Treatment of By-Product Cost in Cost-Accounting

By-product cost can be dealt
in cost accounting in the following ways :—
(i) When they are of small total value : When the by-products are of small total value,
the amount realised from their sale may be dealt in any one the following two ways :
1. The sales value of the by-products may be credited to the Profit and Loss Account and
no credit be given in the Cost Accounts. The credit to the Profit and Loss Account here is
treated either as miscellaneous income or as additional sales revenue.
2. The sale proceeds of the by-product may be treated as deductions from the total costs.
The sale proceeds in fact should be deducted either from the production cost or from the
cost of sales.