Monday, September 12, 2011

Distinction between Joint Products and By-products

What is the difference between Joint Products and By-products in accounting?

The accounting classification of products created from the same manufacturing process into joint products and by-products depends upon the relative importance to the overall production system of good and the products respective value.

For example, if the end products are almost equal in importance and their value is also more or less the same, they may be identified as joint products.

However, if one end-product has greater importance and higher value and the other products are of less importance and rather of low value, some may be classified by accountants as by-products of the manufacturing process. If value of some end- products is so insignificant,  they may be classified by an accountant as waste or scrap.

Another distinguishing factor is that joint products are produced simultaneously, however, in contract,  by-products are produced incidentally during the production of the main product. This could be determined by looking at the overall goal of the manufacturing process and then use to determine if something is a joint product or a by-product of the process.

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