Accounting Profit Calculator
Calculate a business's accounting (net) profit by subtracting all explicit costs — cost of goods sold, operating expenses, depreciation, interest, and taxes — from total revenue.
How to use this tool
- Enter total revenue, cost of goods sold (cogs), operating expenses (excl. cogs & depreciation), depreciation & amortization, interest expense and effective tax rate in the fields above.
- Results update instantly as you type — or click Calculate.
- Read your accounting (net) profit and the full breakdown beneath it.
⚠ This tool provides general estimates for education only and is not financial, tax or legal advice. Figures may not reflect your situation — verify with a qualified professional.
Formula
Gross Profit = Revenue − COGS
Operating Profit (EBIT) = Gross Profit − Operating Expenses − Depreciation
EBT = EBIT − Interest Expense
Tax = EBT × Tax Rate
Accounting Profit = EBT − Tax
How it works
Accounting profit (net income) is calculated by subtracting all explicit, recorded costs from total revenue following the standard income-statement structure: revenue minus cost of goods sold yields gross profit; subtracting operating expenses and depreciation yields operating profit (EBIT); subtracting interest gives earnings before tax; subtracting taxes gives net profit.
This differs from economic profit, which also deducts implicit (opportunity) costs such as the owner's foregone salary or the cost of equity capital. Only costs that appear in financial statements are included here.
Worked example
$500,000 revenue, $200k COGS, $100k OpEx, $20k depreciation, $10k interest, 25% tax
- Gross Profit = $500,000 − $200,000 = $300,000.
- EBIT = $300,000 − $100,000 − $20,000 = $180,000.
- EBT = $180,000 − $10,000 = $170,000.
- Tax = $170,000 × 25% = $42,500. Net Profit = $170,000 − $42,500 = $127,500.
Accounting profit = $127,500; net profit margin = 25.50%.
Common mistakes to avoid
- Confusing accounting profit with economic profit — accounting profit excludes implicit costs such as the opportunity cost of owner-invested capital; economic profit subtracts both explicit and implicit costs and is typically lower.
- Double-counting depreciation by including it in both operating expenses and as a separate line — the formula deducts depreciation once at the EBIT stage; adding it again in operating expenses overstates costs and understates profit.
- Using cash outflows for COGS and expenses instead of accrual-basis figures — accounting profit is an accrual concept; using cash paid rather than costs incurred in the period produces a different (often incorrect) result.
Key terms
- Accounting Profit
- The net income of a business after deducting all explicit costs recorded in the financial statements, including taxes.
- EBIT
- Earnings Before Interest and Taxes — operating profit, representing the profitability of core operations before financing and tax effects.
- Gross Profit
- Revenue minus the direct cost of producing goods or services (COGS).
- Net Profit Margin
- Net profit expressed as a percentage of revenue, indicating how much profit is earned per dollar of revenue.
- Explicit Costs
- Actual, out-of-pocket payments made by a business, as opposed to implicit opportunity costs.
Frequently asked questions
- Why does the calculator separate EBIT, EBT, and net profit?
- Each subtotal has a distinct use: EBIT shows operating performance before financing decisions; EBT shows profitability before tax policy; net profit is what remains for owners. Lenders, investors, and tax authorities each focus on a different line.
- Is accounting profit the same as taxable income?
- No. Taxable income follows tax-authority rules (e.g. accelerated depreciation, disallowed expenses) while accounting profit follows GAAP or IFRS. The two figures frequently differ, which is why companies report both a tax provision on the income statement and a current tax liability on the balance sheet.
- Does this calculator handle interest income as well as interest expense?
- The formula subtracts interest expense (debt financing cost) before calculating EBT. Interest income earned on cash balances would be added to revenue or shown as a separate other-income line before applying the same chain of deductions.