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Profit and Loss

1. Unit 1:Profit and Loss After learning this unit you will be able to-

a.a. Explain the meaning of profit, loss, profit Explain the meaning of profit, loss, profit % and loss %. % and loss %.

b. Recall the formulae used to find profit, loss, profit % and loss %.

c. Solve statement problems systematically.

d. Verify the solution by alternate methods.

Hi……today I am very

happy, you know why?!

Oohhh…reallyOohhh…reallywhat what

happenedhappened

I purchased a purse for 120rs and sold it for

140rs...! So I got 20rs

extraaaaaaaaa

Oooohhh, really then today party in the

evening

A transaction is the commercial dealing in which goods A transaction is the commercial dealing in which goods are purchased or sold. Whenever a purchase or sale is are purchased or sold. Whenever a purchase or sale is made the seller makes either profit or loss. Some of the made the seller makes either profit or loss. Some of the terms that we usually come across in a transaction are terms that we usually come across in a transaction are given belowgiven below

Did you hear the conversation between them there Did you hear the conversation between them there you can find that he got 20rs extrayou can find that he got 20rs extra

In mathematical concept what does it means?... In mathematical concept what does it means?... It’s nothing but a It’s nothing but a PROFITPROFIT..

So let us start our discussion about profit and So let us start our discussion about profit and calculations involved in day- to- day transactions calculations involved in day- to- day transactions

1. COST PRICE: It is the amount paid to purchase the article. It is abbreviated as C.P.

2. SELLING PRICE: It’s the amount at which the article is sold. It is abbreviated as S.P.

3. WHOLESALE PRICE: It is the rate at which goods are bought or sold on a large scale.

4. RETAIL PRICE: It is the rate at which goods are bought or sold on a small scale.

DEFINITIONS What is profit?

• Profit is the excess money gained over the cost price. If S.P>C.P., then the seller is said to have a gain or profit

Profit and LossProfit and Loss accounting is a fundamental way to measure the financial performance of

a business. A firm grasp of the basics is essential.

There are two distinct kinds of profit and loss problems - those in which profit or loss is based on cost and those in which profit or loss is based on selling price. Before such a problem can be solved it must be known in which of these classes it belongs. Bear in

mind, though, that profit or loss is always to be considered as based on cost unless it is

stated or otherwise known that it is based on selling price.

Profit and Loss Based on Cost

When a percent of profit or loss is given, it is understood, unless stated to the contrary, that this percent is based on the

cost. Thus, if someone states simply that he or she sold something at a profit of 10%, it is understood to mean that it was sold for an amount equal to its cost plus 10% of its cost. In modern business, however, it is customary to figure profit

and loss as a percent of selling price.

To find the percent gain or loss,divide the amount gained or lost by the cost.

Example: A toy that cost Rs80 is sold at a profit of Rs20 . Find the percent or rate of profit.

Gain / cost = % profit.20 / 80 = 25%. - Answer

Example: A book that cost Rs100 is sold for Rs80 Find the percent loss.

Cost - selling price = loss.Rs100 - Rs.80 = Rs.20 loss.

Loss / cost = % loss.Rs.20 / Rs100 = 1/5 or 20%. - Answer

To find the loss and the selling price when the cost and the percent loss are given, multiply the cost by the percent and subtract the product from the cost.

Example: A damaged chair that cost Rs110 was sold at a loss of 10%. Find the loss and the selling price

Cost x percent loss = loss.Rs110 x 1/10 = Rs11, loss. - Answer

Cost - loss = selling price.Rs110 - Rs11 = Rs99, selling price. - Answer

Profit and Loss Based on Selling PriceModern accounting practice favors the basing of profit and loss on selling price rather than on cost. This is because commissions and other selling expenses are figured as percentages of selling price, and it also simplifies accounting to base profit and loss on selling price.

To find the percent profit or loss, divide the amount gained or lost by the selling price

Example: A candy bar sells for Rs13 at a profit of Rs 6.5 What percent of profit on selling price does this represent?Gain / selling price = % profit.Rs.6.5 / Rs13 = 0.5 or 50% profit. - Answer

Example: On every radio selling for Rs40 a merchant lost Rs8. What was his rate of loss on selling price?Loss / selling price = % loss.Rs8 / Rs40 = .20 or 20% loss. - Answer

To find the profit and the cost when the selling price and the percent profit are given, multiply the selling price by the percent profit and subtract the result from the selling price.

Example: A toy sells for Rs6.00 at a profit of 25% of the selling price. Separate this selling price into cost and profit.Selling price x % profit = profit.Selling price = profit = cost.Rs6.00 x .25 = Rs1.50, profit. - AnswerRs6.00 - Rs1.50 = Rs4.50, cost. - Answer

To find the loss and the cost when the selling price and the percent loss are given, multiply the selling price by the percent loss and subtract the result from the selling price.

Example: At a sale, neckties selling at Rs50.00 are sold at a loss of 60% of selling price. What is the loss and the original cost?Selling price x % loss = loss.Selling price + loss = cost.Rs50.00 x .60 = Rs30.00, loss. - AnswerRs50.00 - Rs30.00 = Rs20.00, cost. - Answer

Example: A kind of tape is selling at a profit of 12% of selling price, equal to 18 paisa per yard. What is the selling price of the tape?Profit / % profit = selling price.Rs.18 / .12 = Rs1.50 selling price. - Answer

To find the percent profit or loss, divide the amount gained or lost by the selling price.

Note: This rule should be compared with the one under Profit and Loss Based on Cost. The two rules are exactly similar except that in one case 100% represents cost while in the other case 100% represents selling price

• To find the selling price when the cost and the percent loss are given, add the percent loss to 100% and divide the cost by this sum.

Example: Socks that cost Rs7.00 per pair were sold at a loss of 25% of selling price. What was the selling price?

Cost / ( 100% + % loss ) = selling price.Rs7.00 / 1.25 = Rs5.60, selling price. - Answer

Problem :

The price of an item changed from Rs120 to Rs100. Then later the price decreased again from Rs100 to Rs80. Which

of the two decreases was larger in percentage term? Solution to Problem :

solve by yourself