Profit and Loss – Definition, Formula, Calculation, Methods, Difference & Solved Examples

Profit and Loss

In business, profit and loss is an important concept to understand. It is essentially a measure of how well a company is doing. Profit is the amount of money a company makes after expenses are paid, while loss is the amount of money a company loses after expenses are paid.

There are a few key things to keep in mind when it comes to profit and loss. First, it is important to remember that profit and loss are not always black and white. In other words, a company may not always make a profit or lose money. Sometimes a company may make a small profit, or may break even.

Second, it is important to remember that profit and loss can vary from year to year. A company may make a lot of money one year, but lose money the next. This is because profit and loss are not always based on how well a company is doing, but can also be affected by things like the economy or changes in the market.

Finally, it is important to remember that profit and loss are not always a bad thing. In fact, a company that is making a profit is generally doing better than one that is losing money. However, it is also important to keep in mind that a company can’t survive if it only makes a profit and never has any losses. This is because losses can help a company become more efficient and profitable in the long run.

Terms related to Profit and Loss

1. Profit: Profit is the difference between the revenue and the expenses of a business. It is calculated by subtracting the total expenses from the total revenue.

2. Loss: A loss is the difference between the revenue and the expenses of a business. It is calculated by subtracting the total expenses from the total revenue. A loss occurs when the total expenses are greater than the total revenue.

Concept of Profit and Loss

• Profit is the difference between total revenue and total cost. Total revenue is the total amount of money a company receives from its sales. Total cost is the total amount of money a company spends on making and selling its products.
• Loss is the difference between total revenue and total cost. Total revenue is the total amount of money a company receives from its sales. Total cost is the total amount of money a company spends on making and selling its products.

However, profit and loss can also be calculated in terms of percentages. Profit is the percentage of total revenue that is greater than total cost. Loss is the percentage of total revenue that is less than total cost.

Summary of Profit and Loss Formula

The profit and loss formula is used to calculate the profit or loss of a business. The formula takes into account the revenue and expenses of the business to determine the profit or loss.

‘Percentage’ Vs ‘Profit and Loss’

A percentage is a number or ratio expressed as a fraction of 100. It is used to calculate or compare proportions.

A profit and loss statement, also known as an income statement, is a financial statement that summarizes a company’s revenues and expenses over a specific period of time. It shows how much money was made or lost during the period.

Increase Percent of Households Owning a Computer

This indicator shows the percentage of households owning a computer.

The percentage of households owning a computer increased from 2009 to 2013. In 2009, 71 percent of households owned a computer, while in 2013, 78 percent of households owned a computer.

The relation between Increase Percent and Profit Percent.

The relation between increase percent and profit percent is inverse. That is, when the increase percent goes up, the profit percent goes down and vice versa.

The Difference between Increase Percent and Profit Percent.

The difference between increase percent and profit percent is that increase percent is the percentage change in a quantity, while profit percent is the percentage of profit on a quantity.

Learn about Profit and Loss

A profit and loss statement, also known as an income statement, is a financial statement that shows how much money a company has earned and spent over a certain period of time. The profit and loss statement is divided into two parts: revenue and expenses. Revenue is the money a company has earned from selling its products or services. Expenses are the money a company has spent on things such as salaries, rent, and materials. The profit and loss statement shows whether a company has made a profit (earned more money than it has spent) or a loss (earned less money than it has spent).

Definition and Formula

A sequence is a set of numbers that are listed in order. A sequence can be finite or infinite.

The formula for a sequence is:

a n = a 1 + (n – 1)d

Where:

a n = the nth term

a 1 = the first term

n = the number of the term

d = the common difference

Calculation

The calculation is based on the assumption that the average age of the population is 30 years.

30/365 = 0.083

0.083 multiplied by the number of days in a year (365) equals the approximate percentage of the population that is made up of young people (30 years old and younger).

Profit and Loss Basic Concepts

Let us learn profit and loss concepts in maths. It is well explained in terms of cost price and selling price.

Profit(P)

The amount gained by selling a product with more than its cost price.

Loss(L)

The amount the seller incurs after selling the product less than its cost price, is mentioned as a loss.

Cost Price (CP)

The amount paid for a product or commodity to purchase it 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 as per the number of units

Selling Price (SP)

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

Marked Price Formula (MP)

This is basically labelled by shopkeepers to offer a discount to the customers in such a way that,

Profit and Loss Formulas

Now let us find profit formula and loss formula.

• The profit or gain is equal to the selling price minus cost price.
• Loss is equal to cost price minus selling price.

The formula for the profit and loss percentage is:

 

Profit and Loss Examples

• If a shopkeeper brings a cloth for Rs.100 and sells it for Rs.120, then he has made a profit of Rs.20/-.
• If a salesperson has bought a textile material for Rs.300 and he has to sell it for Rs.250/-, then he has gone through a loss of Rs.50/-.
• Suppose, Ram brings a football for Rs. 500/- and he sells it to his friend for Rs. 600/-, then Ram has made a profit of Rs.100 with the gain percentage of 20%.

These are some common examples of the profit and loss concept in real life, which we observe regularly.

Profit and Loss Tricks

You have learned until now how to calculate profit as well as loss and also the percentage of them. Now let us learn some tricks or formulas to solve maths problems based on gain and loss, starting from the general formulas.

1. Profit, P = SP – CP; SP>CP
2. Loss, L = CP – SP; CP>SP
3. P% = (P/CP) x 100
4. L% = (L/CP) x 100
5. SP = {(100 + P%)/100} x CP
6. SP = {(100 – L%)/100} x CP
7. CP = {100/(100 + P%)} x SP
8. CP = {100/(100 – L%)} x SP
9. Discount = MP – SP
10. SP = MP -Discount
11. For false weight, profit percentage will be P% = (True weight – false weight/ false weight) x 100.
12. When there are two successful profits say m% and n%, then the net percentage profit equals to (m+n+mn)/100
13. When the profit is m% and loss is n%, then the net % profit or loss will be: (m-n-mn)/100
14. 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 P/(100-m)(100-n)]
15. If P% and L% are equal then, P = L and %loss = P²/100

Let us explain the above-given formulas with examples.

Solved Problems

Q. 1: Suppose a shopkeeper has bought 1 kg of apples for 100 rs. And sold it for Rs. 120 per kg. How much is the profit gained by him?

Solution:

Cost Price for apples is 100 rs.

Selling Price for apples is 120 rs.

Then profit gained by shopkeeper is ; P = SP – CP

P = 120 – 100 = Rs. 20/-

Q.2: For the above example calculate the percentage of the profit gained by the shopkeeper.

Solution:

We know, Profit percentage = (Profit /Cost Price) x 100

Therefore, Profit percentage = (20/100) x 100 = 20%.

Q.3: A man buys a fan for Rs. 1000 and sells it at a loss of 15%. What is the selling price of the fan?

Solution: Cost Price of the fan is Rs.1000

Loss percentage is 15%

As we know, Loss percentage = (Loss/Cost Price) x 100

15 = (Loss/1000) x 100

Therefore, Loss = 150 rs.

As we know,

Loss = Cost Price – Selling Price

So, Selling Price = Cost Price – Loss

= 1000 – 150

Selling Price = R.850/-

Q.4: If a pen cost Rs.50 after 10% discount, then what is the actual price or marked price of the pen?

Solution: MP x (100 – 10) /100 = 50

MP x (90/100) = 50

MP = (50 x 100)/90

MP = Rs. 55.55/-

Points to remember:

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