Accounting for Byproducts: the Production Method vs. the Sales Method
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This video shows how to account for byproducts. In so doing, it compares and contrasts the Production Method and Sales Method for accounting for byproducts. The Production Method requires that byproducts be accounted for when produced (e.g., that their Net Realizable reduce Cost of Goods Sold when the byproduct is actually produced) while the Sales Method requires byproducts to be recognized in the period in which the byproducts are sold. The Sales Method thus gives managers an opportunity to engage in earnings management, as they can wait to sell byproducts until they want to boost earnings.
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Led Digital Marketing Efforts of Top 500 e-Retailers.
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