An unexpired cost refers to funds that has been paid for a particular expense, but not yet recorded in the books as an expense as it still has residual value.
In a simplistic world, unexpired cost can be referred to as the cost of an asset that has yet to pay for itself.
And the formula to calculate it would be:
Items that consist of unexpired costs are usually assets that have been pre-paid for, but yet to be used for their full economic benefits.
For example, an advertising campaign has been paid for 6 months amounting to $6,000. At the end of one month, $1,000 has been used up and there is remaining $5,000 worth of advertising yet to be received by the company. Therefore, the unexpired cost is $5,000.
To adhere to the matching principle of accounting, unexpired cost items are listed as current assets in the balance sheet.
And when it is officially used as an expense, it would be moved to the expense column.
It can also be applied to depreciation.
For a financial year, depreciation on assets and property would be expired cost. While the remaining value on the asset would be unexpired costs.
Cost of goods sold (COGS) is also recorded when inventory is sold. This represents expired cost. Inventory that has yet to be sold would hold unexpired costs as they have been paid for, but yet to be sold.
