Question

2-1. Explain the difference between a cost, an expense, and a cost object.

Answer 1

Please find the below explanation and “ Don’t forget to give a like! Thank you”

  Cost :

Cost represent the amount of money that is spent on production of goods or services.

Cost can be reflected on either the income statement as an expense or on the balance sheet

as an asset.

Cost can be expired or unexpired.

Example : prepaid rent, fixed asset.

Expense:

Expense is the amount incurred and whose benefit have been expired or consumed with in the

accounting period.

Represents the amount incurred in generating revenues of the current period.

Expenses are reflected on the profit and loss statement.

Example: raw material, labor cost, depreciation .

Cost object :

Cost object is any item for which costs are being separately measured.

Example: product lines, customer, department, service.

Concept used in managing the cost of a business.