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+--- Thread: opportunity cost (/thread-opportunity-cost)
opportunity cost - mashfaq - 03-11-2011
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
- moniacca - 04-05-2011
<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.
- imdad1 - 04-05-2011
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">
- basit_namdar - 04-05-2011
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.
- razaarif123 - 04-08-2011
accounts are managed to disclose real financial tranactions!!!