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# Profit and loss concepts

IACE

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## 1. Profit and loss concepts

The profit and loss concept is used to determine the market price of an item and whether or not the firm is profitable. Every product on the market has a cost price or acquiring price as well as a selling price. Knowing the cost and selling prices of a commodity allows you to calculate the obtained profit or loss. For example, a businessman makes a profit when the selling price of an item is higher than the cost price of that item, and a loss when the buy price is more than the selling price. In this article, we will go over the fundamental principles of profit and loss, as well as the profit margin.

**Cost Price:**The cost piece refers to the price at which the product is purchased. For example, if Arjun paid 20 for a choco pie then the Cost price of the Choco Pie will be Rs 20.**Selling Price:**It refers to the price at which the product is being sold. For example, Arjun purchased a pencil for Rs 20 and sold it for Rs 25, then the selling price was Rs 25.**Profit/ Loss:**The amount gained by selling any product is known as profit. And when the cost price is less than the selling price then it is called a loss. For example, Arjun bought a pen for Rs10 and sold it for Rs 15 then Arjun got a profit of Rs 5. And if Arjun bought a pen for Rs10 and sold it for Rs5 then, there would be a loss of Rs5.**Marked Price:**It refers to the price set by the seller by placing a label on the product. It is a price at which the vendor offers a market discount.**Discount:**It refers to the rebate or offer made by merchants or businessmen to entice customers to buy their products.

## 2. Profit and Loss Formula

Let us understand the formula of profit and loss.

Profit = Selling price – Cost Price.

Loss = Cost price – Selling Price

The formula for Profit and Loss percentage will be

- Profit percentage (P%) = (Profit /Cost Price) × 100
- Loss percentage (L%) = (Loss / Cost price) × 100

The formula for the Selling price and Cost price is given below.

- S.P. = {(100 + P%) / 100} × CP (if SP > CP)
- S.P. = {(100 – L%) / 100} × CP (if SP < CP)
- C.P. = {100 / (100 + P%)} × SP (if SP > CP)
- C.P. = {100 / (100 – L%)} × SP (if SP < CP)

## 3. Profit and Loss Question and Answers

**When a Seller gives 10% profit on goods and she loses 20% of her goods due to damage then what is the loss percentage?**

**Ans. **

Let the number of goods be 100, and

C.P. of each item be ₹1

Hence, Total C.P. = ₹100

Profit% on each item = 10%

20% of goods are lost in a theft

Number of goods left = 80

Now, S.P. of 1 item = [(100 + 10)/100] × 1 = ₹1.10

S.P. of 80 items = 80 × ₹1.10 = ₹88

Loss = 100 – 88 = 12

Loss% = (12/100) × 100% = 12%

Thus, the shopkeeper bears a 12% loss.

**For ₹ 500, a man sold two steel chairs. He makes 20% on one and loses 12% on the other. What is his net profit or loss for the entire deal?**

**Ans.**

S.P. total = 2 × 500 = ₹ 1000

One chair’s C.P. is equal to [(500 × 100)/20 + (500 × 100)/80].

= [(6250/11) plus (1250/3)] ₹ 32500/33

Hence Gain = 32500/33 – 1000 = 500/33

Gain% is equal to (500/33) / (3250/33) = 1.53%.

**A dishonest retailer utilises fake weights to gain 111/9% while claiming to sell his items for cost. Look for the fake weight he is utilising in place of the 1-kilogram weight.**

**Ans. **

Let x gram be the fake weight.

Gain percentage equals [(Fake weight – True weight)/Fake weight]×100

= [(1000 – x)/x] × 100 = 100/9

= 10 x = 9000

= x equals 900

Therefore, The Retailer is utilising 900 gram weights rather than 1 kg.

## 4. FAQ's

### 1. What is the formula for Profit percentage and loss percentage?

**Ans.** The formula of Profit percentage = (Profit /Cost Price) × 100

Loss percentage = (Loss / Cost price) × 100

### 2. What is the Marked price?

**Ans.** It is the price set by the seller before selling any product. The formula of Marked price MP= SP+Discount.

### 3. What is the formula for Loss percentage?

**Ans. **The Formula of Loss% = (loss/ CP × 100)

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