Hai guys ready to share
again..Here we go, this time I want to show you the difference between Expense
and Cost. Yep you guys are right ! The point of what we called “Expenses” in
accounting means Spending…
Many of us still thinking which
word that will suitable to define “Cost or Expenses” in Accounting. Next
question is….are they have the same meaning? Maybe some of accounting lovers
have already know the difference, but for you guys who still confuse, here I
give you the explanation…
Let’s start from the definition,
Expense in accounting means cost, but which cost that will be categorized as
expense ? so guys to make it easy, I’m making the definition of Expense is “an
operational cost that being spent by the company regularly and it has no
relevancy with the fixed assets”.
In Profit and Loss report, expense
position is being count after Gross Profit. In different companies, expense
could be different too, depends on what the companies are running into and depends
on what they are reported in financial statement. The category which always
been of accounting report is General and Administration expense, Marketing and
Sales Expense.
Cost in accounting is used to
explain expense or spending related to provide assets matter. One of example of
spending that categorized as cost is about buying inventories.
So guys, I hope that all of you
get more information about the difference between expense and cost. So, how if
the case is about buying fixed assets ? it will be cost or expense ?
Example :
1. All
things which we pay for buying fixed assets until it operated will become cost
not expense
2. Photocopy
machine for company who owns it as their fixed assets, its depreciation become
expense. But, if the machine was rent it will not be in the fixed assets list,
but we charged this as Prepaid expense in list of Assets. The prepaid expense
will be decreasing every month as rent expense,and rent expense take part in
statement reporting categorized as General and Administration expenses.
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