Statement (I): Accounting profit is a surplus of total revenue over and above all paid-out costs, including both manufacturing and overhead expenses. Explanation: In an accounting sense, profit is a surplus of revenue over and above all paid-out costs, including both manufacturing and overhead expenses. Accounting Profit = TR “ (W + R + I + M)where TR = total revenue,W = wages and salaries,R = rent,I = interest, andM = cost of materials. Obviously, while calculating accounting profit, only explicit or book costs, i. e. , the cost recorded in the books of accounts, are considered. Thus, the statement I is correct. Statement (II): Economic or pure profit is a residual left after all contractual costs have been met, including the transfer costs of management, insurable risks, depreciation, and payments to shareholders sufficient to maintain investment at its current level. Explanation: The concept of economic profit differs from that of accounting profit. Economic Profit takes into accounts also the implicit or imputed costs. The implicit cost is the opportunity cost. Opportunity cost is defined as the payment that would be necessary to draw forth the factors of production from their most remunerative alternative employment. Alternatively, the opportunity cost is the income foregone which a businessman could accept from the second bast alternative use of his resources. Accounting profit does not take into account the opportunity cost. It should also be noted that the economic or pure profit makes provision also forinsurable risks,depreciation, andnecessary minimum payment to shareholders to prevent them from withdrawing their capital. Pure profit may thus is defined as a residual left after all contractual costs have been met, including the transfer cost of management, insurable risks, depreciation, and payment to shareholders sufficient to maintain investment at its current level. Thus, Pure Profit = Total Revenue “ (Explicit Cost + Implicit Costs). Thus, statement II is correct. Therefore, Both statements are correct.