The principal difference between accounting profit and economic profit is:
A)Accounting profit is distorted by the arbitrary treatment of depreciation and unusual items
B)Accounting profit includes both economic profit and the normal return on capital to the providers of equity capital
C)Economic profit is cash flow based and is,hence,less subject to manipulation that accounting profit
D)Economic profit is endorsed by economists who tend to be more rigorous than accountants.

Question

Quizplus · Accepted Answer

Accounting profit calculates the company's net earnings and includes the normal return on capital. Economic profit, on the other hand, subtracts opportunity costs from accounting profit, which is why it includes both economic profit and the normal return on capital.

The Principal Difference Between Accounting Profit and Economic Profit Is