Accounting terms

Dictionary of all accounting terms

What is a Cost?

A cost is any monetary amount that has to be paid by the business in order to achieve or produce something of value.

For business, cost is calculated as a monetary value for the following:

  • resources
  • materials
  • effort
  • risks incurred
  • opportunities lost in the production or delivery of a good or service

In accounting, on the other hands, costs are usually related to:

  • supplies
  • services
  • labor
  • products
  • equipment, etc.

The cost is the amount denoted on invoices as the price, and it is then recorded in bookkeeping as an expense.

In business, the break-even point is when the revenues received equal the costs, and therefore no profit has been made. In order to have profit, or increase profits, a business must ensure that its costs are less than its revenues.

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