CA Inter P4 · Chapter 1 · Question 8 of 8
Interest on the proprietor's own capital, which is charged in cost accounts to compare the results of alternative proposals but involves no actual payment, is an example of:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Imputed (notional) cost
Explanation
Imputed or notional costs are hypothetical costs that do not involve any cash outlay, such as interest on own capital or rent on owned premises. They are considered for decision making and comparison, and are an item of difference when reconciling cost and financial profits.
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