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opportunity cost
03-11-2011, 04:50 PM
Post: #1
opportunity cost
Why opportunity cost is not recognized while calculating the accounting profit? I need some logical reasons ( In the light of accounting standards or applications) . I also know that it is the implicit cost
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04-05-2011, 03:43 PM
Post: #2
 
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by mashfaq</i>
<br />Why opportunity cost is not recognized while calculating the accounting profit? I need some logical reasons ( In the light of accounting standards or applications) . I also know that it is the implicit cost
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Financial statements are prepared on accrual basis. Opportunity cost is not the cost that is actually incured and/or does not relates to the period for which financial statements are prepared. So opportunity costs are not recognized while calculating the accounitng profits.

I hope my reply will help you.

Comments are appreciated.
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04-05-2011, 03:47 PM
Post: #3
 
Agreed with the above answer!!!
Oppourtunity cost is computed for decision making.....

thats y financial manangement and financial accouting are two different areas!! )

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by moniacca</i>
<br /><blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by mashfaq</i>
<br />Why opportunity cost is not recognized while calculating the accounting profit? I need some logical reasons ( In the light of accounting standards or applications) . I also know that it is the implicit cost
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Financial statements are prepared on accrual basis. Opportunity cost is not the cost that is actually incured and/or does not relates to the period for which financial statements are prepared. So opportunity costs are not recognized while calculating the accounitng profits.

I hope my reply will help you.

Comments are appreciated.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
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04-05-2011, 05:47 PM
Post: #4
 
Ok its like something that u have the offer to work in company A for 10,000 Rs but you are currently employed in company B at 6000 Rs. So according to management accounting the benefit from switching job will be 4000. But will you be earning 4000 or 10000?? In F/S we record the whole of income not the extra benefit earned after undergoing some work. As explained above.
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04-08-2011, 10:45 PM
Post: #5
 
accounts are managed to disclose real financial tranactions!!!
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