Distinguishing between an expense and a cost
Eddie Kirn tells you that the accountants where he works are real hair splitters. For example, they make a big issue over the difference between a cost and an expense. He says the two terms mean the same thing to him.
Required
a.Explain to Eddie the difference between a cost and an expense from an accountant’s perspective.
b. Indicate whether each of the following events produces an asset or an expense.
(1) Recognized accrued salaries.
(2) Paid in advance for insurance on the building.
(3) Used supplies on hand to produce revenue.
(4) Purchased supplies on account.
(5) Purchased a building for cash.
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