The Difference between Sunk Costs and Opportunity Costs: Reporting and Role in Decision Making

Reporting

• Sunk costs have already been paid for and are reflected on balance sheets and financial statements
• Opportunity costs are not shown on financial statements, though they may be included in managerial reports

Role in Decision Making

• Sunk costs have already been incurred and are therefore no longer relevant to future business decisions
• Opportunity costs are very important to future business decision-making as they represent the potential benefits a business misses out on when choosing one alternative over another.