Cash Cost

AAA

DEFINITION of 'Cash Cost'

A cash basis accounting cost recognition process that classifies costs as they are paid for in cash, and is recognized in the general ledger at the point of sale. This method is contrary to the accrual cost recognition method, which directly influences the operating cash flow figure.

INVESTOPEDIA EXPLAINS 'Cash Cost'

Cash costs are costs that businesses pay for when using cash, or a check, but not credit. On a cash accounting basis, the costs paid for by using credit would not be recorded in the general ledger until the actual cash has been paid. This is the main reason why firms moved away from the cash accounting method to the accrual method, as the accrual method will recognize credit transactions as well as cash transactions.

RELATED TERMS
  1. Stored-Value Card

    A type of electronic bank debit card. Stored-value cards have ...
  2. Cash Basis

    A major accounting method that recognizes revenues and expenses ...
  3. Accruals

    Accounts on a balance sheet that represent liabilities and non-cash-based ...
  4. Cash Trigger

    A condition that triggers an investor to make a trade or take ...
  5. Historical Cost

    A measure of value used in accounting in which the price of an ...
  6. Accounting Method

    The method by which income and expenses are reported for taxation ...
Related Articles
  1. Should You Pay In Cash?
    Budgeting

    Should You Pay In Cash?

  2. The Essentials Of Corporate Cash Flow ...
    Retirement

    The Essentials Of Corporate Cash Flow ...

  3. Operating Cash Flow: Better Than Net ...
    Markets

    Operating Cash Flow: Better Than Net ...

  4. Understanding Economic Value Added
    Markets

    Understanding Economic Value Added

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center