The difference between corporate accounting profit and economic profit
The difference between economic profit and accounting profit is mainly reflected in the following medical points:
1. The service subjects are different.
2. The purpose angle is different. Accounting profit is an indicator of operating results from the perspective of the business owner, while economic profit is from the perspective of the company, which is a relatively independent entity. Capital can be raised through two channels: debt capital and equity capital. For the company, both creditors and shareholders are "investors". When the company calculates that it has economic profits, it means that investing in this company will obtain "excess profits", which will naturally attract more funds into the company.
3. The measurement range is different.
4. The measurement basis is different.
5. Cost measurement is different.
6. Different application scopes.
7. The measurement procedures are different.
8. The basis for evaluating the economic benefits of enterprises is different.
Economic profit is the concept of profit held by economists. Although economists' profit is also the difference between revenue minus costs, economists have a strict definition of profit. For accountants: profit = total revenue – total costs, however for economists, this result overestimates profits. The reason is: economic income is different from accounting income, economic cost is different from accounting cost, therefore, economic profit is different from accounting profit.
Economic costs include not only the costs actually paid in accounting, but also opportunity costs, that is, the remuneration that an enterprise must pay to resource providers in order to attract resources from other production opportunities. These rewards can be explicit or implicit. We call the monetary payments made by an enterprise to non-enterprise owners who provide resources to it called explicit costs, and the costs incurred by an enterprise using its own resources are called implicit costs.
Both external resources (such as debt capital) and self-owned resources (such as shareholder capital) have costs. The return required by shareholders for investing capital is no less than the interest of creditors and the salary requirements of employees. For a company, implicit costs are the profits that can be gained by using the resources it owns for other best uses. Accountants do not recognize hidden costs and do not include them as deductions in the income statement. The reason is: There is no objective way to calculate hidden costs, and accountants are unwilling to make unfounded estimates.
For example: Wang is the sales manager of a company, with an annual salary of 80,000 yuan, and can earn 5,000 yuan in interest when deposited in the bank. Now I have decided to open a department store and use the one storefront I own as a supermarket business premises. The original store rent income is 30,000 yuan, and 5 employees need to be hired. After one year of operation, the accounts are as follows: total income: 250,000 yuan; cost: 60,000 yuan; employee wages: 30,000 yuan; water and electricity miscellaneous expenses: 10,000 yuan; total (explicit) cost: 100,000 yuan; accounting profit: 150,000 yuan.
However, this accounting profit cannot accurately show the economic status of the enterprise because it ignores hidden costs: Wang provided financial capital, stores and labor, and hidden costs (forgotten income) occurred, then the economic profit is: accounting profit: 150,000 yuan; foregone salary income: 80,000 yuan; foregone interest income: 5,000 yuan; foregone rental income: 30,000 yuan; total hidden costs: 115,000 yuan; economic profit: 35,000 yuan.
The concept of "profit" between economists and accountants has different meanings. Accounting profit = total revenue – explicit cost, economic profit = accounting profit – implicit cost = total revenue – opportunity cost of all inputs.
If the total revenue of an enterprise exceeds all economic costs, the remainder belongs to the enterprise, and this remainder is called economic profit or net profit. The difference between accounting profit and economic profit should also be considered: the inconsistency in the accounting measurement basis. The calculation of accounting profit is based on the accrual basis, while the calculation of economic profit organically combines and unifies the accrual basis and the cash flow method (cash flow method). Modern enterprises have established financial management systems with value management as the core. The economic profit method has become an increasingly popular financial management idea. Its attractiveness is that with economic profit as the corporate goal, it can not only promote the concept of value creation to penetrate into the enterprise, but also be consistent with corporate shareholders and creditors' requirements for higher income goals than capital costs, thus helping to maximize corporate value and shareholder wealth.
