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