What are the definitions of cost and expense in accounting?

First, the concept and characteristics of cost

(I) The broad concept of expenses The International Accounting Standards Committee defines the elements of expenses as follows: "Expenses refer to the decrease of economic benefits during the accounting period, which is manifested in the decrease of owners' equity caused by the decrease of assets or the increase of liabilities, but does not include the decrease of owners' equity caused by economic activities such as distribution to owners". "The definition of expenses includes both losses and losses in the daily activities of enterprises", so it is a broad concept of expenses.

(II) The concept of expenses in a narrow sense (1) The Financial Accounting Standards Committee (FASB) defines expenses as "assets paid or otherwise consumed by an entity in its continuous, main or core business due to delivery or production of goods, provision of services or other activities, or liabilities (or both)"; (2) The definition of expenses in China's enterprise accounting system is: "refers to the outflow of economic benefits in daily activities such as selling goods and providing services". The expenses stipulated by FASB and China accounting system only refer to the expenses incurred in daily activities or main business. Therefore, it belongs to the narrow concept of cost. Since expense is a concept corresponding to income, the concepts of income and expense must be consistent, that is, if income is a broad concept, then expense should also be a broad concept; If income is a narrow concept, then expense should also be a narrow concept, which is the basic requirement of the matching principle. However, the author thinks that it seems inappropriate to adopt the broad concepts of income and expense. This is because profit and loss are marginal and accidental profits and losses that the enterprise management authorities can't control. Providing revenue and expenditure indicators, including profit and loss, can not explain the "management responsibility" of the management authorities, nor is it conducive to managers to strengthen the performance evaluation of internal responsible units (or personnel). Therefore, income and expenses should be narrowly defined. Because of this, the author believes that expenses are the consumption of resources in order to obtain income.

(3) Characteristics of expenses (1) Expenses will eventually reduce the resources of enterprises. This reduction is reflected in the reduction of enterprise assets or the consumption of resources. In this sense, expense is essentially a kind of resource outflow of enterprises, which can be understood as the concept of outflow. The specific forms of outflow resources may be cash, other non-cash assets and the provision of labor services. There are two results of resource outflow: one is that another resource flows in at the same time (assets such as cash or creditor's rights), and the value of the inflow resource is always greater than the value of the outflow resource (generating gross profit); The other is pure outflow, that is, there is only resource outflow without resource inflow, or the causal relationship between outflow and inflow is difficult to determine. (2) Expenses will eventually reduce the owner's rights and interests of the enterprise. Usually, the capital inflow (income) of an enterprise will increase the owner's equity of the enterprise, on the contrary, the capital outflow will reduce the owner's equity of the enterprise, that is, the cost of the enterprise will be formed. According to the accounting identity, assets = liabilities+owners' equity, when the resources of the enterprise flow out (assets decrease), if the liabilities remain unchanged, the owners' equity of the enterprise will inevitably decrease; Or when assets remain unchanged and liabilities increase, it will also lead to the decrease of owners' equity, which are two basic forms of expenses incurred by enterprises. However, in the process of production and operation, some assets reduction should not be listed as expenses, such as debt-paying assets reduction and dividend distribution. (3) The occurrence of expenses is the initiative of enterprises. Although the occurrence of expenses will reduce the owner's rights and interests of the enterprise, the income it obtains must be or the expenses incurred, which is the key factor to determine the income. No expenditure, no income. Therefore, the expense behavior in order to obtain income is the basis of daily activities of enterprises, and it is an active and expected business behavior of enterprises, which is also the fundamental difference between expenses and losses. Although losses and expenses are related to the calculation of enterprise net income, they are all items that subtract current income. But in theory, the calculation of income can only include the proportion of expenses and income. Loss is the marginal or accidental reduction of enterprise resources, which is only a pure deduction of income and does not belong to the efforts made by enterprises.

According to the above analysis, the author thinks that according to the relationship between expenses and income, expenses can be divided into direct expenses and indirect expenses. Direct cost refers to the consumption directly related to income, which is the price that must be paid to obtain income, and its value is directly compensated from the realized income. For example, the cost of selling goods, taxes and surcharges of main business, and other business expenses (since other business expenses include direct expenses and indirect expenses, the author suggests that other business expenses should also be divided into direct expenses-other business expenses and indirect expenses-other business expenses to reveal the information of related business interests). Indirect expenses refer to expenses that are not directly related to income. They are not expenses that must be incurred in order to obtain income. The expenses incurred may not necessarily generate income, but they should be incurred in order to obtain income, such as advertising fees and employee training fees.

Indirect cost is a kind of pure consumption of enterprises. According to the requirements of the principle of importance and cost-effectiveness, indirect expenses can only be offset from the current income and get value compensation. Indirect expenses include management expenses, operating expenses and financial expenses.

Second, the concept and characteristics of cost

(1) The concept of cost in a broad sense (1) In the Report of the Committee on Cost Concepts and Standards published by American Accounting Association (AAA) in 195 1, the definition of cost is: "Cost refers to the value sacrifice that occurs or should occur to achieve a specific purpose and can be measured in monetary units. (2) The fourth issue of Accounting Terminology Bulletin issued by American Institute of Accountants (AICPA) in 1957 defines cost as: "Cost refers to the cash paid to obtain goods or services".

Or other assets transferred, shares issued, services provided or liabilities incurred. Cost can be divided into two parts: unexpired cost and expired cost. Unexpired costs can be borne by future income, such as inventory, prepaid expenses, plant, investment, prepaid expenses, etc. The cost consumed cannot be borne by future income, and should be listed as the deduction of current income or the debit of retained surplus, such as the cost of selling products or other assets and the current expenses. (3) In the book "Accounting Theory", the famous American accountant Eldon hendrickson defined cost as: "Cost is the cash or other expenses paid for obtaining a certain property or a certain service."

(B) The narrow sense of the concept of cost "Enterprise Accounting System" formulated by the Ministry of Finance of China defines cost as: "Cost refers to various expenses incurred by enterprises for producing products and providing services." In a broad sense, cost refers to the price paid by an enterprise to obtain an asset or a service, while in a narrow sense, cost only refers to the price paid to produce a product or provide a service. No matter what kind of cost view, the purpose of enterprise cost, or in order to obtain an asset or a service, in order to achieve this goal, enterprises will inevitably consume resources (or sacrifice or pay). Therefore, in order to clarify the connotation of cost, sort out the extension of cost, eliminate the contradiction of cost concept among disciplines and truly reflect the essential characteristics of cost concept, the broad concept of cost is more in line with this concept. Therefore, the author believes that cost is the price paid to obtain an asset or a service.

(3) Characteristics of cost (1) Cost is a measure of resource transformation. In the society of commodity economy, if an enterprise wants to obtain one resource, it must sacrifice another resource, which is the basic requirement of the law of value. So, what is the entry price of the acquired resources? The current system (or criterion) is based on cost, that is, how much (cost) the enterprise has paid for this resource is the entry price (historical cost) of the acquired resource. Cost has no independent existence form and must be attached to specific assets or services. It is meaningless to talk about cost without specific assets or services. Cost is only used to explain how much an enterprise has paid to obtain an asset or a service, so cost is a measure of resource transformation. This just explains why there is no cost element in accounting elements. (2) The cost will not reduce the owner's equity. Because cost is a measure of enterprise resource transformation, there is no pure resource consumption in enterprises, but resources have changed from one form to another, and the total resources of enterprises have not changed, so owners' rights and interests will not be reduced. This is the fundamental difference between cost and expense, and it is also the difference between "cost" and "consumption".

(4) Nature and classification of costs (1) Nature of costs. The essence of cost is the price paid by an enterprise to achieve a specific purpose. What is the connotation of its cost? Marx once analyzed the economic connotation of product cost, and pointed out that the value of every commodity produced in the capitalist way is w=c+v+m in the formula. If the surplus value m is subtracted from the value of this product, what remains in the commodity is only the equivalent or compensation value of a capital value c+v spent on production factors. C+v is the capital consumption in the process of product production, which is called cost. Therefore, the essence of cost is the transfer value of production materials consumed in the process of production and operation and the monetary expression of living labor costs creating value for workers themselves. Although the cost that Marx refers to here only refers to the product cost in a narrow sense, we can still abstract the economic essence of general cost from the product cost essence analyzed by Marx, that is, the essence of cost is the value that needs compensation in the process of social reproduction rather than the distributable value, and the specific quantitative items include the consumption of production materials (C) and the consumption of living labor (V). (2) Classification of costs. The costs incurred by enterprises will inevitably lead to the mutual conversion of resources, and there are two kinds of results: one is the conversion of resources caused by foreign transactions, such as the purchase of machinery and equipment, which will form the procurement cost of fixed assets; Foreign investment forms investment costs, etc. The other is the mutual conversion of different resources within the enterprise, such as collecting raw materials to produce products, forming the production cost of products. No matter the external transaction or the resource conversion cost formed within the enterprise, there is a * * * same feature, that is, the equivalence of resource conversion, that is, no income is generated during the conversion process. This is also the theoretical basis that the cash dividend (or interest) contained in stock (or bond) investment can not be used as investment income, but can be used as advance payment in the process of foreign securities investment. According to the clarity between cost and its object, cost can be divided into direct cost and indirect cost. Direct cost refers to the cost that is directly related to a specific object and can be directly attributed to the object according to specific standards. Direct cost is the main body of cost, which is influenced by factors such as price, labor productivity, supply and demand. Indirect costs refer to costs that are not directly related to specific objects and cannot be directly attributed to related objects according to specific standards. Indirect costs are not only affected by factors such as price and labor productivity, but also by subjective factors such as distribution standards and distribution methods. According to the essence of cost, we can reveal the connotation of cost and sort out the extension of cost, which can distinguish the relationship between cost and concepts such as expense and expenditure, and also coordinate various cost concepts such as opportunity cost, activity cost, product cost and investment cost.