In cost accounting, experimental expenses refer to the costs incurred in the development and testing of new products or processes. These expenses can include costs related to research and development, prototyping, testing, and other expenses related to the experimental phase.
The treatment of experimental expenses in cost accounting depends on the outcome of the experiment. If the experiment is successful, and the new product or process is approved for production, then the experimental expenses are treated as part of the cost of producing the new product or process. In this case, the experimental expenses are added to the product's cost of goods sold and are amortized over the life of the product.
On the other hand, if the experiment is not successful, and the new product or process is not approved for production, then the experimental expenses are treated as period expenses and are expensed in the period in which they were incurred. In this case, the experimental expenses are charged against current income and are not amortized over the life of the product.
It's important to note that the treatment of experimental expenses in cost accounting may differ depending on the specific accounting method used by a company. For example, under the US Generally Accepted Accounting Principles (GAAP), experimental expenses are expensed in the period in which they are incurred, regardless of the outcome of the experiment. However, under International Financial Reporting Standards (IFRS), experimental expenses may be capitalized and amortized over the life of the product, even if the product is not approved for production.