Distinguish Between Explicit and Implicit Costs and Give an Example

question 82

Essay

Distinguish between explicit and implicit costs and give an example of each.Why would accounting profit be greater then or equal to economic profit?

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Definitions:

Contra Liability

A liability account that decreases the value of the liability to which it is related, essentially serving as a negative liability.

Net Income

The total profit or loss of a company after all revenues, expenses, taxes, and costs have been subtracted.

Financial Statements

Reports that summarize the financial performance and position of a business, including the balance sheet, income statement, and cash flow statement.

Accrued Revenues

Revenues earned but not yet received in cash or recorded at the statement date, often recognizing revenue before the payment is received.