Examining the Definitions of Accounting and Economics (Profit, Capital Markets, CAPM and APT, EVA, CFO Role Evolution) | Q&A

The Definitions of Accounting and Economics

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 What are the differences between accounting and economic definition of profit? 

An accounting profit is the business income surplus more than the business expenses. A business makes money after it sells its goods or services. When the money made is more than the money they spend when making the goods and services, then it is said that that business has made an accounting profit. When the total cost is deducted from the total income made by a business, in case the remaining amount is positive then it is regarded as accounting profit. An accounting profit is therefore the excess of accounting income over accounting expenses.Accounting Profit = Total Income – Total Expenses

Economic profit includes opportunity cost of the firm that is used for production. The opportunity costs are the implicit costs.…