depreciation is implicit or explicit cost?give reason

Depreciation is difficult to classify either as 'implicit' or 'explicit' cost. Depreciation is a explicit cost if there is actual cash expenditure involved to meet the wear and tear of capital. On the other hand, it is a implicit cost if it is measured on the basis of depreciation formula (i.e book cost) and does not involve any cash expenditure.

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depreciation is implicit cost. it is imputed cost of the fixed asset consumed (worn-out) in the production of output.

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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.

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now i did a google search and all results are for IMPLICIT.. but marking scheme said explicit,,,, i;m confused

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thank you Manpreet for correcting me and for the knowledge :)

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let us wait for the experts to answer, i guess :)

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hmm first i also thought that ans is implicit..but now i think tht dep is explicit only..good try both of u..let us wait for the expert ans..

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The same debate is going on in my school as well. A CA said it wont be included , a book said explicit , i myself wrote explicit in my practice exam , but its implicit , i am certain of it , hmm only 80% sure , if i get a better answer , i ll let you know

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One more thing manpreet , companies do record implicit costs , payment of saleries to directors , payment of divident are implicit and recorded

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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.

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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.

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i also think that depre. is implicit cost,b'coz we need not make payment for it to outsiders(acc. to defination)..

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