Articles

Distinction between economic and accounting profit

The general definition is valid for both economic and accounting profit: income - expenses But the terms differ in: what is included in the formula: economic profit: explicit (i.e. expenses in the profit and loss) and implicit costs (i.e. costs that would be sacrified if we would

Division of costs to various categories

Costs can be divided into different categories according to their drivers or behavior. In general, cost classification helps understand the costs by studying their behavior and drivers with the aim of their reduction or optimization. And as in other life situations, it is much easier to influen

Difference between profit and cash-flow

Profit is usually not equal to cash flow because profit is defined as the difference between income and expenses, while cash flow as the difference between receipts and expenditures. Accounting profit is the final line in the income statement, while cash flow is the final line in the statement of c

Difference between expense and expenditure

Expense is not the same term as expenditure as well as income is not the same as receipt.   Expenditures (and receipts) are associated with cash movements and as such affect the entity´s cash flow. Expenses represent consumption of inputs (material, labor etc.) in order to generate re

Accounting profit

Accounting profit = income - explicit costs It is a term defined by accounting standards, rules or national legislation used for the purpose of preparing financial statements or possibly tax returns. The difference between economic and accounting profit is described in this article. Accounting pr

Forms of accounting profit used in practice

Above in other articles were mentioned forms of profit that are somehow clearly defined. Nevertheless, the economic world is fond of other indicators and some of them can be usually found in the reporting system of nearly any company. They are often not based on any GAAP (not mentioned even in IFRS)

Economic profit

Economic profit: income - explicit and implicit costs   It is a concept arising from general economic theory and its purpose is to evaluate the success of the company. The difference between the economic and accounting profit is described in this article.

Distribution indirect costs (Distribution overheads)

Distribution indirect costs (distribution overheads) costs that are incurred to be able to deliver the product to customer. Together with administrative and selling overheads they form non-production indirect costs (non-production overheads). Distribution overheads include for example: wages of

EBIT / PBIT

EBIT (PBIT) is the total profit/loss without: interest expense (i.e. cost of debt) income tax possibly also profit/loss from discontinued operations (defined in IFRS, other GAAPs may not use this concept)   EBIT usually also includes so-called Non-operating result, which is the result o

Profit

Profit is generally defined as a difference between income and expenses. It is one of the most common business objectives, a kind of reward for risk and the key measure of success in corporate life. However, there are many different forms of profit which greatly limits its comparability. Above

Tax profit

Tax profit is profit serving as the basis for calculating income tax under the provisions applicable tax law. Tax profit calculation is usually based on the accounting profit that is transformed to tax base.

Operating income / Operating profit

Operating income is the profit/loss from ordinary operations of the company without: interest expense (i.e. cost of debt) income tax incomes and expenses from non-operational activity (i.e. Non-operating result), which is the result of other than ordinary activities. possibly also profit/loss

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