Any costs incurred after split-off point to process or market the by-product are entered in separate accounts from those used for recording the costs of main product(s).
Under recognition of net revenue method, the journal entries involve charging all costs incurred on the by-product after split-off point against the revenue realized from the sale of by-product. Marketing and administrative costs, if any, are also assigned to the by products.
Some companies maintain an account named as “by-product account” to which all revenues realized from the sale of by-products are credited and all costs incurred on by-products after split-off point are debited.
The balance of the by-product account is disclosed on the income statement using one of the four manners discussed in recognition of gross revenue method of costing by-products.