The main objectives of this research are to investigate the nature of Social Costs and their characteristics; their problems and negative effects on the welfare of society; and theoretical solutions to those problems. To help understand the nature and problems of social costs, as well as the solutions to those problems, from the perspective of the economic theory, definitions of social costs pioneered by welfare economists, such as John Stuart Mill, John Maurice Clark, Arthur Cecil Pigou, and K. William Kapp, have been reviewed in the first section of this research. After reviewing the literature on welfare economics, social costs have been defined and characterized. Then, problems of social costs and solutions to those problems have been discussed in the second section of this research. The problem with social costs is that they createa misallocation of available productive resources among industries, and thus, the maximum social welfare will not be achieved. Economists agree in principle that the solution to this problem lies in internalizing social costs into private costs of doing business to be reflected in the market pricing system. These market-type solutions to the problem of social costs have been discussed, and it was concluded that they do not really offer effective solutions, as there are serious practical' obstacles to them. In practice, social costs are extremely difficult, if not impossible, to identify and quantify in money terms with precision. The problem of Measurement has been dealt with in the third and final section, and it was concluded that accountants should not attempt to measure and -report the total costs to society created by a company's economic activities. More research works are needed as recommended at the end of this research
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