First, let’s outline the key information given:
Cost of goods purchased by A = ₹2,00,000
Percentage of goods sold by B = 95%
Sale price of 95% goods = ₹2,50,000
Commission to A = 1% on purchases
Commission to B = 5% on sales
A drew a bill on B = 80% of original cost of goods = 80% of ₹2,00,000 = ₹1,60,000
A got the bill discounted for = ₹1,50,000 (so the discount = ₹10,000)
Profit-sharing ratio between A and B = 3 : 2
The usual way to find the joint venture profit is to prepare a short “Joint Venture Account,” taking into account:
Total sale proceeds
Value of unsold stock (if any)
Cost of goods
Commissions
Any joint expense (such as discount on the bill, if borne by the venture)
Step 1: Determine closing stock (unsold 5%)
Since 95% of the goods are sold, 5% remains unsold.
Total cost of goods = ₹2,00,000
Cost of 5% (unsold) = 5% of ₹2,00,000 = ₹10,000
This unsold stock is typically valued at cost (unless stated otherwise).
Step 2: Calculate total “inflow” to the Joint Venture
Sales (95%) = ₹2,50,000
Value of unsold stock (5%) = ₹10,000
Total Inflow
=
Sales
+
Closing Stock
=
2
,
50
,
000
+
10
,
000
=
2
,
60
,
000
Total Inflow=Sales+Closing Stock=2,50,000+10,000=2,60,000
Step 3: Calculate total “outflow” (expenses) of the Joint Venture
Cost of goods = ₹2,00,000
A’s commission = 1% of purchases
1
%
×
2
,
00
,
000
=
2
,
000
1%×2,00,000=2,000
B’s commission = 5% of sales
5
%
×
2
,
50
,
000
=
12
,
500
5%×2,50,000=12,500
Discount on the bill = ₹1,60,000 (face value) – ₹1,50,000 (received) = ₹10,000
Since A drew the bill “for the joint venture” and got it discounted to raise money for the venture, the discount (₹10,000) is treated as a JV expense (unless the problem explicitly says it is A’s personal expense).
Hence,
Total Outflow
=
Cost of goods
+
A’s commission
+
B’s commission
+
Bill discount
Total Outflow=Cost of goods+A’s commission+B’s commission+Bill discount
=
2
,
00
,
000
+
2
,
000
+
12
,
500
+
10
,
000
=
2
,
24
,
500
=2,00,000+2,000+12,500+10,000=2,24,500
Step 4: Compute the total Joint Venture profit
JV Profit
=
Total Inflow
−
Total Outflow
=
2
,
60
,
000
−
2
,
24
,
500
=
35
,
500
JV Profit=Total Inflow−Total Outflow=2,60,000−2,24,500=35,500
Step 5: Apportion profit between A and B
Profit-sharing ratio = 3 : 2
Total ratio parts = 3 + 2 = 5
A’s share =
3
5
×
35
,
500
=
21
,
300
5
3
×35,500=21,300
B’s share =
2
5
×
35
,
500
=
14
,
200
5
2
×35,500=14,200
Final Answer
A’s share of profit
=
₹
21
,
300
A’s share of profit=₹21,300