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Cost Accounting: What is a Cost: Cost Versus Expense? 1 Views

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What is a Cost: Cost Versus Expense? Cost and expense are pretty similar terms when looking at traditional definitions but they’re a little different in business. While cost usually represents the cost of an asset at the time purchased, expense represents something that’s paid for over time (payroll would be an expense). They’re also different in financial statements. Cost is used in terms like “cost of goods sold” which just means how much did it cost to make whatever was made. Expenses are used in a more broad sense on financial statements, to find profit for a period after subtracting them from income (gross income or sales).

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Transcript

00:00
And finance Allah shmoop what is a cost as in
00:05
a cost versus and expensive Shmoop think about life as
00:12
a grand tradeoff You decided Teo really go for it
00:15
and fulfill your dream of becoming a figure skater for
00:18
your shining fifteen minutes of fame in the Olympics and

00:21
a few years of you know Disney on Ice afterwards
00:24
And that well you spent eighty hours a week for
00:27
a decade on the better part of your youth on
00:29
the ice spinning and twirling and doing that infinity thing
00:33
From age eight to twenty you spent the most precious
00:36
resource You had time dedicated to the mission of winning
00:40
an Olympic gold medal being the best skater you could
00:42
be and pretty much ignoring everything else While that time
00:46
the time you spent skating was a cost you had
00:49
a precious resource your time and you spent it all
00:52
pretty much on the ice You could have spent the
00:55
same amount of time learning how to code in Java
00:57
or C plus plus and or swift If you like
01:00
doing the iPhone app that's the language they use Or
01:03
you could've spent it mastering chemistry and biology and a
01:06
mission to cure cancer Or you could have spent it
01:09
mastering the meaning of the meaning of the meaning of
01:11
things and been a lawyer defending the rights of the
01:13
poor the downtrodden and the innocent But no you spent
01:17
your resource is on the ice Big cost They're hoping
01:20
for audience applause and some kind of satisfaction for having
01:24
landed on your feet Well that allocation of your precious
01:27
resource your time was a cost What's the ultimate cost
01:31
opportunity cost Yeah like you for went the opportunity of
01:35
being a cancer cure or a defender of the poor
01:39
the downtrodden or ah the next Mark Zuckerberg to instead
01:44
be skater So cost is a sacrifice of resource is
01:48
cost is a philosophy and event not necessarily even tracked
01:53
It's kind of a commitment to one thing over another
01:55
right So that's cost on what's expense Well not nearly
01:59
so Pete Those laden inhuman in a kind of sad
02:02
and expenses just in accounting structure where the dollar value
02:06
of some cost is calculated and then subtracted from what
02:09
are hopefully revenues Teo upset it expenses Just a line
02:14
item on an income statement with numbers It's not where
02:17
dreams go to die Or uh maybe just held out
02:20
for a while to be revisited later in life or 00:02:22.333 --> [endTime] being put you know on ice
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