Accounting Costs

Definition

Accounting costs refer to actual monetary expenditures made by a firm for resources used in production. These include explicit out-of-pocket expenses such as wages, rent, and raw materials.

Related terms

Economic Costs: Economic costs encompass both explicit (accounting) costs and implicit (opportunity) costs. They include the value of resources used in production, whether they involve actual monetary payments or not.

Implicit Costs: Implicit costs are opportunity costs that arise from using resources for a particular purpose instead of their next best alternative use.

Total Costs (TC): Total cost is the sum of all fixed and variable costs incurred in producing a given quantity of output. It includes both explicit (accounting) costs and implicit (opportunity) costs.