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.

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

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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

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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.

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Opportunity Cost

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

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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.

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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.