Cost and Management Accounting · Joint Products and By Products

Joint Products and By-Products: Meaning and Differences

Updated 4 October 2026 · Fact-checked

Joint products are two or more products of similar importance that come from the same process and raw material, and are separated at the split-off point. A by-product is a secondary output of low value. To answer, identify the split-off point, compare sales value, and decide how to treat each output.

Understand Joint Products and By-Products: Meaning and Differences

Some processes cannot make one product alone. Refining crude oil gives petrol, diesel and kerosene together. Milk processing gives butter and skimmed milk. You cannot choose to make only one of them. This is the base of the topic.

Joint products are two or more products, each with significant sales value, produced from the same process and the same raw material. All of them are main products of the business. Petrol and diesel from crude oil are examples.

By-products are outputs of relatively small value that come out of the same process as the main product. Molasses in sugar manufacture and sawdust in a timber mill are typical. The business does not run the process for them. They are a secondary result.

Joint costs are the costs of the common process up to the split-off point. The split-off point is the stage where the products become separately identifiable. Before this point you cannot say which cost belongs to which product. After it, costs of further processing are separate costs of each product and can be traced directly.

Co-products is a term used for products of equal importance produced together, often treated as the same thing as joint products. In some texts, co-products can also be made in separate runs from the same material, so their costs may be easier to separate. For exam answers, treat co-products as main products of similar standing and say so clearly. The key test is value: if the output has significant value, it is a joint product. If the value is small, it is a by-product.

Key rules to remember

Joint cost: Joint cost = All costs incurred up to the split-off point; Includes material, labour and overheads of the common process. Costs after split-off are not joint costs.
Separable (further processing) cost: Separable cost = Cost incurred after split-off for a specific product; Charge it directly to that product. Do not share it among other products.
Test for classification: Significant sales value → Joint product; Small sales value → By-product; The judgement is on relative value, not on the order of production or on quantity.
Cost to be shared among joint products: Joint cost to share = Total joint cost − Net realisable value of by-product (when by-product credit is allowed); This is one common treatment. The by-product treatment can differ by method and question wording.

How to solve Joint Products and By-Products: Meaning and Differences questions

Use this method for any theory or numerical question that asks you to identify, classify or distinguish these outputs.

1Read the process and list every output that emerges, with its quantity and sales value if given.
2Mark the split-off point: the stage where the outputs separate and can be identified.
3Classify each output. Significant value means joint product or co-product. Small value means by-product. Scrap or waste has very little value and is a separate category.
4Separate costs into joint costs (up to split-off) and separable costs (after split-off, product specific).
5Decide the treatment asked in the question: apportion joint costs among joint products, and deal with the by-product as the question or method requires.
6State the conclusion in a line, such as which outputs are joint products and what the joint cost is.
7In theory answers, give a definition, an example and at least the key differences in a point-wise form.

Quickest way: Value test and split-off line

When to use it: Use it for MCQs and for short written answers when time is tight.

Draw a line on the process diagram at the split-off point. Everything before it is joint cost.
Ask one question: does this output have significant sales value? If yes, it is a joint product. If low, it is a by-product.
In MCQs, eliminate options that say joint products have low value, or that by-products are the main aim of production.
Eliminate options that put further processing cost into joint cost.
In written answers, use three parts: definition, example, difference. Keep a two-column difference list of four to five points for full step marks.

Common mistakes in Joint Products and By-Products: Meaning and Differences

Treating all outputs of a process as joint products.
Students see several outputs and assume they are equal.
Fix: Check sales value. Low-value outputs are by-products. Only significant ones are joint products.
Including post split-off processing cost in joint cost.
The word 'joint' makes students pool every cost of the process.
Fix: Joint cost stops at the split-off point. Later costs belong to the specific product.
Saying that joint products can be costed separately before split-off.
Students confuse joint products with products made in separate runs.
Fix: Before split-off the products are not identifiable, so their costs can only be shared by a chosen basis.
Treating by-product and scrap as the same.
Both have low value and both are secondary.
Fix: A by-product has a recognisable market value and is a distinct product. Scrap is a residue of very low value. Mention this difference in theory answers.
Writing an example without linking it to the definition.
Students memorise examples without the test.
Fix: After the example, name the main product and the by-product and state why, in one line.

Worked examples

Example 1

A refinery processes crude oil in one common process. At the end of it, petrol, diesel and kerosene emerge, and each is sold at a good price. A small quantity of tar is also obtained, sold at a very low value. Identify the joint products and the by-product, and state what the split-off point means here.

Show the solution

List outputs: petrol, diesel, kerosene and tar.
Petrol, diesel and kerosene each have significant sales value and arise from the same process and raw material. So they are joint products.
Tar has a very low value compared with the others. So it is a by-product.
The split-off point is the stage at which these outputs become separately identifiable after the common process.
All costs up to that stage are joint costs. Costs of any later refining of one product are charged to that product only.

Answer: Joint products: petrol, diesel and kerosene. By-product: tar. The split-off point is where the outputs separate after the common process; costs up to it are joint costs.

Example 2

A company incurs a joint process cost of ₹5,00,000 up to the split-off point. It gets products A and B, both main products. After split-off, it spends ₹40,000 on further processing of A only. State the joint cost and the cost that must be charged to A directly.

Show the solution

Joint cost is the cost up to the split-off point. This equals ₹5,00,000.
The further processing cost of ₹40,000 is incurred after split-off and only for A.
So it is a separable cost and is not part of the joint cost.
The ₹5,00,000 is shared between A and B by a suitable basis. A then bears the ₹40,000 directly on top of its share.

Answer: Joint cost to be shared between A and B is ₹5,00,000. The ₹40,000 is charged directly to A only.

Exam tips

Theory questions often ask for the difference between joint products and by-products. Give at least four points: value, objective of production, importance, and costing treatment.
In numericals, mark the split-off point first. This prevents the wrong costs from entering the joint cost pool.
In MCQs, watch for the words 'significant value' and 'incidental'. They usually decide the answer.
Give one clear example for each term. Use sugar and molasses for a by-product, and petrol and diesel for joint products.
Keep working neat. Even a short, labelled answer earns step marks, since MCQs need no working but the 70 marks of written answers do.

Practice questions from Joint Products and By Products

Joint Products and By-Products: Meaning and Differences in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Joint Products and By-Products: Meaning and Differences: frequently asked questions

What is the difference between joint products and by-products?

Joint products are main products of significant value made together from the same process. A by-product is a secondary output of low value. The business runs the process for joint products, not for the by-product.

What is the split-off point in cost accounting?

It is the stage in a common process where the joint products become separately identifiable. Costs up to this point are joint costs. Costs after it can be traced to individual products.

Are joint products and co-products the same?

Most study texts treat them as the same: main products of similar importance. Some texts use co-products for outputs that could be made separately from the same material. In exams, state the meaning you use and give an example.

Is scrap a by-product?

No. A by-product is a distinct output with a recognisable market value. Scrap is a residue of very small value. Both are secondary, but their accounting treatment is handled separately.