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Sir,
I have been solving some questions of JOINT PRODUCTS and BY-PRODUCTS.In the first question I understood all the data that was given except the statement “by-product sales revenue is credited to the process account” , so in this question as you said I substracted the by-product sales value from the total production cost and there was the answer.
Well, in the second question everything was same(apart from the values($)) except the statement and that was “by-product sales revenue is credited to the sales account” and here Sir they did not substracted the by-product sales values from the total production cost.
Sir kindly help me with this, how and what happens when they credit either accounts, what does it mean, because I always get confused in these kind of questions about different accounts.
Usually it is what was in the first question.
In the second however the revenue is treated simply as extra sales.
So the only difference it makes is that you do not subtract it from the joint costs. Everything else continues as before.
You know from the free lecture how to split the joint costs.
Any revenue from the byproduct is usually subtracted from the joint costs. However, if they tell you that ‘by-product revenue is credited to sales account’, then you do not subtract the byproduct from the joint costs. Otherwise everything is exactly the same.
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