What is accounting profit?

Accounting profit is the profit of a business that includes all revenue and expense items mandated under an accounting framework, such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). Thus, if total recorded revenues exceed total recorded expenses, the remainder is an accounting profit. Conversely, if total recorded revenues are less than total recorded expenses, the remainder is an accounting loss.

The accounting profit equation is:

Revenue per GAAP or IFRS - Expenses per GAAP or IFRS) = Accounting profit/loss

Example of Accounting Profit

ABC International records $100,000 of revenues in its most recent reporting period through the issuance of customer invoices, and also accrues an additional $20,000 of revenue, as per IFRS standards, resulting in $120,000 of revenue. ABC also records $85,000 of expenses in the same period through the recordation of supplier invoices and wage payments to employees, and also accrues an additional $25,000 of expenses, as per IFRS standards, resulting in $110,000 of expenses. The result is:

$120,000 Revenue per IFRS - $110,000 per IFRS = $10,000 Accounting profit

Related Topics

What are headline earnings? 
What are pro forma earnings?
What is EBITDA?
What is other comprehensive income?
What is the net income formula?