Social Enterprise Accounting versus Traditional Accounting in the Non Profit Sector
Economic Profit vs. Accounting Profit
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My Business My Business Venture Venture Comparing Economic Profit Comparing Economic Profit to Accounting Profit to Accounting Profit
Transcript of Economic Profit vs. Accounting Profit
My Business VentureMy Business Venture
Comparing Economic Profit to Comparing Economic Profit to Accounting ProfitAccounting Profit
Total Revenues – Total Costs = Total Revenues – Total Costs = Profit or LossProfit or Loss
Price X Quantity Price X Quantity Normal ProfitNormal Profit: Opportunity Cost : Opportunity Cost
of Entrepreneur. of Entrepreneur.
My Business VentureMy Business Venture
TOTAL REVENUE
2000 BURRITOS SOLD @ $5.00 = $10,000
TOTAL EXPENSES
CITY PERMIT $2000
PAYMENT TO FORMER STUDENT TO MAKE BURRITOS $3000
PAYMENT TO REDDY RENTS FOR EQUIPMENT: (Capital, Fridge, Cash register, Utensils, ect.)
$2000
Payment to Mpls. Industrial Food Supply $1000
TOTAL COST $8000
ACCOUNTING PROFITS:
(total revenue – total cost)
$2000
Did I really make accounting profits? What did my accountant forget?
It turns out I could have worked for the summer at Sears selling refrigerators
SEARSNET WAGES $2900
FORGONE INTEREST ON START UP CAPITAL
$100
Total Implicit Costs $3000
EconomicProfit
Implicit costs(including a
normal profit)
ExplicitCosts
Accountingcosts (explicit
costs only)
AccountingProfit
Ec
on
om
ic (
op
po
rtu
nit
y) C
os
ts
TOTAL
REVENUE
Profits to anEconomist
Profits to anAccountant
ECONOMIC COSTS
WHAT WAS THE OPPORTINITY COST OF RUNNING MY BUSINESS?
DID I MAKE AN ECONOMIC PROFIT WITH PHAT BURRITOS?
Accounting Profit $2000
Implicit Costs $3000
Economic Profit - ($1000)
THE ENDTHE END
