Difference Between Costs and Expenses

Costs and expenses are two different things:

Costs

are resources given up in order to achieve an objective.

Cost ⇒ is an economic concept.

Expenses

are costs that have been charged against revenue in a specific accounting period.

expense ⇒ is an accounting concept.

A cost need not be an expense,but every expense was a cost before it became an expense. Most costs eventually do become expenses,such as manufacturing costs that reach the income statement as cost of goods sold when the units they are attached to are sold, or the cost of administrative fixed assets that have been capitalized on the balance sheet and subsequently expensed over a period of years as depreciation.

However, some costs do not reach the income statement. Implicit costs ( Implicit costs are costs that do not involve any specific cash payment and are not recorded in the accounting records ) such as opportunity costs (An opportunity cost is the contribution to income that is lost by not using a limited resource in its best alternative use. An opportunity cost is a type of implicit cost ) never become expenses in the accounting records, but they are costs nonetheless because they represent resources given up in order to achieve an objective.