Question

Difference between accounting profit and economic profit in economics

Answer 1

Profit is one of the most widely watched financial metrics in evaluating the financial health of a company.

Accounting profit can be defined as the amount of money left over after deducting the explicit costs of running the business. Explicit costs are merely the specific amounts that a company pays for those costs in that period. For examples: wages.

Economic profit is partly same to accounting profit in that it deducts explicit costs from revenue. However, economic profit also includes the opportunity costs for taking one action against another in the period. Economic profit  can also be determined by economic principles and not by accounting principles.