Dear colleagues
would you be kind to provide me with papers on the economic and accounting profit. I want to know the different in concept and application on taxes also in relation to accounting profit
In Simple terms,
Economic Profits = Accounting Profit - Intangible costs(Ex. Opportunity cost).
Where,
Accounting profit : Profit recorded in the financial statements
Intangible cost : Costs not recorded in books of accounts but are to be borne by the owner.
Revert if more details are needed.
Regards,
Dr. Prasad Joshi
Dear Saifeldin,
The economic profit is defined as the difference between revenues and loss when the opportunity costs of production were recorded in the amount of expenditure or so-called “super profits” or “above normal”.
Economic profit is a measure of performance that compares net operating profit to total cost of capital.
Economic profit is also referred to as Economic Value Added (EVA). There are three components necessary to calculate economic profit: Net Operating Profit After Tax (NOPAT), CI (Capital Invested), and the Weighted Average Cost of Capital (WACC).
The formula is:
EVA = Net Operating Profit After Tax - (Capital Invested * WACC)
, where
EVA – Economic Value Added;
NOPAT - Net Operating Profit After Tax;
CI - Capital Invested;
WACC - Weighted Average Cost of Capital.
Accounting profit is profit or loss for a period before deducting tax expense (financial result).
Regards,
Snezhinka Konstantinova
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