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How to Calculate Accounting Profit.
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How to Calculate Accounting Profit.

Rosemary Njeri

Accounting profit is a company’s total earnings, calculated according to generally accepted accounting principles.

Unlike economic profits, accounting profits does not include opportunity costs.

Accounting profit can be utilized to determine a company’s taxable income for purposes of loan considerations, interest calculations, growth estimates and internal budget considerations.

Formula to calculate accounting profit.

 Calculate Accounting Profit.

Explicit costs include Material cost, Labor cost, Production & overhead cost, transportation cost, sales and marketing cost, etc.

Total revenue refers to the total receipts from sales of a given quantity of goods or services.

Example:

If a company’s total revenue’s value is $ 500million and the total cost of the explicit costs is $ 100million. Determine the accounting profit of the company.

 Calculate Accounting Profit.

Therefore, the accounting profit of the company is $ 400 million.

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