DIFFERENCE BETWEEN PARTNERSHIP AND JOINT VENTURE :
| Partnership | Joint Venture |
| (i) It is not limited to a specific venture. | (i) It is limited to a specific venture. |
| (ii) It is a continuing profit seeking enterprise. | (ii) It is a terminable profit-seeking venture. |
| (iii) It is carried on under firm’s name. | (iii) There is no common firm’s name in joint venture. |
| (iv) Persons carrying on partnership business are called partners. | (iv) Parties are called co-venturers. |
| (v) Profit or loss is ascertained on an annual basis. | (v) Profit or loss is ascertained only after the end of the specific venture. |
| (vi) Partnership firms are governed by Indian Partnership Act, 1932. | (vi) There is no specific act for joint ventures. |
| (vii) The doctrine of implied authority is applicable to partners. |
(vii) The doctrine of implied authority is not applicable to co-venturers. |
Loan Account: If a partner advances to the firm a sum over and above the amount of capital required to be contributed by him under the partnership contract, the amount is credited to a loan account opened in his name. In the event of dissolution of partnership, a partner is entitled to receive the amount of loan advanced by him in priority to repayment of capital to the partners. However, if capital is insufficient to meet losses on dissolution, the amount of the loan can be used to meet losses.
Capital Accounts: There are only a few points of difference between the accounts of a partnership firm and those of a sole proprietorship concern. One difference is that in a sole proprietorship concern there is only one capital account, whereas, in the firm’s ledger there are as many capital accounts as there are partners in the firm (unless some partner is not required to contribute capital at all). Amount contributed by a partner whether in cash or in the form of some other asset or assets is credited to his capital account.
Types of Capital Account: The capital account of a partner may be either a Fixed Capital Account or a Fluctuating Capital Account.
(i) Fixed Capital Account : Under Fixed Capital Account method, there will be two accounts for each partner, i.e.
(i) Partner’s Capital Account – recording only capital of the partner and
(ii) Partner’s Current Account – recording the transactions relating to drawings, interest on capital, commission, salary, share of profit or loss, etc of the partner. Under this method, capital accounts are not touched at all and debits and credits for interest on capital, interest on drawings, profits, losses, drawings, etc., are made in separate accounts called current accounts or drawing accounts. Capital account is credited only when fresh (or further) capital is introduced or debited when capital is withdrawn.
(i) Fixed Capital Account : Under Fixed Capital Account method, there will be two accounts for each partner,
i.e.
(i) Partner’s Capital Account – recording only capital of the partner and
(ii) Partner’s Current Account – recording the transactions relating to drawings, interest on capital, commission, salary, share of profit or loss, etc of the partner. Under this method, capital accounts are not touched at all and debits and credits for interest on capital, interest on drawings, profits, losses, drawings, etc., are made in separate accounts called current accounts or drawing accounts. Capital account is credited only when fresh (or further) capital is introduced or debited when capital is withdrawn.
If there is no addition or withdrawal of capital during the year, the capital account does not change and it remains fixed through-out the year. Sometimes, there may be current accounts as well as drawings accounts. Drawing accounts are used to record only the withdrawals made by partner; and transferred to the respective current accounts at the end of the year. Such drawings accounts are maintained when drawings are irregular and extensive to facilitate calculation of interest on drawings.
(ii) Fluctuating Capital Account : Just as in a sole proprietorship concern, in partnership also, profits or losses, drawings, interest on capital, interest on drawings, salary (to partners), commission, additional capital introduced, etc., may all be recorded in the capital accounts. Such capital accounts are called Fluctuating Capital Accounts because the balances of these accounts continue to fluctuate due to various debits and credits. Under this method, there is no need to maintain respective current accounts because all transactions passing through current accounts are passed through capital accounts.