Cost of Opportunity. Risk protection and cost protection are the three reasons that bank charge interest on loans.
A cost is an outlay needed to create, market, or prepare an item for regular usage. In other terms, it's the cost incurred to produce a good, buy inventories, sell goods, or prepare equipment for use in a commercial activity.
Costs come in a variety of forms, both fixed and variable, but they are always recorded in the same way. Costs are deducted in a closing entry at the conclusion of the accounting period after being reported as costs on the income statement throughout the period.
Costs related to selling items, such as hiring sales employees, leasing space for sales, and buying product display racks, are reported as selling expenditures and shown on a multi-step income statement.
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