Accounting profit

The accounting benefit is the result of the difference between its revenues from its sales and the provision of services and the expenses  incurred to carry out the sales during a year of exercise.

The accounting benefit is simply the benefit reflected in the accounting . Specifically, the accounting benefit appears in the income statement , also known as the profit and loss account. This figure is calculated in accordance with the accounting regulations that the company receives. Thus, depending on the regulations applied, the accounting benefit of the same company may differ.

With the above in mind, we must emphasize that in the end the accounting benefit is what a company enters minus what it spends. In what you enter are mainly sales or provision of services, while in what you spend we can find the costs associated with those sales (salaries, supplies, leases).

In short, it can never be affirmed that the result of a company is a certain and objective figure, but that it must be put in relation to the criteria applied, so that it is a meaningful figure.

How is the accounting benefit calculated?

The accounting benefit formula is:

Accounting benefit = Income – Expenses

The formula is very simple. Of course, as we have said, the important thing is to know what counts as income and what counts as expenses, according to the applicable regulations. This regulation will depend not only on the country, but also on the type of company.

Differences between accounting and economic benefit

The accounting benefit is defined as the difference between income and expenses of a period, while the economic benefit is established by the difference between the economic value of the own funds between two periods.

We can then define both benefits:

Economic benefit = Own funds (period X) – Own funds (period X-1) 
Accounting benefit = Income – expenses

In this way, we can say that the accounting benefit is associated with the difference between income and expenses of a company according to the regulations of the General Accounting Plan with its generally accepted principles, but these results can be altered. For example, excessive provisions can be provided so that the benefit is not so high, an income or expense can be delayed, simulate sales with other companies to inflate the income statement. However, the economic benefit is related to collections and payments.

 

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