What Is the Difference Between Explicit Costs and Implicit Costs

question 259

Essay

What is the difference between explicit costs and implicit costs? List three examples each of explicit costs and implicit costs that may be experienced by a small business.

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Definitions:

Depreciation

The accounting method of allocating the cost of a tangible asset over its useful life.

Accumulated Depreciation

Overall depreciation expense tallied for a fixed asset since it started being used.

Accrued Salaries

Salaries that have been incurred but not yet paid, representing a liability for the company until payment is made.

Salaries Payable

A liability account that represents amounts owed to employees for services rendered but not yet paid.