On what basis are accounting profits calculated?
A) opportunity costs plus explicit costs
B) implicit cash receipts and actual expenditures of cash
C) actual cash receipts and actual expenditures of cash
D) explicit cash receipts and implicit expenditures of cash

Question

Quizplus · Accepted Answer

Accounting profits are calculated by subtracting actual cash expenditures from actual cash receipts. Unlike economic profits, accounting profits do not take into account implicit costs, such as opportunity costs. Accounting profits only consider explicit costs, which are actual cash payments for inputs used in production. Therefore, choice C - actual cash receipts and actual expenditures of cash - is the correct answer.

On What Basis Are Accounting Profits Calculated