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The Difference Between Economic Cost And Accounting Cost

2010/12/24 11:12:00 49

Economic Cost Accounting Cost Distinction

Accounting cost is a dominant cost. It can be measured in money and can be reflected in accounting accounts.

In addition to accounting

cost

Besides, there is another hidden cost.

Hidden costs are often not recognized by managers.

It is very different from the explicit cost, that is, the accounting cost.

Generally speaking, the implicit cost can not be reflected directly from the book, so it is difficult to measure accurately.

For example, opportunity cost is implicit cost.

Economic cost is the sum of the two costs of explicit and implicit costs.

Therefore, economic cost is a ratio of accounting.

cost

A broader and richer concept.

It can be no exaggeration to say that economic costs involve almost all the contents and fields of operation of enterprises.

Economic cost is the total cost in the process of enterprise operation. Some economic cost items do not realize that there are some economic cost items. Although we know its existence, we do not consider it as an independent cost item, such as organization cost.

Only by selling the final product and providing services outside the company can the enterprise obtain revenue from the market, and in order to organize production within the enterprise, various organizations must be established.

Especially for large enterprises, the organization may be quite large, the structure of the organization may be quite complex, and to maintain the normal operation of these organizations, there must be expenditure, sometimes the expenditure may be very large. These expenditures are organizational costs.

The organization cost of an enterprise usually does not constitute an independent cost item, so the enterprise does not make a separate accounting and analysis of it.

In fact, organization costs are

enterprise

The total cost structure occupies an extremely important position. It consists of explicit part and recessive part.

Among them, the salaries of managers and the operating expenses of the organization belong to the dominant part of the organization cost, and the reduction of the efficiency of the organization, such as the overstaffing of organizations, is the hidden part of the organization cost.

The hidden costs of enterprises still have many manifestations.

Such as influence cost, authority failure cost, information distortion cost and so on.

Since the economic cost is more extensive and richer than the accounting cost, we should not take account of the accounting cost in making the decision, but also consider the economic cost.

Only by achieving the cost advantage in the management of explicit and implicit costs can enterprises gain the advantage in total cost, so that they can take the lead in fierce competition.