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.

Updated on: 25-Jul-2020


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