Sunk Cost
Accounting glossary · Understand, connect, apply
A sunk cost has already been incurred and cannot be changed by the decision now being considered. It is excluded from a forward-looking comparison of alternatives.
Example
A business paid 4,000 for a feasibility study last month. Whether it launches the project or stops, that payment cannot be recovered, so it does not distinguish today’s choices.
Remember the difference
Past spending can provide information, but it does not justify further spending by itself. Future disposal proceeds, taxes or cancellation payments can still be relevant and must be considered separately.
Browse the accounting glossary → · Follow a learning path
Published 4 November 2026. Prepared with AI assistance; examples are fictional and simplified for learning.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
← Return to the accounting glossary