[This is part of the series: The Complete Guide To Economics 101.]
What is accounting profit?
Accounting Profit is profit that accounts for only explicit costs.
In this way, accounting profit ignores implicit costs.
Said different, accounting profit ignores opportunity costs.
Formally, this looks like:
Profit = Total Revenue – Total Cost
Where:
Total Cost = Explicit costs only
Economic profit, however, accounts for both explicit and implicit costs.
