What is the formula for calculating accounting profit?

The formula for calculating accounting profit focuses specifically on the explicit costs incurred by a business. Accounting profit is derived from subtracting these explicit costs—which include out-of-pocket expenses such as wages, rent, and utilities—from total revenue generated by the business. This means that the correct approach reflects the direct financial transactions that the business engages in.

The distinction between accounting profit and other forms, like economic profit, is important here. Economic profit accounts for both explicit and implicit costs (the opportunity costs of resources used). However, accounting profit does not consider implicit costs, making it a more straightforward calculation that emphasizes actual cash flows and tangible expenses.

Therefore, the correct choice aligns with the definition of accounting profit, which is calculated as total revenue minus only the explicit costs involved in running the business.