Difference Between Cost And Expense

A cost may be an Expense or Expenditure as when cost is expired we called it as an expense and when it is not expired, then we called it an Asset as in case of Prepaid Expenses whose benefit or cost is not expired eventhough the payment is made by company while an expense is the expired cost whose benefit is enjoyed by the company. In fact, A cost becomes an expense when the benefits against it are fully utilized by the company.

Cost is a wider term as it includes both expense and expenditure which is either a Revenue Expenditure (Expense) or a Capital Expenditure (Asset) while An Expense is a narrow term which includes only direct and indirect expenses whose benefits are enjoyed and then payment is made later on.

An Example of Cost is Cost of Sales which is used in the production of goods or for selling the products to end customers while for an expense, the example is Salaries Paid by company to employees for the services delivered by them.

For Cost, the part of expense is recorded on Income Statement and part of unexpired cost is recorded on balance sheet as a Asset while an expense is always shown on Income Statement or Trading And Profit And Loss Account during the accounting period.