, and the profit that has to be divided could no longer be identified. Where a co-venturer transfers goods out of his own stock the entry runs the other way: Joint Venture debited, his own Purchases or Goods Sent to Joint Venture credited.

(c) Venturer's Capital Account→The right account with the wrong direction. A co-venturer's account is personal: credited when he brings in cash, supplies goods or pays an expense, and debited when he draws money, takes over unsold stock or receives his final settlement. On this transaction it may well be involved — on the credit side, as the source of the money.

(d) Profit and Loss Account→A venturer's own Profit and Loss Account receives one figure only from the venture: his agreed share of its profit or loss, transferred when the venture is complete. Debiting a purchase there would charge one participant with the whole cost of goods that belong to the venture jointly, and would leave nothing in the Joint Venture Account against which to set the sale proceeds.

The symmetry with the consignment item before it→On a consignment an abnormal loss is credited to the Consignment Account, because a loss must be lifted out of an account measuring trading results. On a joint venture a purchase is debited to the Joint Venture Account, because a cost must be put into the account measuring the venture's results. What decides the side is simply whether the item is a cost of the venture or something to be taken out of it.

Study next

The three methods of recording a joint venture, and when each is usedThe memorandum joint venture account and why it lies outside the double entryJoint venture compared with partnership and with consignment, on continuity, capital, ownership and dissolutionTreatment of unsold stock, of a venturer's own goods contributed, and of a commission or salary allowed to a working venturerFinal settlement between co-venturers and the closing of the Joint Bank Account

Common traps

Naming the right account with the wrong side. A co-venturer's account is credited on this transaction, not debited.
Passing venture purchases through the venturer's own Purchase Account, which destroys the separation the venture accounts exist to create.
Treating a joint venture as a partnership with capital accounts. There is no capital; there are contributions and a settlement.
Carrying an individual cost of the venture into a venturer's own Profit and Loss Account instead of only his share of the result.
Reading the direction word too quickly when consignment and joint venture items are printed side by side, as they are here.

EPFO accountancy sets joint venture as a single-entry identification item — which account is debited or credited, or which method a described situation is using — rather than as a full problem. Papers also like the comparison question: how a joint venture differs from a partnership, or from a consignment, on continuity, on ownership of the goods and on the sharing of results. Both shapes are answered from the same preparation, which is the complete journal of a venture under one method plus the list of differences from the two neighbouring topics.

Related PYQs

EPFO_EOAO_2017_Q64Open & attempt →

The abnormal loss on consignment is credited to

(a) Profit and Loss Account
(b) Consignee’s Account
(c) Consignment Account
(d) Income and Expenditure Account

Answer(c) Consignment Account

The consignment item printed immediately before this one; the two are a matched pair, one asking what is credited and the other what is debited, with neither direction word emphasised.

Practice

practice — not a real PYQ
Under the separate set of books method, when a co-venturer contributes cash to the venture the entry is
- (a)Joint Venture Account debit, Co-venturer's Account credit
- (b)Joint Bank Account debit, Co-venturer's Account credit
- (c)Co-venturer's Account debit, Joint Bank Account credit
- (d)Joint Venture Account debit, Joint Bank Account credit
Answer(b) Joint Bank Account debit, Co-venturer's Account credit
practice — not a real PYQ
The Memorandum Joint Venture Account is
- (a)a ledger account in the books of every co-venturer
- (b)an account prepared outside the double-entry system merely to ascertain the profit or loss of the venture
- (c)another name for the Joint Bank Account
- (d)the account in which unsold stock is finally carried forward
Answer(b) an account prepared outside the double-entry system merely to ascertain the profit or loss of the venture

Why