Cost In accounting cost and expanse is so far different terms. Expanse is the cost that is incured to earn revenue. Not each of the cost is consider as expanse. Only these cost is considered as expanse that is concerned with earning revenue.
Cost may be an asset or an expanse. The condition is important when we will define expanse or not.
Let us consider a few example that can define how we say cost as an expanse.
The purchased equipment for a company initially be consider as the assets of the company. But after a certain accounting period a portion of its value will be used. A portion of the cost is expired. This expired cost of the equipment is considered as the depreciation expanse.
In that way any purchased value may be considered as asset and expanse.
Any unexpired cost is considered as an asset.
If a company purchases land for its business operation then the land cost is an assets of the company and it will never be expanse. On the other hand the delivery truck purchased with a cost initially will be consider as assets and after some time when a portion of the cost is used then it will be consider as depreciation expanse.
Which types of cost we may define as assets or expanse is basically depends on either it related with product cost or selling cost. If cost is related with production then it should not be consider as expanse. Expanse is the cost expired to sell.
The direct labour cost is considered as asset but the delivery drivers wages is an expanse. Direct Labor cost is related with production and on the other hand driver of delivery truck wages is the cost for selling.
The considering of direct labour cost as asset or expanse is depends on sales. Until the product is sold the labor cost of production is considered as asset. After sell of the product the labor cost become an expanse.