IAS 2 INVENTORIES : BY-PRODUCTS

6. BY-PRODUCTS


Most by-products are immaterial. If this is the case, then they are measured at net realisable value, and this value is deducted from the cost of the main product.


Example: by-products
Each batch of good product produces scrap metal that is resold for $10. Reduce the costs of each batch by $10 to account for the revenue from the scrap metal. This example uses 6.500 batches.


I/B
DR
CR
Inventory
I

65.000
Cash (from scrap merchants)
B
65.000

Reducing costs of inventory by cash from by-products



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