Question: Duke and Lord entered into a joint venture to buy and sell second-hand cars. Profits and losses were to be shared: Duke two-thirds and Lord one-third. On 16th August, 1962, Duke purchased two cars for £320 and £480 respectively. He incurred expenditure of £120 on repairs and on 1st September, sold one of the cars for £400 and on 10th September the other car for £620. On 12th September, 1962, he purchased a further car for £600 which was sold on 20th September for £800, which amount was paid to Lord who paid it into his own bank account.
Re-printed by courtesy of the Society of Incorporated Accountants (S.A.A.).
Re-printed by courtesy of the Institute of Chartered Accountants (C.A.).
On 12th August, 1962, Lord purchased a car for £400 which he sold for £500 on 15th August, having incurred expenses of £40 on it. This car was returned by the customer on 20th August; he was allowed £480 for it. As this car was still unsold on 30th September, 1962, it was agreed it should be taken over by Duke at a valuation of £450. On 30th September, 1962, the sum required in full settlement as between Duke and Lord was paid by the party accountable. You are required to prepare:
(a) The Joint Venture Account as it would appear in the books of Duke recording his transactions with the joint venture, and
(b) A Memorandum Account for the Joint Venture, showing the net profit.