Accounting Profit Calculator
This accounting profit calculator works out the profit a business actually records, then shows what is left once you also count what running the business costs you personally. Enter total revenue and your explicit costs, the real outgoings such as wages, rent, materials, insurance, power and interest. Revenue minus explicit costs is your accounting profit, the figure that lands in the financial statements and that tax is assessed on. Then enter your implicit costs, the opportunity cost of the resources you put in: the salary you gave up to work in the business, the interest or rent your own money and premises could have earned elsewhere. Subtracting those as well gives economic profit, the economist's test of whether the business beats your next best alternative. The distinction matters for anyone weighing up self-employment in NZ: a sole trader can show a solid accounting profit yet be worse off than staying in a salaried job once the forgone wages are counted. Students meet exactly this calculation in first-year economics, and the calculator shows both margins so you can see each profit as a share of revenue. Use it alongside our net profit and break-even tools when you are testing whether a business idea genuinely stacks up.
Accounting profit here is a simple revenue-minus-costs model and ignores timing rules, depreciation schedules and tax. A positive economic profit means the business beats your next best alternative; a negative one means you would be better off deploying your time and capital elsewhere, even if the accounts show a profit.
How it works
Accounting profit is total revenue minus explicit costs, where explicit costs are every actual payment the business makes: wages to staff, rent, materials, freight, insurance, power, marketing and interest on borrowing. Economic profit subtracts implicit costs as well, which are not payments at all but the value of the owner's own resources measured by their best alternative use. The most common implicit costs are the salary you could earn working for someone else, interest your invested savings could earn, and market rent for premises or gear you own and use in the business. Both profits are also shown as margins, each profit divided by revenue and multiplied by 100, so you can compare businesses of different sizes on the same footing.
Worked example
Suppose your business turns over $250,000 a year and pays $180,000 in explicit costs across wages, rent, stock and interest. Accounting profit is 250,000 minus 180,000, which is $70,000, an accounting margin of 70,000 divided by 250,000, or 28 percent. Now count the implicit costs: you left a $45,000 salary to run the business full time. Economic profit is 70,000 minus 45,000, which is $25,000, an economic margin of 10 percent. The business genuinely beats your alternative. If the forgone salary had been $80,000 instead, economic profit would be negative $10,000: the accounts would still show a $70,000 profit, but you would be $10,000 worse off than staying employed.
Related calculators
- Net Profit Calculator: the bottom line after all recorded costs.
- Gross Profit Calculator: revenue minus cost of goods sold.
- Operating Profit Calculator: profit from core operations.
- Profit Margin Calculator: margins at every level.
- Break-Even Calculator: the sales needed to cover costs.