Source: EconLog
by Jon Murphy
“In any principles of economics class, students learn the difference between accounting profit and economic profit. Accounting profit, which is what one typically understands when discussing ‘profit,’ is total revenue minus your monetary costs. It is what appears on the bottom line of an accounting statement as ‘profit.’ Economic profit is a broader term. Recall that, for economists, ‘cost’ is a term of art: it is the highest-valued alternative not undertaken. This includes both monetary costs and alternative uses of your resources, often called implicit costs. Economic profit, thus, is total revenue minus total costs (both your monetary and your implicit costs). Implicit costs do not show up on an accounting statement, yet they are still vital to making life decisions.” (01/06/26)
https://www.econlib.org/econlog/accounting-vs-economic-profit