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This question is about accountant.
Accounting Profit vs. Economic Profit
Accounting profit is the net income for a business or company, while economic profit is income earned after taking explicit and implicit company costs into consideration. Accounting profit is also known as a company's earned profit or revenue minus expenses and is reported on a company's income statement.
Economic profit is determined by subtracting total costs from a company or investment's total revenue or return. It subtracts explicit costs from revenue and also includes opportunity costs for a given period. Implicit costs, generally the costs of a company's resources, are also considered in the economic profit equation.
Here are the key differences between accounting profit and economic profit:
| Economic profit is money earned after taking a company's explicit and implicit costs into consideration. | Accounting profit is the net income for a business or company, also considered revenue minus expenses. |
| Economic profit is determined by subtracting total costs from a company or investment's total revenue or return. | Accounting profit is determined after subtracting expenses, like labor costs, raw materials, transportation and storage costs, and production, sales, and marketing costs. |
| Economic profit points to total revenue from sales, minus opportunity costs from all inputs. | Accounting profits are reported on a company's income statement. |
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