The by-product should be recorded as inventory until its intended marketability has been established. The cost of a by-product is attributed to individual products manufactured using it if those products are finished and ready for sale, or if there is a market for the by-products. If a market is not established, the cost of the by-product remains in ending inventory until it is sold as part of the main products. When this happens, it is recorded as a separate line item on the income statement.