When I read about how much something COSTS, it gets me wondering.

 

How are these costs arrived at?

 

For instance.  I will read about some poor soul lost and needed a search and rescue effort for three days.

 

Then I read in the papers about how much the rescue effort cost and the figure I read is a big number.

 

And then they talk about how the person lost should be billed for that rescue effort.

 

So now.   The planes and ships were already in place.   The staff is already in place.   So where do the extra costs come in?  Perhaps more gas and if they have to pay overtime or hire extra planes etc.

 

But if you're using the same people and same equipment as before, then the cost would be what was used in three days as compared to what would have been used anyway.

 

And what about training flights, etc.?  Do you show how much those cost?  It's the same thing isn't it?

 

I see the same type of thing for the cost of wars, etc.   Well unless you disband the military those costs would have taken place anyway.

 

Do you see where I am coming from?

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Comment by Geezerchick on January 24, 2012 at 9:18am

I think billing people for rescuing them makes no sense. We all pay taxes so these rescue services are available if we need them. It's like insurance.  We don't bill people if the fire department comes to their house to put out a fire. These are services we have decided are part of a civilized society.

Comment by Steve S on September 20, 2011 at 8:20pm

JB - I agree, asset valuation in Financial Accounts is another whole kettle of rotten fish. WHether its Greek bonds, empty foreclosed houses in Florida. In fairness, I have to say that marking to market brings up its own not so wonderful issues. IMHO This isn't the best forum for talking much about accounting practices and their relative merits. 

 

I do appreciate your bringing up the Big Questions in clear language.

Comment by Joe Blow on September 20, 2011 at 1:29pm

The worst thing about it is that the accountants help make up the tax laws which hardly anyone knows how to read.

By the way I also questioned why Land on a balance sheet is always at 'cost' regardless of  where it is located.

 

For instance.  If the original land was purchased in a prosperous area which became a slum, shouldn't it be written down?

 

Comment by Steve S on September 20, 2011 at 1:05pm

Gotcha.

I think it is good for people who read your post to think about the questions you are asking. I tried to point to some resources for anyone interested, although I can't imagine anyone reading a book about cost accounting for jollies. I feel like my understanding of financial and cost accounting has given me valuable insights into all sorts of human activity. More than I would have ever expected. I was a Math and Econ major, took some electives in accounting courses.

Bogus cost accounting is an art and science all of its own. Last time I checked locally,the State of California had about 20 licensed CPAs in its workforce. With that few CPAs you can bet your bottom dollar any cost figures are bogus.

I'd imagine there are many more accountants working for the state who had taken the CPA test at some time but do not maintain Active License status. But I am not sure.

Comment by Joe Blow on September 20, 2011 at 11:23am

Steve S

 

I was an accountant before I retired.

 

That's why I posted the blog in layman's terms.

 

Figure it out yourself.

Comment by Linda Seccaspina on September 20, 2011 at 10:53am

I never know.. and sometimes I never think about it because I figure no one cares what I think.

HUGGGGGGGG

Comment by Steve S on September 20, 2011 at 10:33am

This is an old question that accountants answer. It's all out there for you to learn.

Ask any accountant. To get a deeper knowledge, start somewhere like here.

Any business student should be able to lend you a textbook that will explain how costs are accounted. Your public library probably has several texts as well. Search for "cost accounting".

 

Good luck, good learning!

 

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