An unexpired cost is a cost that is left until an item has paid for it i.e. difference between the price paid for an item and the amount of money it has generated. An unexpired cost is an asset. It is an inventory until sold for example buildings and equipments. Under an unexpired cost the future benefits remain from the ownership of an asset being used in the production process. The unexpired or the unused portion of the economic benefits from the expenditure would represent an asset for the future use. The unexpired cost is a measure that is primarily used for financial reporting within the firm. The unexpired cost of an asset is calculated as
Unexpired cost= Historical cost of an asset- accumulated depreciation
The balance sheet is a statement of unexpired costs i.e. the assets. The concept of matching revenues and expenses on the income statement is central to financial accounting. The matching concept provides a basis for deciding when the unexpired cost becomes an expired cost. The balance sheet and the income statement are two financial statements. The balance sheet is statement of unexpired costs (assets) and liabilities and the owners’ capital. The income statement is a statement of revenues and expired costs (expenses and losses).
An unexpired cost refers to all those costs, including inventory costs and miscellaneous prepaid or deferred costs that are associated with the revenue of future periods. These unexpired costs are then carried forward to future periods as assets because they represent future benefits. The unexpired cost has the capacity to contribute in the production of revenue in the future. Inventory cost is an example of unexpired cost, as it can be sold in the subsequent years and will influence total revenue earnings of a firm.
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