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:

Expense Accounts

These accounts record the consumption of assets or services that occur during the operation of a business, leading to a decrease in owner's equity.

Revenue Accounts

Accounts in the general ledger that track the income generated by a company from its normal business operations.

Gain On Sale

The profit realized when a capital asset is sold for a higher price than its purchase price.

Property And Equipment

Tangible assets owned by a business for use in the production or supply of goods and services or for rental to others.