Accounting Profit Calculator (revenue − explicit costs)

Understanding the accounting profit calculator — concept and principle

This calculator works out accounting profit: a year's revenue minus all explicit costs, the payments a business actually makes. It also shows the margin, costs as a share of revenue and profit per month. Small-business owners and economics students use it as a quick check and a first step toward economic profit.

Revenue minus explicit costs — with the default inputs: $110,000.

How it is calculated

Total explicit costs = goods and materials + wages and salaries + rent, utilities and insurance + other costs actually paid
Accounting profit = total revenue − total explicit costs
Profit margin (%) = accounting profit ÷ revenue × 100
Explicit costs as % of revenue = explicit costs ÷ revenue × 100
Profit per month = accounting profit ÷ 12

All inputs are yearly amounts in your chosen currency.

The principle

Explicit costs are out-of-pocket payments to suppliers, employees, landlords and lenders. Implicit costs are opportunity costs, such as the salary the owner gives up. Accounting profit subtracts only explicit costs; subtracting implicit costs too gives economic profit, which shows whether the business beats your next best alternative.

Worked example

Defaults: revenue 480,000; goods and materials 190,000; wages 120,000; rent, utilities and insurance 42,000; other costs 18,000.

Explicit costs = 190,000 + 120,000 + 42,000 + 18,000 = $370,000.
Accounting profit = 480,000 − 370,000 = $110,000.
Margin = 110,000 ÷ 480,000 × 100 = 22.9%.
Costs as % of revenue = 370,000 ÷ 480,000 × 100 = 77.1%.
Per month = 110,000 ÷ 12 = $9,167.

Each point is the calculator re-run with only “Total revenue for the year” changed; the gold point is the default example. Change the inputs above and this chart follows your numbers.

Total revenue for the year	Accounting profit
120,000	-$250,000
240,000	-$130,000
360,000	-$10,000
480,000	$110,000
600,000	$230,000
720,000	$350,000
960,000	$590,000

How to read the result

A positive figure means revenue covered every bill. The margin lets you compare years and firms of different size; margins differ a lot by industry, so compare with similar firms. If the owner takes no wage, the profit must also pay for the owner's time.

Common mistakes

Including the owner's forgone salary; that belongs in economic profit, not accounting profit.
Forgetting interest, bank fees or insurance.
Treating the purchase of equipment as a cost of one year. Formal accounts spread it through depreciation.
Confusing accounting profit with cash in the bank; timing of payments differs.

Keep in mind: This is a simplified profit figure before tax and without depreciation rules or accruals. It is not a formal financial statement or tax advice.

Frequently asked questions

What is the difference between accounting profit and economic profit?

Accounting profit deducts only explicit costs. Economic profit also deducts implicit costs such as the owner's forgone salary and the return on the owner's capital.

Is accounting profit the same as net income?

Close, but net income in published accounts also reflects depreciation, accruals and income tax.

Can accounting profit be negative?

Yes. If explicit costs exceed revenue, the result is an accounting loss.

Sources: OpenStax, Principles of Economics, 3rd ed. (2022), section 7.1 "Explicit and Implicit Costs, and Accounting and Economic Profit"

Checked 9 Nov 2026. Accounting profit = total revenue − explicit costs; explicit costs are actual out-of-pocket payments: OpenStax, “Principles of Economics”, 3rd ed. (2022), section 7.1 “Explicit and Implicit Costs, and Accounting and Economic Profit”.

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