Money is created to be spent: this thesis is almost beyond doubt. In the economic world, the use of financial resources is expressed in the form of costs and expenses. Their quantitative assessment allows us to understand how profitable the activity of the enterprise is, to determine the weak links in the management system. Understanding the difference between these legal categories will allow you to better understand both the economic activities of the whole property complex and effectively manage the personal budget of a particular person.
Costs - estimation of the cost of resources spent on the production and sale of products for a certain unit of time. This category is most widely used in accounting and is reflected as an object of work in progress, manufactured products or delivered goods. The most important feature of costs is their actual presence on the balance sheet of the enterprise. In other words, property and material values remain unwritten.
Costs are costs that are justified and documented, and are also directly related to the profit received. They include the cost of resources required for the production of products, remuneration of personnel, losses and losses, funds spent on maintaining equipment in working order. The main feature of expenses is confirmation of their write-off, movement, use for specific needs. In this case, the fact must have a documentary expression of the form established by law.
So, costs are all the money that for one reason or another left the company. However, only that part of them that meets three conditions can be recognized as expenses: justification, confirmation, direct connection with income. Thus, these are the resources that go into the purchase of resources, maintenance of equipment in working order, marketing and promotion of products. If the resources spent are not related to making a profit, then they cannot be recognized as reasonable expenses. This circumstance is subject to primary verification when conducting an audit or assessing economic efficiency.
In this case, the costs when reflected in the documentation are necessarily deregistered. The costs continue to be on the balance sheet and can be expressed, among other things, in the availability of products that have already been produced, but have not yet been shipped. That is why, in order to determine profit, it is necessary to study not only production costs, but also costs.
Expenses reduce the capital of the organization, since they are written off once and for all. Costs can remain within the firm, are current and non-current assets. With their help, it is possible to assess the financial strength of a particular enterprise, to draw a conclusion about its viability.
- The volume of the category. Costs is a broader concept that includes costs.
- Movement. Costs are funds and resources spent on the production of goods and are not written off from the balance sheet, expenses are material values that are taken off the books.
- Documentary evidence and substantiation. Costs are on the balance sheet of the enterprise until they are written off, costs are spent resources, the use of which is confirmed by documents and recognized as reasonable.
- Relativity. Costs can be assets of the enterprise and are expressed in storage capacity, while costs relate exclusively to costs.
- Influence. Costs affect the profitable part of the enterprise, and costs affect the cost of production and the competitiveness of production.