Final answer:
Costs that 'hit the books' on financial statements are the explicit costs which include actual payments such as wages and rent. These appear on financial statements, unlike implicit costs that involve opportunity costs and personal resources used for business, which are not recorded directly.
Step-by-step explanation:
We can distinguish between two types of costs in business: explicit costs and implicit costs. The costs that 'hit the books' on financial statements are the explicit costs, which are out-of-pocket costs or actual payments made by the firm. These include wages paid to employees, rent for office space, and other expenditures that can be directly recorded in the financial accounts of a company.
On the other hand, implicit costs are the opportunity costs of using resources that the firm already owns, which do not appear directly on financial statements. These include the value of the owner's time if they work without a formal salary or the use of personal assets for business purposes like a home used as a retail space.
An example of calculating the accounting profit involves subtracting explicit costs from total revenues. For instance, if a company's revenue is $1,000,000 and its explicit costs are $600,000 for wages, $150,000 for rent, and $200,000 for other expenses, the accounting profit would be $50,000.