How does accounting profit differ from economic profit?

**Summary Sentence:** Accounting profit and economic profit are two distinct measures used to evaluate a company's financial performance, each considering different factors. **Answer:** Accounting profit is the net income a company earns after subtracting all explicit costs, such as wages, rent, and materials, from total revenue. It is calculated based on standard accounting principles and is reported on the company's financial statements. Economic profit, on the other hand, goes a step further by also considering implicit costs, which include the opportunity costs of all resources employed. This means economic profit accounts for the potential earnings from the next best alternative use of those resources. Therefore, while accounting profit focuses solely on tangible, out-of-pocket expenses, economic profit provides a more comprehensive view by including both explicit and implicit costs. **Paraphrased Content:** Accounting profit and economic profit are two different metrics used to assess a company's financial health, each incorporating various elements. Accounting profit is determined by deducting all explicit costs, such as salaries, rent, and materials, from the total revenue. This figure is derived following standard accounting practices and is reflected in the company's financial reports. Conversely, economic profit includes not only these explicit costs but also implicit costs, which represent the opportunity costs of utilizing resources in their current manner instead of the next best alternative. Consequently, while accounting profit is concerned with direct, out-of-pocket expenses, economic profit offers a broader perspective by factoring in both explicit and implicit costs.