What is accounting profit?

Question

Zippia Team · Accepted Answer

Accounting profit is an organization's total earnings when calculated using generally accepted accounting principles (GAAP). It includes the costs of running a business, such as operating costs, depreciation, taxes, and interest.

Accounting profit may also be referred to as bookkeeping profit or financial profit.

Accounting profit displays the amount of money a company has made after subtracting all explicit costs used to run the business. Specific, explicit costs include:

Employees and labor
Inventory for production
Raw materials
Transportation costs
Production costs
Sales costs
Marketing costs

Accounting profit is a metric that is utilized to help access the status and overall financial health of an organization. Accounting profit is often displayed on company financial statements and is the net income earned by a company after subtracting all costs from revenue.