Inscrivez-vous ou connectez-vous pour rejoindre votre communauté professionnelle.
Here I am trying to differentiate Cost, Expense and Loss with an example.
Suppose I am a manufacturer of goods for which I need raw material. Currently, I need to buy worth $8,000 of raw material, but since I don't want to run out of raw material in near future, I'll buy raw material worth $10,000. Now I'll record $10,000 as cost, $8,000 as expense and $2,000 as an asset.
Term "Expense" is used to mean a cost that has being used up while a company is doing its main revenue generating activities. (Here, $8,000 worth raw material is used to generate revenue).
Now, suppose in the next period I had used up $2,000 worth raw material, but I am generating revenue of $1,500...so here I had incurred a loss of $500 in this period. So my Income statement will show a loss of $500 and Balance sheet will show $0 as asset.
Hope this example helps.
Cost
Cost includes expired & deferred cost expired cost is the cost which already incurred
But deferred cost already incurred and its match with economic benefits is not received
Example prepaid expense or expenditure on researches and development
The effect on accounts transaction for the cost as a debit and posting to income statement or balance sheet
Expense
Expense include only expired cost which used for earning revenues that mean the cost match with economic benefit during a particular period
Example advertising
The effect only on income statement as a debit
Loss
Loss is out flow of fund that arises not due to business but due to some other events without any matching economic benefits
Example a claim or dispute by court for building fire case
The effect only on income statement as a debit
In accounting, though all three words that is cost, expense and loss represents outflow of funds from the company to outside world, however there is a difference in the manner in which the outflow of funds or cash happens.
While cost includes both expired and deferred cost. Expired cost is the cost that has been already incurred, while deferred cost is one which has been incurred but its economic benefit is not received, prepaid expense or expenditure on research and development are some of the examples of deferred cost.
An expense includes only expired cost which is used up in earning revenues in a company’s main operations. In other words it is a cost with a matching economic benefit during a particular period. Example of it includes expenses such as advertising, rent raw material cost etc….
As far as loss is concerned it is the outflow of funds or cash which arises not due to business transactions but due to some other events. For example loss due to lawsuit or due to fire in the building in case it is not insured. Hence loss is outflow of funds without any matching economic benefit.
an example,1- Cost is "Rate" of room in hotel300$,
2- Expense is paying, you stayed for1 day @ hotel and you payed300$
3- Loss is you spend300$ there no Interest, you just loss 300$ without in come.
Alimony: is the economic sacrifice or explicit contractual incurred by origin, and is defined as all cash transactions, whether the transactions associated with obtaining benefits or services was immediate or benefits associated with these transactions or future services.
Expense: Cost is depleted during the period in order to create revenue period, or is the cost associated with obtaining revenue during a particular accounting period.
Cost: economic sacrifices are all elective (explicit or contractual - implicit or non-contractual) which shouldered established for the use of factors of production in order to obtain the benefit of present or future
basically Expense is the amount of cost which has expired and Cost is the amount of expense which has not yet expired and loss is the difference between earnings and expenses
