Human beings can do a lot of things alone but for some tasks, we require support from others and business is no exception as while doing business you cannot do all projects or tasks yourself and that is where joint venture, as well as consignment, comes handy. Joint venture and consignment helps individuals and companies to complete the task easily and successfully but if you are one of those people who thinks that both are same then you are wrong as there are many differences between the two, let’s look at some of the differences between the joint venture and consignment –
Joint Venture and Consignment Difference
Meaning
Joint venture refers to that venture in which two companies or individuals come together so as to complete a project or task in agreed profit sharing ratio and this venture comes to an end once the task or project is finished while consignment refers to arrangement between two parties where one party who is the owner of the goods authorizes the other party to sell goods and that other party, in turn, receives commission for the amount of sales generated.
Parties
In case of joint venture there are two parties who are also called co-ventures, in simple words they are similar to partners only thing is that this partnership is of temporary nature while in case of consignment there are two parties one is consignor of the goods who is also owner of the good and other is called consignee of the goods who sells the goods consigned by the consignor. In simple words, the relationship between consignor and consignee is that of principal and agent and not partners.
Reward
In case of a joint venture, both parties agree to share profits and losses in the agreed ratio between them while as far as the consignment is concerned consignee gets fixed commission from consignor on the amount of goods sold by the consignee during a given period.
Time Factor
A joint venture is for a short period of time because the moment task or project for which venture was started completes the joint venture comes to end while as far as the consignment is concerned it does not end in a short period of time rather consignor and consignee can keep their relationship going as long as they want.
Ownership and Decision Making
In case of joint venture both parties contribute capital and can take important decision with regard to venture independently but as far as consignment is concerned it is the consignor who contributes capital and he or she is the owner of the goods while consignor is only an agent of the consignee and that is the reason why consignee cannot take any decision independently with respect to goods consigned and he or she has to ask consignor before taking any decision with respect to the goods consigned.
Scope of Work
Joint venture can be for any work or project or in simple terms the scope of work as far as the joint venture is concerned is wide but when it comes to consignment its scope is limited as the consignment is for sale of goods only.
As one can see from the above that joint venture and consignment are completely different from each other and that is the reason why accounting treatment, as well as legal requirements of both of them, differs from each other.