Business vs. Economic Profit

The general public and business community typically define profit using an accounting concept. This concept explains profit as the residual of sales revenue minus the explicit (accounting) cost of doing business. It is the amount available to the equity capital after payment for all other resources the firm uses. This definition of profit is referred to as accounting or business profit. Here explicit costs are paid in money. The amount paid for a resource could hace been spent on something else, so it is the opportunity cost of using the resource. For example, explicit costs for Sidney sweaters can be his expenditures on wool, utilities, wages and bank interests.
The economists also define profit as the excess of revenue over the costs of doing business. To an economist, however, the inputs provided by the firm’s owner(s), including entrepreneurial effort and capital are resources that also must be paid for it they are to be employed. Therefore, to an economists, profit is business profit minus the implicit costs of capital and other owner provided inputs (explicit costs) used by the firm. This definition is referred to as economic profit to distinguish it from business profit. A firm incurs implicit costs when operating business. A firm incurs these costs (implicit) but does not make a payment. For example when it uses its own capital and when it uses its owners time or financial resources