CA Intermediate · Cost and Management Accounting · Joint Products and By Products
Under Indian cost accounting practice, if a by-product has insignificant value and is sold, the usual treatment of its net realisable value is to:
A by-product of small value is not allocated joint cost. Its net realisable value is credited to the Profit and Loss account as other income, or reduced from the cost of the main product.
- AAllocate joint cost to it on the sales value method
- BCredit it to the Profit and Loss account or deduct it from the cost of the main productCorrect
- CTreat it as a joint product
- DCharge it as abnormal loss
Explanation
By-products of small value are usually not given a share of joint cost. Their sale proceeds are treated as other income or deducted from the main product's cost. Allocating joint cost applies to joint products.
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