Difference Between Accounting Profit and Economic Profit - Formula -
&&&&&&&&&&&&&&&& &&&&
&&&&&& &&&&&& &&&& &&
&&&&&&&&&& &&&& && &&
&&&&&&&&&&&&&&& &&&&&&
&&&&&&& &&&& &&&&&&&&
&>> Difference
Between Accounting Profit and Economic Profit
Difference Between Accounting
Profit and Economic Profit:
Accounting Profit:
There is no satisfactory definition of the term profit. Generally profit of a
firm is defined as:
&The access of revenue over its current costs&.
The word cost carries different meanings with economists and accountants.
accounting:
The term Profit equals total revenue - explicit costs.
This is the profit used by accountants to determine a firm's taxable income.
Explicit costs are the actual cash payments for resources purchased in resource
markets. These are the rent paid on land and plant and equipment, wages to
labor, interest on capital, cost of raw material, transport charges etc., etc.
When all these explicit costs are subtracted from the firm's total revenue, we
get &accounting profit.
Formula For
Accounting Profit:
Accounting Profit = Total Revenue -
Explicit Costs
Example of
Accounting Profit:
Accounting profit is explained by taking a simple example. Let us suppose,
the total revenue of a firm from the sale of goods in 2006 is $90000. Its
costs on the purchase of raw material, payment of wages and other utilities
i.e., explicit costs are $35000. The firms accounting profit will be $55000.
Total sales revenue.............$90000
Cost of raw material = $15000
Wages to labor and other utilities =
Accounting profit = $90000 - ($15000 + $20000) = $55000
(Total Revenue - Explicit Cost)
When depreciation charges of capital equipment used by the firm and the
amount of money paid to the government as taxes is deducted from gross profit
or Accounting profit, we get net profit of accountants.
Economic Profit:
Economic profit is different from accounting profit. Accounting profit
ignores the opportunity cost of the firm's own resources used in the
production of goods. The economist include these costs named as implicit costs
while determining the total cost of production.
&If a firm's total revenue exceeds all its
economic costs both explicit and Implicit, the residual which goes to the
entrepreneur is called an economic or pure profit&.
Thus economic profit
equals total revenue less all costs both explicit and implicit.
A firm's Implicit costs are the opportunity costs of using its self owned,
self employed resources. Implicit cost include use of firm's own building, use of its own capital, and the business owners time given for the production of
goods. While determining the total costs, the money payments which these self
employed resources could have earned in their best alternative uses should be
at and added in cost. The implicit costs are in a way opportunity costs. Economic profit takes into account the opportunity
costs of& all resources used in production. Implicit costs also include normal
profit earned by a firm.
Normal profit is the minimum amount required to keep
on entrepreneur engaged in the present line of production.
Formula For Economic
Profit = Total revenue - (Explicit Cost + Implicit Cost)
Example of Economic
Suppose a person uses, his own resources, land, capital, his own
time in the production of goods. The opportunity costs of these resources is
included below in finding out economic profit of the firm.
Accounting Profit = $55000
Entrepreneur's own forgone salary& =
Foregone interest on capital = $1000
Foregone rent = $2000
Economic Profit = $12000
Summing Up:
(a) Accounting profit
is the firm's total revenue less its explicit costs (b) Economic profit
to the economist is the total
revenue of a firm less explicit and implicit cost.
Implicit cost includes normal
profit to attract and retain an entrepreneur engaged in the present line of
production.
Relevant Articles:
Principles and
Theories of Micro Economics
Principles and
Theories of Macro Economics
Development and
Planning Economics
Monetary Economics and
Public Finance
&&&&&&&&&&&&&&&&&&
&&&&&&&&&&&&&&&
&&&&&&&&&&&&&&&
&&&&&&&&&&&&&&&
&&&&&&&&&&&&&&&
&&&&&&&&&&&&&&&
&&&&&&&&&&&&&&&
material on this site is the property of
. No part of this website may
be reproduced without permission of economics
All rights reserved Copyright
(C) 2010 - 2015谁知道accounting profit 和 economic profit 的区别?accounting profit = total revenue - total explicit costeconomic profit = total revenue - opportunity cost = total revenue - (total explicit cost + total implicit cost)
economic profit =accounting profit-opportunity cost我不是很懂~这是没有把自己当人看时才出现的最常用的例子就是,你每天工资10块,你今天请假炒股票,投资100块,拿到120块.会计利润是20块.经济利润是10块.
为您推荐：
其他类似问题
accounting profit 又叫business profit 企业利润= 收入-显性成本；economic profit 经济利润= 收入-显性成本-隐形成本。explicit cost 是指那些可以看到的direct payment，比方说一个企业do business所要花费的costs，ie： rent，wages，material等等而implici...
扫描下载二维码1. Introduction
1.1 Introduction to Competitive Output本周的内容...
赞(0)评论(0)
Module 6 笔记
注：非原创，整理自Coursera Lecture Notes
1.1 Introducti...
赞(0)评论(0)
应该是在Module 5给出了Economic Profit和Accounting Profit的定义：
赞(0)评论(2)Accounting Profit Vs. Economic Profit - Finance Train}