Explicit costs

Explicit costs ⇒ are also called out-of-pocket costs. Explicit costs involve payment of cash and include wages and salaries, office supplies, interest paid on loans, payments to vendors for raw materials, and so forth.

Explicit costs are the opposite of implicit costs. Most explicit costs eventually become expenses, though the timing of their recognition as expenses may be delayed. For example, when inventory is purchased, its cost does not become an expense until it is sold.