Formula To Calculate Accounting Profit :

Accounting profit is the net income that remains after subtracting the explicit costs from a company total revenues in accordance with GAAP.

To calculate the accounting profit, use the following formula

Accounting Profit = Revenue - Explicit Costs

Explicit costs of running the business are

1) Raw materials Costs

2) Labor Costs

3) Transportation costs

4) Sales and marketing costs

5) Production costs and overhead

6) Inventory needed for production

Example :

Mr. Beden invested $100,000 to start a steel business and earned $120,000 in profit, What is the accounting profit of Mr.Beden ?

Accounting Profit = Revenue - Explicit Costs

Accounting Profit = $120,000 - $100,000

Mr. Beden accounting profit would be $20,000.