Accounting profit is defined as

• A. Total revenue minus explicit costs, excluding taxes
• B. Total revenue minus explicit costs and depreciation
• C. Total revenue minus explicit and implicit costs
• D. Total revenue minus explicit costs

Answer: (D)

Accounting profit reflects profitability after paying the resources used in production, focusing only on out-of-pocket costs. It equals total revenue minus explicit costs, which are the actual payments to inputs like wages, rent, materials, and depreciation recorded as an expense. Implicit costs, such as the opportunity cost of the owner's time, aren’t subtracted here, which is why this measure can be higher than economic profit. Depreciation is part of explicit costs, so subtracting it separately would double-count. Taxes aren’t part of this calculation in this framing. So the expression is total revenue minus explicit costs.