About what costs are, says economic theory. This is mainly the cost of the enterprise for the manufacture of products. These costs include the acquisition of any resources. In fact, these are the payments that each organization needs to make to the account of the resources provided by households or other firms.
There are various types of production costs . In particular, they distinguish: alternative, variables, transactional, fixed, economic costs and expenses of missed opportunities.
There are also accounting costs. They represent payments for resources to third-party suppliers. Simply put, accounting costs are external costs. They include cash costs that are necessary for the implementation of the production process. In particular, these include rents, raw materials, depreciation, wages, taxes, credit interest, administrative and trading expenses, etc. The total amount of all these costs forms gross production costs.
The resources used in the production of services and goods have their value. It is expressed in cash. Thus, all payments are reflected in accounting documents. In accordance with this, the method of cost estimation is named. The costs estimated using the accounting method are called accounting costs.
Allocate the main articles for which cost estimates are carried out. Among them should be noted:
- Material costs. This article includes the cost of paying for fuel, raw materials, energy, as well as the cost of semi-finished products, components and other things.
- Wages. This includes remuneration of employees and other deductions provided for by the employment contract.
- Deductions to ensure social needs. This category includes payments that are established by law. They are directed to various funds (social insurance, employment promotion, pension and others).
- Depreciation. These deductions are made for depreciation of the building, equipment.
- Other expenses. This category includes payments on commissions to the bank for banking and cash services, rental payments, fees, taxes, payment for services and work of third-party companies, and credit interest.
Accounting costs aimed at ensuring production and subsequent sales are formed in accordance with the provisions of the relevant Regulation, which describes the composition of costs.
It should be noted at the same time that the implementation of the enterprise on the market involves other, larger costs that are associated with expanded and simple production. Such costs are called entrepreneurial. In essence, entrepreneurial expenses form the bid price. These costs include:
- Accounting costs.
- VAT (if it is accrued over value) and excise taxes (in the case when the product is excisable).
- Normal entrepreneurial income.
- Customs duties on exported products (if foreign economic activity is carried out).
- Imputed (alternative) expenses. In this case, we are talking about the costs associated with missed opportunities for the best use of enterprise resources.
When making economic decisions, given the limited resources, the business entity must choose between alternative methods of their use. Thus, all costs taken into account when making decisions can be considered opportunity costs. If we consider these costs from the perspective of the enterprise, then they have an internal (implicit) and external (explicit) nature. Accounting costs include only explicit costs.