Recognition of Net Revenue Method--By Product Costing:
This method recognizes the need for assigning
some cost to the by-product. It does not attempt, however, to allocate any
main product cost to the buy product. Any expenses involved in further processing or marketing the by-product are recorded in separate accounts.
All figures are shown on the
income statement, following one of the
procedures described at
recognition of gross revenue method page.
Journal entries in this method would involve
charges to by-product revenue for the additional work required and perhaps
for factory overhead. The marketing and administrative expenses might also
be allocated to the by product on some predetermine basis. Some firms carry
an account called by-product to which all additional expenses are debited
and all income is credited. The balance of this account would be presented
in the
income statement, following one of the procedures out lined at
recognition of gross revenue method page. However, accumulated
manufacturing costs applicable to by product inventory should be reported on
the balance sheet. |
