Compare economic cost and accounting cost.

The major differences between economic cost and accounting cost are as follows −

Economic cost

• It has monetary value of all resources.

• It refers to opportunity cost.

• It focuses more on implicit cost.

• It is relevant for decision making.

• It is forward looking.

• It is not objectively verified.

• It estimates the cost of alternatives sacrificed.

Accounting cost

• It is based on explicit costs.

• It is present in the financial statements.

• It is backward looking.

• It is objectively verifiable.

• It tells about financial position of a firm.

• It is used to make tax payments.