Discuss the treatment of by-product Cost in Cost Accounting.

Treatment of by-product Cost in Cost Accounting: By-Product cost can be dealt in Cost Accounting in the following ways: (a) When they are of small total value: When the by-products are of small total value, the amount realized 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 Costing Profit and Loss Account and no credit be given in the Cost Accounts. The credit to the Costing 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. (b) When the by-products are of considerable total value: Where by-products are of considerable total value, they may be regarded as joint products rather than as by-products. To determine exact cost of by-products the costs incurred up to the point of separation, should be apportioned over by-products and joint products by using a logical basis. In this case, the joint costs may be divided over joint products and by-products by using relative market values; physical output method (at the point of split off or ultimate selling prices (if sold). (c) Where they require further processing: In this case, the net realisable value of the by-product at the split-off point may be arrived at by subtracting the further processing cost from the realisable value of by-products. If total sales value of by-products at split-off point is small, it may be treated as per the provisions discussed above under (a). In the contrary case, the amount realised from the sale of by-products will be considerable and thus it may be treated as discussed under (b).