What Are Economic Earnings?

Economic benefits are an economic concept. The dominant economic benefit in economics refers to the maximum amount that he can spend while maintaining the same wealth at the end of the period as at the beginning, including realized and unrealized benefits.

economic profit

Economic benefits refer to a

Economic income = present value of expected future cash inflows-

economic profit

For the recognition and measurement of the accounting period's profit and loss, the actual transactions during the period should be analyzed, and various income and expenses should be confirmed and measured, and calculated according to the accounting equation "income-expenses = profit". The recognition and measurement of income and expenses must follow the principle of income realization, accrual principle, historical cost principle, matching principle, division of profitable expenditure and capital expenditure. Fluctuations in the value of assets or liabilities are not recognized unless there is objective factual identification. Accounting income only recognizes realized income and does not recognize unrealized income.

According to the concept of economic income, the recognition and measurement of the period's profit and loss should compare the net assets at the end and the beginning of the accounting period. After deducting the additional investment of the investor and adding back the profit distributed to the investor, it is the profit or loss of the period. If the net assets at the end of the period and the beginning of the period are equal, the capital is preserved; if the net assets at the end of the period are less than the beginning of the period, the capital is not preserved, and the difference is a capital deficit; if the net assets at the end of the period are greater than the beginning, the capital is not only preserved, but a surplus is generated. The difference is profit. According to the different attributes of capital measurement, people also divide capital preservation into financial capital preservation and physical capital preservation. The former emphasizes the preservation of nominal monetary capital, while the latter emphasizes the preservation of the actual production and operation capabilities of enterprises. Under the capital preservation perspective, the recognition and measurement of profit or loss may also include unrealized gains, such as accepted donations, revaluation appreciation, and foreign currency translation differences.

According to Adam Smith s theory of increasing wealth, the value-added concept of economics is introduced, and corporate income should be an increase in wealth. The increased wealth includes not only victory paid to shareholders and retained earnings of the enterprise, but also salaries paid to employees. , Various taxes paid (excluding VAT), external donations, etc. According to this concept, economic income can be calculated according to the equation of "revenue-depreciation-cost of purchased goods or services = current value-added amount". Business operations should not solely pursue profits, but should seek all parties involved in corporate activities The interests of stakeholders seek to increase corporate wealth. The beneficiaries of wealth appreciation are not only shareholders, management, but also general employees, lenders, government departments, and other stakeholders such as the public.