My wife and I are having a disagreement as to what it means. She says that it means the cost of something you purchased some time ago, and had you not purchased it the money would be gone anyway.
Basically, 3 years ago we decided to purchase something to hold onto and sell later on when the value goes up. She says that the purchase price can be considered as profit since it was so long ago. I disagreed. Anyway, she calls it “sunk cost”.
In: 59
Okay, we know “sunk cost” is not the right name for what she’s talking about, but what is she talking about?
I know almost nothing about accounting, but I would like to learn, so I hope y’all will bear with me and.possibly help me figure this out.
After the application of a bit of Google Fu, I think she’s saying the entire net sale price of the investment in question will add to your liquid net worth for this year regardless of what it does to your total net worth because the original price has little to no bearing on your liquid net worth for this year.
Do I understand what she’s saying?
Is she correct?
Is there a word for what happened to the original purchase price in terms of current liquidity?
Edit: removed some words for clarity’s sake..
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