Man is the product of thoughts. Everyday, he thinks new and new business ideas. Just open the YouTube and write just "How to Start" and you get lots of innovative business ideas. All need capital. Both share market and loan market is not suitable for such innovative ideas to convert in business. At that time, you or anybody can get the capital from his friends, relatives and his social circle and promise to give the share of his profit on the basis of his invested venture capital. So, if you have received the capital as venture capital, you must pass the journal entries of venture capital. If you want to carry business at success level, it is must.
When Joint Venture Business Gets Venture Capital Fund
Bank Account Debit
Partners' Venture Capital Account Credit
For Example
You have 4 uncles, 4 brothers and 2 sisters and 10 friends. You get Rs. 10,000 from each. All fund will keep in venture capital account because it is your liability, so, it will credit and your bank account will debit.
Bank Account Debit 200,000
Venture Capital Account Credit 2,00,000
4 Uncle's Share 40,000
4 Brothers' Share 40000
2 Sisters' Share 20000
10 Friends' Share 100,000
When Venture Capital is Invested in Different Business and Assets
Land and Building Account Debit
Machines Account Debit
Vehicles Account Debit
Material Account Debit
Equity Shares Account Debit
Mutual Fund Account Debit
Fixed Deposit Account Debit
Investment in Other Business Account Debit
Investment in Human Resource Account ( Separate Bank Account for Paying other Day to Day HR. Expenses ) Debit
Venture Working Capital Account ( Separate Bank Account for Paying other Day to Day Expenses ) Debit
Bank Account Credit
Logic :
All invested money has increased our asset. So, these account will debit. Bank balance will decrease. It is also our asset. So, we have to credit it.
When Day to Day Expenses are Paid Out of Venture Working Capital
Internet Bill Account Debit
Electricity Bill Account Debit
Mobile Bill Account Debit
Refreshment Bill Account Debit
Repair Bill Account Debit
Other Expenses Account Debit
Venture Working Capital Account ( Separate Bank Account ) Credit
Logic
Every month, we have to pass this entry. Because we need to pay all these expenses for operation of our business. All expenses will decrease the capital. Capital is our liability. We have authority to use the capital for paying expenses. Decrease the liabilities will debit. So, expenses will debit.
When We Get Income from Invested Venture Capital
Bank Account Debit
Sale Revenue from Business Account Credit
Return from Equity and Mutual Funds Credit
Other Incomes Account Credit
Logic
All incomes will increase the value of our venture capital. So, we will credit. Because if capital will increase, our total liability will increase. Increase in liability must credit .
When We get Net Profit on Invested Venture Capital
We will make the list of our total expenses and incomes and after comparing, we will get Net Profit
Profit and Loss Account Debit
Net Profit Transfer to Venture Capital Account Credit
If We give the Share of Net Profit to the Partner or Co-venturers
Venture Capital Account Debit
Bank Account Credit
Outgoing Partner's Venture Capital Account Debit
Bank Account Credit
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