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Accounting profit is the amount of money that is still available after all direct operating expenses have been paid. Explicit costs consist of labour, inventory needed for manufacturing, raw materials, production, sales, and marketing expenses. Accounting profit is distinct from economic profit in that it solely accounts for the money that a company spends and the money that it brings in.
The impact of nonrecurring items is also eliminated in underlying profit, which is distinct from accounting profit. Companies frequently include many definitions of profit in their financial statements. Some of these numbers include every expense and revenue line item included on the income statement. Others are imaginative interpretations that management and their accountants have put together. Accounting profit, also known as accounting profit or financial profit, is net income obtained after deducting total revenue from all dollar costs. In essence, it displays how much money a company has remaining after paying its explicit operating expenses.
The following expenses should be taken into account:
- wage-related labour
- Stock required for production
- components, raw
- Transport expenses
- Costs of sales and marketing
- expenditures on labour and materials
