Final answer:
Accounting profit and economic profit differentiate between the recording of costs and benefits and the actual payment and receipt of cash. Accounting profit considers only explicit costs, while economic profit considers both explicit and implicit costs.
Step-by-step explanation:
Accounting profit and economic profit are two conceptions of profit that differentiate between the recording of costs and benefits associated with economic activities and the actual payment and receipt of cash.
Accounting profit is the difference between total revenue and explicit costs, which are the dollars brought in and paid out. On the other hand, economic profit considers both explicit and implicit costs, resulting in a more comprehensive measure of total cost.
The difference is significant because a business pays income taxes based on its accounting profit, but its economic success depends on its economic profit, which reflects the true costs incurred.