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Implied cost
Hidden or opportunity cost incurred in using the already paid for assets, without taking into account the income these assets would earn if hired out to others. For example, not paying rent on the self-owned property (called implicit rent) is an implicit cost, because rent is a tax deductible expense but implicit rent is not. Similarly, implicit cost of liquid assets or stockholders' (shareholders') capital is the maximum interest that would be earned on them as a fixed deposit or as an investment in a mutual fund (unit trust). Implicit costs must be added to actual cash outlays to establish a true estimate of the cost of production or of running a business. Also called imputed cost or notional cost.
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- Part of Speech: noun
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- Industry/Domain: Accounting
- Category: Auditing
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