Final answer:
Accounting profit is the profit that remains after a firm has paid its explicit costs. It is different from economic profit, which takes into account both explicit and implicit costs to assess the true economic success of a business.
Step-by-step explanation:
Generally speaking, there are two types of calculable profits. Of these, accounting profit is what remains after a firm has paid its explicit costs.
Explicit costs are actual payments or out-of-pocket costs, such as wages paid to employees or rent paid for office space. On the other hand, implicit costs represent the opportunity costs associated with the use of resources that a firm already owns, such as an owner's contribution of time or use of personal property for business purposes without a formal salary.
While accounting profit only considers explicit costs, economic profit accounts for both explicit and implicit costs. Economic profit equals total revenue minus both types of costs, and understanding this helps to determine the true economic success of a business beyond just the accounting profit, which is used for income tax purposes.