Byproducts , or by-products, are products with relatively little value that emerge from a common process along with the main products. The main products have significant value and are referred to as joint products . The point at which the byproducts and joint products emerge from the common process is known as the split-off point . The costs prior to the split-off point are known as the common costs .
Since the value of the byproducts is usually insignificant, the accounting for the byproducts can vary. Here are two of several methods of accounting for byproducts:
- The byproducts could be valued at the split-off point at their net realizable value . This amount reduces the common costs which will be allocated to the joint products at the split-off point.
- None of the common costs is assigned to the byproducts. As a result the full amount of the common costs are allocated to the joint products at the split-off point. When the byproducts are sold, the amount received is reported as revenues .
