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...62 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

00:12

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

00:22

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

00:28

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

00:33

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

00:37

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

00:47

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]

00:56

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

01:01

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

01:06

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

01:11

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

01:14

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

01:18

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.

01:26

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

01:30

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.

Up Next

Finance: What is a profit center?
2 Views

A profit center is whatever aspect of a company's business makes them the most dough, and should make up for the...not-so-profit-y centers.

Finance: What is a Profit-Sharing Plan?
3 Views

A profit-sharing plan is when you share all your profits with Shmoop. No, really. Don't hit play. Just trust us and send us money.

Find other enlightening terms in Shmoop Finance Genius Bar(f)