Accounting Profit: Definition and How to Calculate

What Is Accounting Profit?

By Mike Price – Updated Sep 4, 2025 at 11:35 PM

Key Points

Accounting profit, calculated as revenue minus all costs, directly impacts stock prices.
Economic profit includes opportunity cost, providing deeper insight into resource utilization.
Cash flow, often preferred by investors, offers a clearer financial position than accounting profit.

A company's accounting profit, better known as its net income, strongly influences its stock price. Investors focus on this number, which is calculated by subtracting all expenses from revenue, more than any other performance metric. Let's take a look at how to calculate accounting profit and learn about other related metrics.

Loading paragraph...

Laptop with gold coins to show accounting profit from software development. — Image source: Getty Images

Loading paragraph...

Revenue	$200,000,000
Cost of Goods Sold	$ 50,000,000
Gross Profit	$150,000,000
Sales and Marketing	$ 10,000,000
Payroll	$ 5,000,000
Rent	$ 25,000,000
Depreciation	$ 2,500,000
Operating Profit	$107,500,000
Interest	$ 5,000,000
Taxes	$ 38,000,000
Net Income (Accounting Profit)	$ 64,500,000

This company's revenue for the reporting period is $200 million. Its gross profit, which is revenue minus the direct costs of making the company's product, otherwise known as cost of goods sold, is $150 million. Subtracting fixed costs, such as rent or marketing that do not vary with how much product the company makes, from the company's gross profit yields an operating profit of $107.5 million. The company's accounting profit or net income of $64.5 million is equal to the $107.5 million operating profit minus non-operating expenses such as interest payments on debt and taxes.

Loading paragraph...

Opportunity Cost

Opportunity cost refers to what you miss out on by going with one option over another comparable option.

Loading paragraph...

How to Calculate Total Revenue Growth in Accounting

Determining a company's revenue growth rate, and also understanding how that rate can be manipulated at smaller firms.

What Is the Difference Between Gross Amount and Net Amount?

Confused about the difference between a gross amount of something and the net amount? We've got you covered.

How to Calculate Total Assets, Liabilities, and Stockholders' Equity

Assets, liabilities, and stockholders' equity are three features of a balance sheet. Here's how to determine each one.

What Is a Bond Rating?

A bond's rating can say a lot about a particular security and its investment risk level.

Loading paragraph...

About the Author

Mike Price is a 23 year-old Masters of Finance graduate who first started learning about investing on the Motley Fool when he was 13. He is currently seeking a job.

XMFMichaelPrice

Mike Price has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.