# Profit and Loss

Profit is the difference amount when a person sells a product at a higher rate than cost price & loss is the difference amount when a person sells a product at a lower rate than cost price. Every commodity, product or item has a cost price and selling price and depending on the values of these prices, we compute the profit gained or the loss incurred for an individual product.

## Profit and Loss Basic Concepts

Profit (P): The amount gained by selling a product for more than its cost price.

Profit Formula = Selling price – Cost price

Loss (L): The amount the seller incurs after selling the product less than its cost price is mentioned as a loss.

Loss = Cost Price – Selling Price

Cost Price (CP): The amount paid for a product or commodity to purchase is called a cost price. Also, denoted as CP. This cost price is further classified into two different categories:

• Fixed Cost: The fixed cost is constant, it doesn’t vary under any circumstances
• Variable Cost: It could vary depending on the number of units and other factors

Selling Price (SP) : The amount for which the product is sold is called the Selling Price. It is usually denoted as SP. Also, sometimes called a sale price.

Markup: It is the amount by which cost price is increased to reach market price. Markup = market price – cost price

Discount: The reduction offered by a merchant on a marked price is called a discount.

Discount = Marked Price – Selling Price

Discount Percentage = (Discount/Marked price) x 100

Successive Discount: If an article is sold at two discounts then it is said that it is sold after two successive discounts.

Dishonest Dealing: In it, a person/shopkeeper sells any product at the wrong weight and earns a profit. This can be done either by using false weight or by false reading.

## Profit and Loss Formulas

Profit or Gain = Selling price – Cost Price

Loss = Cost Price – Selling Price

Profit percentage (P%) = (Profit /Cost Price) x 100

Loss percentage (L%) = (Loss / Cost price) x 100

## Profit and Loss Tricks

• Profit, P = SP – CP; SP>CP
• Loss, L = CP – SP; CP>SP
• P% = (P/CP) x 100
• L% = (L/CP) x 100
• SP = {(100 + P%)/100} x CP
• SP = {(100 – L%)/100} x CP
• CP = {100/(100 + P%)} x SP
• CP = {100/(100 – L%)} x SP
• Discount = MP – SP
• SP = MP -Discount
• For false weight, profit percentage will be P% = [(True weight – false weight)/ false weight] x 100.
• When there are two successful profits, say m% and n%, then the net percentage profit equals to [m+n+(mn/100)]
• When the profit is m%, and loss is n%, then the net % profit or loss will be: [m-n-(mn/100)]
• If a product is sold at m% profit and then again sold at n% profit then the actual cost price of the product will be: CP = [100 x 100 x P/(100+m)(100+n)]. In case of loss, CP = [100 x 100 x L/(100-m)(100-n)]
• If P% and L% are equal then, P = L and %loss = P2/100

Points to remember:

• For profit, the selling price should be more than the cost price
• For loss, the cost price should be more than the selling price
• The percentage value for profit and loss is calculated in terms of cost price