Incurred cost

An incurred cost is a cost arising from the consumption of an asset or service, or from a loss that has been sustained. For example, a business uses water over the course of a month, but is not billed for its water usage until the end of the quarter. Under the accrual basis of accounting, the firm incurred the cost of the water when the water was consumed, so the firm should accrue this cost in its month-end financial statements.

Related Courses

Cost Accounting Fundamentals