Explicit and Implicit Cost

Anoop Shrivastava (Free Lancer) (476 Points)

30 December 2008

Can any one tell me about Explicit and Implicit cost. And plz give the few examples of that.

Thanks,

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10 Replies

Jeet Biswas (ACMA (in Service)) (5073 Points)
Replied 30 December 2008

A Comparison....

Explicit Costs:

1. involve immediate cash payment

2. Actually incurred; can b objectively measured.

3. Are recorded in Books of A/cs

4. Purpose- Accounting, Reporting, Cost control & decision Making.

5. Also known as Out of Pocket costs.

6. Examples: Salaries, Wages, Advertisements etc

Implicit Costs:

1. Doesnt involve cash payment

2. Not Actually incurred; have to be estimated.

3. Are Not recorded in Books of A/cs

4. Purpose- decision Making like asset replacement, make/buy etc.

5. Also known as Imputed/Notional costs.

6. Examples: Interest on own Capital, rent of owned premises, salary of proprietor etc.

4 Like

shailesh agarwal (professional accountant) (7642 Points)
Replied 31 December 2008

good

Jaydip H. Trivedi (Accounting Income Tax Servoces VAT servoces LIC services & Finance consultancy) (184 Points)
Replied 31 December 2008

Really a good not for quick recall, really a good one.

Meekha (student) (169 Points)
Replied 29 May 2009

The best. Can you also please give me a comparision betwwen cost control and cost reduction ? In this similar manner?

geeta (Student) (42 Points)
Replied 01 June 2009

The comparision given by him was exactly correct

Jacky Gupta (Employed) (61 Points)
Replied 02 June 2009

further explaining:

explicit cost: : involve immediate cash payment for the expenses actully incurrred to run the buisness

Implicit Cost : It is a cost of Self owned resources, Self Employed For e.g

Self employed: salary of proprietor ,

Self owned resources : interest on capital

triumph-CMA (Chartered Accountant) (503 Points)
Replied 03 June 2009

Originally posted by :J€€T
"	A Comparison.... Explicit Costs: 1. involve immediate cash payment 2. Actually incurred; can b objectively measured. 3. Are recorded in Books of A/cs 4. Purpose- Accounting, Reporting, Cost control & decision Making. 5. Also known as Out of Pocket costs. 6. Examples: Salaries, Wages, Advertisements etc Implicit Costs: 1. Doesnt involve cash payment 2. Not Actually incurred; have to be estimated. 3. Are Not recorded in Books of A/cs 4. Purpose- decision Making like asset replacement, make/buy etc. 5. Also known as Imputed/Notional costs. 6. Examples: Interest on own Capital, rent of owned premises, salary of proprietor etc.	"

triumph-CMA (Chartered Accountant) (503 Points)
Replied 03 June 2009

Originally posted by :J€€T
"	A Comparison.... Explicit Costs: 1. involve immediate cash payment 2. Actually incurred; can b objectively measured. 3. Are recorded in Books of A/cs 4. Purpose- Accounting, Reporting, Cost control & decision Making. 5. Also known as Out of Pocket costs. 6. Examples: Salaries, Wages, Advertisements etc Implicit Costs: 1. Doesnt involve cash payment 2. Not Actually incurred; have to be estimated. 3. Are Not recorded in Books of A/cs 4. Purpose- decision Making like asset replacement, make/buy etc. 5. Also known as Imputed/Notional costs. 6. Examples: Interest on own Capital, rent of owned premises, salary of proprietor etc.	"

shankar.m.p (ipcc student) (192 Points)
Replied 03 September 2009

Originally posted by :J€€T
"	A Comparison.... Explicit Costs: 1. involve immediate cash payment 2. Actually incurred; can b objectively measured. 3. Are recorded in Books of A/cs 4. Purpose- Accounting, Reporting, Cost control & decision Making. 5. Also known as Out of Pocket costs. 6. Examples: Salaries, Wages, Advertisements etc Implicit Costs: 1. Doesnt involve cash payment 2. Not Actually incurred; have to be estimated. 3. Are Not recorded in Books of A/cs 4. Purpose- decision Making like asset replacement, make/buy etc. 5. Also known as Imputed/Notional costs. 6. Examples: Interest on own Capital, rent of owned premises, salary of proprietor etc.	"