Question

Give one difference between accounting cost and opportunity cost.

Answer 1

Sr. No.	Basis	Accounting Cost	Opportunity Cost
1.	Definition	Accounting Cost refers to the actual money spent by a firm on inputs (e.g., wages, rent, raw materials).	Opportunity Cost refers to the value of the next best alternative foregone when a choice is made.
2.	Recording in Books	Accounting Cost is recorded in the financial books of accounts.	Opportunity Cost is not recorded in the books; it is a notional or estimated cost.
3.	Example:	Paying ₹10,000 as rent for a shop.	Using your own shop means forgoing the rent income you could have earned from renting it out.
4.	Focus	Accounting cost focuses on historical financial transactions or actual costs incurred.	Opportunity cost focuses on future decision-making and what is given up in choosing one option over another.
5.	Type of Payment	Accounting costs are actual payments made to external parties or for resources used (e.g., wages, rent, etc.).	Accounting costs are actual payments made to external parties or for resources used (e.g., wages, rent, etc.).
6.	Relevance	Accounting cost is relevant for calculating financial profit or taxes based on actual expenses.	Opportunity cost is relevant for making economic decisions and allocating resources efficiently.