Question

Accounting profit can never be higher than economic profit. Do you agree or disagree with this sentence? Explain in 5 lines.

Answer 1

False

Accounting profit is some having some difference from the economic profit

Accounting profit is a simple difference of total revenue and total cost

But if we talk about economic profit then it consideres the opportunity cost also that we called implicit cost and profit is the difference of total revenue minus total cost minus implicit cost

Implicit cost are those costs which are not included in the booking account but they are having the cost

For example if a company hire an employee then it spends some money on his training but this fee is not included in the balance sheet or income statement of the company

So it is false to say that accounting profit is less than the economic profit as implicit cost are not included but accounting profit data is always recorded