942 Abnormal losses may arise owing to causes such as, theft, fire, and the like. For calculating the profit of the joint venture abnormal losses are ignored. It is ignored on the ground that joint venture account itself represents Trading as well as Profit and Loss Account. However, any insurance claim received is credited to the Joint Venture Account Normal losses are inevitable or unavoidable. These may arise due to natural causes like breaking in bulk, evaporation, leakage, drying and the like. No effort can prevent these losses. When there is no stock remaining unsold, there will be no treatment for normal loss. But where there is some stock remaining unsold, the value of stock on joint venture will be ascertained as follows: Value of goods purchased * Unsold goods (in units) Net quantity after normal loss) in units illustration 11 X and Y entered into a joint venture agreement to share the profits and losses in the ratio of 2:1. X supplied goods worth 60,000 to Y incurring expenses amounting to + 2,000 for freight and insurance. During transit goods costing 5,000 were damaged and a sum of 3,000 was recovered from the insurance company. Y reported that 90% of the remaining goods were sold at a profit of 30% on their original cost. Towards the end of the venture a fire occurred and as a result the balance stock lying unsold with y was damaged. The goods were not insured and Y agreed to compensate X by paying in cash 80% of the aggregate of the original cost of such goods plus proportionate expenses incurred by X. Apart from the joint venture share of profits, Y was also entitled under the agreement to a commission of 5% of the net profits of joint venture after charging such commission. Selling expenses incurred by Y totalled = 1,000. Y had earlier remitted an advance of 10,000. Y duly paid the balance due to X by draft. You are required to prepare in the Books of X: (1) Joint Venture Account, and (2) Y Account