Accounting profit (会计利润 kuài jì lì rùn) is a company’s amount of revenue remaining after subtracting explicit costs such as the costs of factors of production and expenses for the running of the business. See also: economic profit; profit.
Accounting profit differs from economic profit as it only subtracts explicit costs which can be clearly identified from the total revenue, while economic profit considers both explicit and implicit costs.
Examples of explicit costs: raw materials, labor wages, sales and marketing costs, mortgage, rent.
Part 1: Breakdown of Words
- “Accounting” (会计 kuài jì) refers to the process of recording, measuring, and processing financial transactions.
- “Accounting” (会计 kuài jì) as in “accountant” (会计师 kuài jì shī), “accounting firm” (会计师事务所 kuài jì shī shì wù suǒ), or “accounting system” (会计系统 kuài jì xì tǒng).
- “Profit” (利润 lì rùn) as in “profit margin” (利润率 lì rùn lǜ), “gross profit” (毛利润 máo lì rùn), or “profit and loss account” (利润表 lì rùn biǎo).
Part 2: Example
- Accounting profit formula (会计利润公式 kuài jì lì rùn jì suàn gōng shì).
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