The article presents views of the author about a work which appeared in publications of the American Association of University Instructors in Accounting. I pointed out that the term cost, the meaning of which is by no means standardized, is used to refer primarily to three things, money costs, economic costs and business costs. Money cost is the sense in which the term is popularly used. Most persons think of cost in money terms, it is the price that is paid for goods and services. Scholar Alfred Marshall employed the phrase expenses of production to designate such payments. Since cost in this sense is equivalent to the money payments for goods and services, it follows that the total money paid by all consumers for wages, rent, interest, and profits must be equal to prices paid by all consumers for the satisfaction of their wants. Money costs to the consumer essentially represent selling price, or sales, they are what the consumer pays. The concept of economic cost is very different from that of money cost, as the term is used by the average man, whether consumer or producer. Economic cost is subjective, it is cost in terms of labor, exertion, sacrifice, or disutility. Some writers have called it pain cost and it is measured in irksome labor or reluctant waiting.

To business men it has long been apparent that concerns which sell exclusively on account are obliged to set their prices at higher levels than those which sell exclusively for cash. Three major reasons are commonly assigned to explain this fact. First, a concern selling exclusively on account requires a larger amount of working capital than one which sells exclusively for cash, which necessitates higher prices or a more rapid turnover or both for the business selling on a credit basis, if Its profits are to be equal to those of the business on a cash basis. Second, a concern which sells exclusively on account find its working capital continually undermined from losses on un-collectible accounts receivable. To show a satisfactory rate of profit, therefore, it is essential that the management charge an estimated insurance premium to compensate for this loss. Third, the concern on a credit basis finds additional expenses incurred in granting credit and In making collections. And on this account, also, businessmen early recognized the necessity for a higher price list when sales were made exclusively on account then that needed when sales were made exclusively for cash.

The second decade of the present century was marked by a great development in that phase of accounting having to do primarily with principles, practices, and procedures in the field of manufacturing. The name applied to this body of material was "cost accounting." During this period, the development of cost systems in manufacturing institutions, the attention of engineers and industrial associations to cost accounting, and the inclusion of courses in cost accounting in the larger universities of the country gave evidence of this new development in the field of accounting. Frequent statements of writers that the principles of cost accounting might advantageously be applied to selling and administrative expenses, and that commercial enterprises might well emulate the cost accounting of industrial concerns, are conducive to serious reflection upon the possible existence of a science, inherent in factory or cost accounting, which is more fundamental than surface conditions seem to indicate. There is at least a suggestion that the description of technical devices and procedures which forms the bulk of cost accounting does not exhaust the possibilities of the subject.

From time to time there appear in the public press news and others items relating to the costs of higher education. Sometimes the reference is to the distinctly personal problem of costs incurred by individuals who "go to college." At other times the reference is to the problem of the costs incurred by colleges and universities in rendering their services. These two problems are, of course, related, not infrequently they are confused. It may be worth while, therefore, to differentiate briefly between them. It seems to the writer that any inquiry into college and university operating costs should recognize this three-fold classification of functions. It may from time to time be most pertinent, if indeed not necessary, for academic and business administrative officers to compare courses and amounts of income with causes and amounts of expense. Deficits do appear, sometimes with alarming frequency. Endowment and special trust funds, moneys available from public treasuries and payments by students may provide quite inadequately for current needs.