What are the differences between cost and expense?


In general sense, cost and expense could be used as a synonym to
each other however these two have different meanings in accountancy. In order
to identify the difference between the cost, expense and loss, it is required
to have the basic idea about the stated terms. 








In this regard, it can be noted
that cost is the amount of money spent on producing goods. On the other hand,
the expense can be said as the price of benefits used for generating revenue
for a certain period. Thus, it is quite clear that expense is based on the
period, whereas the cost is based on the production. On the basis of
this, the distinction between cost and expense can be shown by considering the
following bullets:


Ø  The term cost is used
for denoting something, which is having some returns. On the other hand,
expenses are used for the item, which depreciates.


Ø   Cost is reported
when an organization purchases assets, whereas the expense is generated while
acquiring resources that would expire.


Ø  Cost is reported through
the financial position statement or balance sheet as it adds value or creates
future economic benefit. On the other hand, expenses are shown in the income
statement as under matching principle, expenses are to be matched with revenue
earned.




Thus, it can be
concluded with the note that if some amount is spent after deriving the
advantage or benefit, it is called cost. Expenses, on the other hand, are the
explicit costs incurred for generating sales.