Important Terms Used In Joint Product and By-Products
Before we continue to discuss the techniques of accounting in case of joint products and by-products, it will be essential to understand certain terms clearly. These terms are described below:
This is an end up to which input factors are generally employed for production of multiple products that can be either joint products or by-products. After this point, the joint products or by-products increase individual identity. Other words, up to a specific stage, the manufacturing process is similar for all the products and a stage come after that the individual processing becomes dissimilar and distinct. For instance, in a dairy, various products such as milk, ghee, butter, milk powder, ice-cream etc. might be produced. The general material is milk. The pasteurization of milk is a general process for all the products and after this process; every product has to be processed separately. This point is of particular importance in the accounting of joint product and by-products because the joint cost acquired before this point is to be apportioned suitably in the joint products.
Joint cost is the pre separation cost of generally employed input factors for the production of multiple products. Other words, all costs acquired before or up to the split off point are known as joint costs or pre separation costs and the apportionment of these costs is the major objective of joint product accounting. Costs acquired after the split off point are post separation costs and can be simply identified along with the products.
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