Profit or loss pertaining to a specific accounting period before deducting tax expense. In other words, it refers to profit (loss) reached at after subtraction of “explicit” costs and expenses from total revenue or total sales:
Accounting profit = total revenue – total explicit cost
From an accounting perspective:
Revenue = accounting profit + explicit cost
This profit is calculated based on accounting facts and figures, and doesn’t incorporate the effect of opportunity cost (otherwise, it is called economic profit). In general, accounting profit is larger than economic profit as calculation of the latter takes into consideration in addition to explicit costs all implicit costs. From an economic standpoint:
Revenue = economic profit + implicit cost + explicit cost
The accounting profit is also known as bottom line or net income or bookkeeping profit.
