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What is the difference between Accounting profit and Economic profit?
economic profit & accounting profit:Economists measure a firm's economic profit. Accountants measure the accounting profit.Economic cost=total revenue-explicit cost-implicit cost. accounting profit= total revenue- explicit cost.Economic profit is smaller than accounting profit. - Arnab____________________________As per my understanding :(Jignesh Patel)Accounting profit involves non cash transactions/adjustments for depreciation, allowances, provisions etc. and application of relevant accounting standards such as capitalising development costs, leased assets etc. And importantly accounting profit is calculated for a period of time. It is calculated for whole of the entities business.Where as, Economic Profit is calculated from the perspective of economist over long run. It means the profit in real terms. It is normally calculated for the purpose of project appraisal. This includes calculating and matching the projects Cash Inflows with Cash Outflows at its present value by discounting them at the companies required cost of capital. This task requires consideration and inclusion of both financial and non-financial risk factors that affects the profits. Relevant adjustments to the above cashflows are required. For example, it considers opportunity costs, residual value, changing working capital requirements, changes in inflation level, tax rates, interest rates etc. on the cashflows over the period of the project. Obviously, this project life can be broken down into annual projections parallel to the accounting year._____________________________In the context of general management accounting, the difference between accounting profit and economic profit is simply that economic profit takes into account opportunity cost (the cash flows we gave up by choosing to devote scarce resources to one project rather than another). The basis for the notion of opportunity cost is that, since we don't have unlimited resources to invest, we are not able to invest in every single opportunity for profit, and so we must choose which projects we will invest in. And since we don't have to resources to undertake every profitable project, we also have to choose to reject some opportunties that would also be profitable. But when we reject one opportunity in favor of another, we also give up any return we would have gotten by accepting the opportunity. That profit we give up is the opportunity cost of not accepting that opportunity.Economic Profit equals Accounting Profit less Opportunity CostTo illustrate:On January 1, I call my $50,000/year job and tell them I'm quitting to start my own company. I then spend $100,000 of my own money to start and operate the new business over the first year ,and I spend all of my time running the business. At the end of the year, I have revenues of $120,000 for the year, and $100,000 in expenses for the year.My accounting profit for the year is revenues less expenses, or $120,000 - $100,000 $20,000 accounting profit. (Taxes and discounting are not figured into this example, in order to keep it simple). Making $20,000 on an investment of $100,000 looks like a good return - until I consider economic profit.But if I had just stayed in my old job, I would have made $50,000 for investing the exact same amount of time as I did running my business. The $50,000 salary I gave up by choosing to go into my own full time business (since there is only one me, and I couldn't do both) is the opportunity cost of my decision to go into business for myself. To calculate my economic profit or loss, I must deduct from my $20,000 accounting profit the $50,000 I gave up to see the real results of my decision in economic terms.As it turns out, my accounting profit of $20,000 is actually an economic loss, when I factor in what I would have realized if I had chosen to remain in my old job.Accounting Profit less Opportunity Cost equals Economic Profit or (Economic Loss)$20,000 less $50,000 equals $(30,000) economic lossyes that's all
What is the value of a 1934 will pay to the bearer on demand 100 dollar bill?
Despite its age, your bill is only worth face value in worn condition, up to maybe $140 if almost unworn. $100 bills did not circulate regularly until the last 15 or 20 years as inflation rose, so many older ones stayed in circulation for very long periods of time.
What is the advantages and disadvantages of Cable-stayed bridge?
Advantage: It is strong. Also the cables won't break under extreme temperatures. Disadvantages: Wind is a big factor. It can rock the bridge side to side, causing the cables to become lose.
If the price of beef doubled and the price of chicken stayed the same people would most likely buy?
If the price of beef doubled while the price of chicken remained stable, consumers would likely shift their purchasing behavior toward chicken, as it becomes the more affordable option. This substitution effect occurs because people often seek to maximize their utility by choosing cheaper alternatives when the price of a preferred good rises significantly. Consequently, we would expect an increase in chicken sales and a decrease in beef sales.
What effect did Fords economic policy have of the economy?
inflation went down, but unemployment remained high
Why did Catholics move to Maryland despite the Calvert support?
Because Cecil Calvert stayed in England, they stayed , too.
Why catholics move to Maryland despite the calverts support?
Because Cecil Calvert stayed in England, they stayed , too.
Why did catholics move to Maryland despite Calverts support?
Because Cecil Calvert stayed in England, they stayed , too.
Why did few Catholics move to Maryland despite the calverts'support?
Because Cecil Calvert stayed in England, they stayed , too.
Why did few catholics move to Maryland despite the Calvert's supports?
Because cecil calvert stayed in england, they stayed, too
Why did few catholics moves to Maryland despite the Calverts' support?
Because Cecil Calvert stayed in England, they stayed , too.
Why did few catholic move to Maryland despite the Calvert support?
Because cecil calvert stayed in england, they stayed, too
Why did few Catholics move to Maryland despite the Calvert support?
Because cecil calvert stayed in england, they stayed, too
Why did few Catholics moved to Maryland despite the Calvert's support?
Because cecil calvert stayed in england, they stayed, too
Why did few Catholics move to Maryland. despite the Calvert support?
Because cecil calvert stayed in england, they stayed, too
Why did few Catholics move to Maryland despite the Calvert' support?
Because cecil calvert stayed in england, they stayed, too
Why did few catholic move to Maryland despite the calverts support?
Because Cecil Calvert stayed in England, they stayed , too.
