depreciation is implicit or explicit cost?give reason
oh abbas! ,,, depreciation IS EXPLICIT COST... this was in cbse sample paper 2014 and in CBSE MARKING SCHEME... it is clearly mentioned that DEPRECIATION IS EXPLICIT.... the firm is NOT USING OWNER;S resources,,,,, a good way to judge i found is that if the EXPENSE show in TRADING PL a/c.. ... then it is EXPLICIT..... because IMPLICIT COSTS ARE NOT SHOWN IN THE BOOKS!... this answer is correct i guarantee you...... MOREOVER - (just for knowledge) PURCHACE OF FIXED ASSET IS NOT EVEN A COST!!! MIND BLOWING! ..... it is INVESTMENT HENCE NOT SHOWN IN PL a/c so NOT A COST... this was also in the sample paper.
i have been thinking of it for sometime now. i guess it satisfies the most basic definition of implicit costs, i.e. implicit costs are imputed costs. indeed, depreciation is imputed. although it is recorded in the books, but it isn't a real valued thing and the value is only attributed on guesswork; not a market value, but a self-assigned value. what i conclude and sum up: depreciation is an imputed cost, hence inplicit.
yeah ..u r right Abbas..bcozan implicit cost is any cost that results from using an asset instead of renting, selling, or lending it. So dep. is also an implicit cost .The implicit cost for a firm can be thought of as the opportunity cost related to undertaking a certain project or decision, such as the loss of interest income on funds, or depreciation of machinery used for a capital project.