By product production - apk upload

By  product production

By-products In the production process, by-products are got from many of the materials used in the work of production. For example, oil cakes from oil seeds, cotton seeds in the production of cotton. These oil cakes or cotton seeds are by products. These by products are obtained naturally form main product like oil seeds or cotton. The accounting of by products is done as follows

(1) When by-product is of less value- and its price in comparison to the main product is very low then the amount received through the sale of the by-product is credited to the process account from which the by-product has been obtained. If the amount realised from the sale of the by-product is subtracted from the total expenses incurred in that particular process, then the cost of the main product will be obtained.

(2) When by-product is of more or considerable value then it is known as an important by-product. In the case of an important by-product, special processing of the by-prod cut is generally done. A separate account is generally prepared for a by-product of considerable value. The price of the by-product is found out and written in the credit side of the main process in which the byproduct of considerable value is produced. Later when a separate account for the by-products is prepared then this price is taken as cost price and is entered on the debit side of the by-product Account.

After which the expenses that are incurred in the processing of the by-product are also included in the cost of the by product. Here the problem of division of joint expenses may arise and hence it must be taken kept in mind.

(3) When the by-product is used by the producer
himself- that is, the product of one process is used as raw material for the next process. Sometimes, the amount for the by-product is transferred to the By-product Stock Account. When the producer needs the by-prod cut for production then it is transferred from the By-product Stock Account to the Process Account, of the process in which the by-product is being used.

Main Product and By-product Accounts

After the processing of a main product, many by-
products of considerable value is obtained from them. After obtaining the by product from the main product, some additional expenses are incurred on the main product and it is completed. In the same manner, the various by-products obtained from the main product are also completed by incurring extra expenses on them.

While preparing Main Product Account, the joint
expenses of the main product and subsequent expenses of the main product, which are incurred to complete it after it has been separated from the by-product, is written on the debit side. On the credit side is written the cost of the various by-products. In this way, the balance amount is the cost of the main product after it has been completed.

The cost amount of the various by-products, ob-
tained from the main product account is written in the debit side of every related by-product account, and those expenses that are incurred to complete it after it has been separated from the main product, is added to it. In this way, the total of the debit side of the byproduct account will show the total product cost, which is written on the credit side of the by-product account and the total of both sides will be balanced.

Inclusion of Selling and Distribution Expenses in Joint Expenses

Sometimes, when apportionment is done, the total of joint expenses is more than the total joint expenses. The difference in the amount is generally taken to mean that thenselling and distribution expense is included in the given expenses. Sometimes, a hint is given in the question itself that these expenses are included, but if no hint is given then also the difference in the amount should be taken as sellingnand distribution expenses and its apportionment must be done in ratio to the selling price.

Joint product

When the products that are obtained during a process are of equal importance and it is difficult to decide which one is the main product and which one is the secondary product, then such products are known as joint products.For example, while refining crude oil, gasoline, lubricants, tar, fuel oil, kerosene oil etc. are obtained which are of equal importance. These are all examples of joint products.

When during a production, joint product is obtained then it becomes necessary to find out the cost of these joint products separately. To determine what part of the total cost is part of the cost of the joint product is very difficult. What part of the total cost should be divided amongst which joint product and in what quantity.

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