Accounting Profit

  

Well, it's profit. But with the word "accounting" thrown in there beforehand, it implies that there's something semi-fishy about whether or not there really was profit in a given business or a given transaction.

Like...you had to buy a factory to stamp out the 250 tractors you sold, and if you depreciated that factory to 20% of its cost over 40 years, then, in fact, this year's production of those 250 tractors was profitable, but not on a cash-on-cash basis. Only on an accounting basis, where liberal rules were applied to the rate of depreciation of the factory. Huzzah Accounting Profit.

Related or Semi-related Video

Finance: What are operating profits, net...60 Views

00:00

finance a la shmoop.what are gross profits operating profits and net

00:07

profits? well the greatest fishing company that walks the earth or swims

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the ocean made a fortune last year from selling nets. catching things like well [fish is caught from the ocean]

00:17

me. but that's really a different thing and no Bueno. leave us alone. in an

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accounting sense net profits come after operating profits that come after gross

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profits .and the net thing is well pretty much taxes. so here's an income statement

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yeah yeah revenues and then there's the cost of the stuff you're selling. okay

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fine. we'll note the nets only cost a little bit to make and you sell them for

00:42

a fortune .way overpriced if you ask me. like whatever happened to line fishing

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anyway lazy humans. so you have your revenues then your cost of goods sold.

00:51

all right well if you subtract those cogs from the revs you get your gross [income statement pictured]

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profits. yeah gross just gross and sad frankly like why not eat more chicken

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seriously. anyway .so then you have your costs of operating the business you know

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overhead. secretaries and insurance and rent and fish-smell deodorizer. and then

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you have operating profits after you subtract. them yep you subtract those

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right from gross profits. get operating. so you made some number let's call it 10

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million bucks why not .you know how many of my brethren died to give you that

01:23

money right? blood money. talk to Leo to see about it.

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maybe he'll make a movie . anyway let's say the tax rates 30% well you'd pay 3

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million in taxes on that 10 million of operating profit to then have net

01:35

profits of seven million dollars. lots of profits .there people. yeah hope you can [equation]

01:40

sleep at night.

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