What is Accounting Profit?
Accounting profit (or bookkeeping profit) is the net income earned by a company after subtracting all explicit costs from total revenue. It is the profit figure reported in financial statements and used for tax purposes.
Formula
Accounting Profit = Total Revenue - (Operating Expenses + Interest + Depreciation + Taxes)
Explicit vs. Implicit Costs
Accounting profit only considers explicit costs (actual monetary payments like wages, rent, materials). It does not account for implicit costs (opportunity costs), which are considered when calculating Economic Profit.