What Is the Difference Between Accounting Profit and Economic Profit

question 149

Multiple Choice

What is the difference between accounting profit and economic profit?

• A) They are the same thing.
• B) They are only different if the accountant makes a mistake.
• C) Accounting profit is usually smaller than economic profits.
• D) Accounting profit makes no allowance for several implicit costs, including equity capital, while economic profit takes these costs into account.

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Definitions:

Voidable Title

A title to property or goods that may be declared invalid by a court due to fraud, incapacity, or other issues, allowing the person harmed to void the transaction.

Bona Fide Purchaser

An innocent buyer for valuable consideration who purchases goods without notice of any defects in the title of the goods acquired.

Regular Course

This term typically refers to actions or operations that are conducted in the normal and usual manner, according to established patterns or procedures.

Sale on Approval

A conditional sales agreement in which the buyer has the right to return the product within a specified period if it does not meet their satisfaction.