Two merchants, Audu and Bisi, agree to combine their capital and expertise to purchase and sell a seasonal batch of agricultural produce over a three-month period, after which the business will terminate and profits will be shared. Which of the following key features distinguishes this business arrangement as a joint venture rather than an ordinary partnership?
- It is formed for a temporary duration to execute a specific transaction and automatically terminates upon completion.Cevap
- BIt is a permanent business entity operating under a registered firm name with perpetual succession.
- CThe relationship between the parties is strictly based on a principal-agent contract where one party earns a commission.
- DIt requires continuous adherence to the going-concern accounting convention for long-term operations.
Cevap
It is formed for a temporary duration to execute a specific transaction and automatically terminates upon completion.
A joint venture is a temporary partnership formed between two or more parties (co-venturers) to carry out a specific business transaction or project. Once the objective is accomplished, the venture automatically comes to an end, distinguishing it from an ordinary partnership which is established with an expectation of continuous, long-term business operations (going concern).
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Anahtar Kavram
Temporary duration and specific venture scope of Joint Ventures