What is the Difference Between Cost and Expense?

[Suba]

In running a business, an entrepreneur will always be involved in spending money, whether directly or indirectly. For this reason, it is important for an entrepreneur to be able to differentiate between costs and expenses so that it will be easier for him to make financial statements both for control and for tax reporting. In the income statement we will easily differentiate between costs and expenses, because both have different positions, we also often encounter costs of goods sold, factor overhead costs, labor costs, etc. Meanwhile, we can find expenses in administrative expenses, salary expenses, marketing expenses, etc.

 

[Augusta]

cost generally refers to the total amount spent on something, while expense refers to the cost that is used up or consumed in the process of generating revenue, often within a specific accounting period.

 

[Starmix]

LOL, it's commonsense wise, these two terms mean differently. Without a cost there's no expense. You'll only spend if you know the cost that matches with your money. It's from the cost you'll know the affordability and capability of your budget.

 

[Augusta]

Cost is recorded when the resource is used or consumed, or when the benefit is received.
Expense represents the cost that is used up or consumed in the process of earning revenue.

 

[Suba]

Although costs and expenses are both types of monetary transactions, they are treated differently in the business and accounting world. Costs are considered to have long-term benefits, such as the purchase of production machinery, factory buildings, material costs, and FoH costs, and are recorded on the balance sheet. Expenses, on the other hand, are only valid for one accounting period, such as marketing expenses, salary expenses, and operational expenses, and are recorded on the income statement.

 

[Augusta]

Costs are recognized when an asset is acquired, while expenses are recognized when the asset is used up or consumed