Accounting Profit
 |
Definition of 'Accounting Profit'A company's total earnings, calculated according to Generally Accepted Accounting Principles (GAAP), and includes the explicit costs of doing business, such as depreciation, interest and taxes. |
 |
Investopedia explains 'Accounting Profit'Accounting profits tend to be higher than economic profits as they omit certain implicit costs, such as opportunity costs.For example, if you invest $100,000 to start a business and earned $120,000 in profit, your accounting profit would be $20,000. Economic profit would add implicit costs, such as the opportunity cost of $50,000 should you have been employed instead during that period. As such, you would have an economic loss of $30,000 ($120,000 - $100,000 - $50,000). |
Related Definitions
Articles Of Interest
-
All About EVA
Looking for a formula to determine whether a company is creating wealth? Time to learn all about economic value added. -
Understanding Economic Value Added
Discover the simplicity of this important valuation metric. We reveal its underlying ideas and examine each of its components. -
Depreciation: Straight-Line Vs. Double-Declining Methods
Appreciate the different methods used to describe how book value is "used up". -
Financial Statement: Extraordinary Vs. Nonrecurring Items
When it comes to analyzing a company, successful analysts spend considerable time differentiating between accounting items that are likely to recur going forward from those that most likely will ... -
Get A Career In Showbiz Accounting
An accounting career doesn't have to be boring. If you love numbers, but want excitement as well, consider the field of showbiz accounting. -
What Management Accountants Do
If you like keeping track of a company's income and expenses but also want to hold a position with significant responsibility and authority, management accounting could be the job for you. -
GAAP And The IFRS Standards Convergence Efforts In 3 Substantial Areas
Understand the specific steps that have been taken in hopes of converging the GAAP and the IFRS accounting standards, despite the philosophically and culturally based methodological differences ... -
Using The Price-To-Book Ratio To Evaluate Companies
The P/B ratio can be an easy way to determine a company's value, but it isn't magic! -
Small Business: Speed Up Receivables To Avoid A Cash Crunch
Waiting for customers to pay can be a losing game. Look to factoring for quicker cash. -
The Impact Of Combining The U.S. GAAP And IFRS
The convergence of accounting standards is changing the attitudes of CPAs and CFOs toward harmonization of international accounting.
Free Annual Reports
