Profit is an economic benefit where one of the parties is benefited thanks to an economic transaction, that is, it is the remaining portion of the total income minus the total costs of production, distribution and marketing of a product or service. This term comes from the word "win" which translates as "greed".
In accounting there are various terms that the word profit can adopt, although in most of the times it is a positive benefit for one of the parties, where profit is the main factor in the transaction. For example, "The last two years, the organization achieved a higher profit than in previous years, exceeding one million dollars."
Two terms that tend to confuse many people are economic profit and accounting profit, one of them the one that appears in the financial statements are those called accounting costs and is usually the raw material, labor, among others. But something curious is that from the economic perception, the cost of a product is not that he pays for himself, but the value that it can have when using it in different alternatives.
The differences between these two terms that may seem similar is that accounting profit is not a condition that can make investment in a company attractive, since those who place capital always seek to place their resources in the financial system and not risk their equity in the development of business activity. In economic systems such as capitalism or neoliberalism, the most important thing is that the more that is invested in goods, the more money the investor has to earn.
In conclusion, the economic profit is calculated thinking beyond the accounting profit, since the latter is the money that is obtained after having paid all the costs and only takes into account the money both spent and earned. While the economic gain sees what is called opportunity costs, what the accounting gain does not do, since it could result in serious economic losses for the organization, however, it does not decrease the money previously obtained by the company.
