A fresh M.Com graduate turns down a job offer of Rs.3,00,000 per year and starts his own business. He will invest Rs. 5,00,000 of his own money, which has been in a bank account earning 7 per cent interest per year. He also plans to use a building he owns in Kolkata that has been rented for Rs.15,000 per month. Revenue in the new business during the first year was Rs.10,70,000 while other expenses were Advertising Rs. 50,000 Rent Rs. 1,00,000 Taxes Rs. 50,000 Employees’ salaries Rs. 4,00,000 Supplies Rs. 50,000 Determine Profit using accounting profit approach and economic profit approach.

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A fresh M.Com graduate turns down a job offer of Rs.3,00,000 per year and starts his
own business. He will invest Rs. 5,00,000 of his own money, which has been in a
bank account earning 7 per cent interest per year. He also plans to use a building he
owns in Kolkata that has been rented for Rs.15,000 per month. Revenue in the new
business during the first year was Rs.10,70,000 while other expenses were
Advertising Rs. 50,000
Rent Rs. 1,00,000
Taxes Rs. 50,000
Employees’ salaries Rs. 4,00,000
Supplies Rs. 50,000

Determine Profit using accounting profit approach and economic profit approach.

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