Discuss in detail the different concepts of cost.
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In order to understand the general concept of costs, it is important to know the following types of costs: Accounting costs and Economic costs. Outlay costs and Opportunity costs. Direct/Traceable costs and Indirect/Untraceable costs.
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Accounting Costs and Economic costs are the different concepts of costs.
What is the difference between accounting and economic costs?
Accounting Costs:
- In this cost entrepreneur directly gives cash for production
- Examples of this cost are- raw materials, wages of labor, and purchasing a land
- These costs are maintained by chartered accountants in final statements
Economic Costs:
- These costs include the investment of the entrepreneur
- These costs help to calculate the profit above the normal profit
- These costs are used by entrepreneurs to sell their service
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