question_answer

Distinguish between explicit cost and implicit cost and give examples.

Answer:

Basis of Difference	Explicit Costs	Implicit Costs
Meaning	These refer to the expenditure incurred or payments made by a firm to various factors of productions and also non factors of production.	These refers to the opportunity cost of the firm?s own resources.
Record in books of account	These costs are recorded in the books of account.	These costs are not recorded in the books of account.
Other name	These costs are also called as out of the pocket expenses?.	These costs are also called imputed costs.
Cash outlay from business	In case of explicit cost there is an cash outlay from the business.	In case of implicit cost there is no cash outlay from the business.
Example	For example, payments in the form of wages for labour, rent for building	For example, rent of his own land interest on his own capital, and salary for his own service as manager etc.