6 Th Entrance :Profit and Loss

2. Introduction
 The aim of every business is to earn profit.
 Every trader tries to sell the goods at a price higher than their cost, so that he may
earn a profit.
 Sometimes, however he may be forced to sell them at less than the cost, in which case
he suffers a loss.
 Thus the excess of selling price over the cost price is profit, and the excess of cost price
over the selling price is loss.

3. 2.1. Concepts in Profit and Loss

4. 2.1. Concepts in Profit and Loss
1) Cost Price (C.P) :
When a person pays amount to purchase an article, transport charges, octroi charges etc.
Then the total amount paid is called as cost price.
2) Profit :
The excess of selling price over the cost price is known as profit. Profit is always calculated on
cost price. When a shopkeeper purchase an article for Rs.100 and sells the same article for
Rs125 then he earns a profit of rs.25.
3) Loss :
The excess of cost price over the selling price is known as Loss. Loss is always calculated on
cost price. When a shopkeeper has purchased a certain article from wholesaler or
manufacturer and if the price fall down. In such case the shopkeeper is forced to sell the
article at as price less than cost price.
4) Selling Price (S.P) :
Total amount realised by selling an article is called as selling price of that article. Selling
price includes profit or loss.

5. 2.1. Concepts in Profit and Loss
5) Marked Price (M.P) :
The printed price of an article or catalogue price for which the consumer gets the article is
called as Marked price. This price is also known as list price or Catalogue price.
6) Trade Discount :
Discount is a deduction for the sale value of goods allowed by the seller to the buyer. traders
who buy good in large quantities from manufacturers or wholesalers are generally given an
allowance on the list price of the goods. This is known as trade discount.
7) Cash Discount :
Cash Discount is a deduction allowed by a creditor to a debtor on the amount due from the
latter, if he settles the account within a specified time. This is a sort of incentive for the debtor
to pay early. The seller who has sold goods on credit thus gets back his money early so that
he can use it for further business. Sometimes,a buyer may get benefit of both discounts in
such a case.

6. 2.1. Concepts in Profit and Loss
8) Commission :
The remuneration paid by the manufacturer to the agent is called as commission. Commission
is always paid on selling price. The rate of commission is usually in the form of percentage of
the value of transaction. It may be uniform for the entire amount or it may vary after certain
amount of sale.
9) Brokerage :
In some transactions agents charge commission to the seller as well as to the buyer. They are
called as ‘brokers’ and the commission in such cases is termed as brokerage. The brokers work
in the field of purchasing and selling of shares, debentures, bonds, vehicles etc.

7. 2.2. Formulae in Profit and Loss
1) Profit = S.P.-C.P.
2) Loss = C.P.-S.P.
3) S.P = C.P.+Profit
4) S.P = C.P.-Loss
5) C.P = S.P. – Profit
6) C.P. = S.P. + Loss
7) S.P. = M.P. - Trade Discount
8) Cash Price = S.P. - Cash Discount
9) M.P. =

8. 2.2. Formulae in Profit and Loss
Important Points to be Remembered :
1) Percentage of profit or loss is always calculated on C. P.
2) Commission or discount is always calculated on S. P.
3) Percentage of profit or loss does not depend on number of articles sold or purchased.

9. Exercise
Example 1) : (To find out profit)
Mr. Prakash purchased 100 toys at Rs. 20 each. He sold all toys at Rs. 25 each. Find
out total profit and percentage of profit earned ?
Solution:
Total C. P. of Toys = 100 ´ 20
= 2000
Total S. P. of Toys = 100 ´ 25
= 2500
Profit = S. P - C. P.
= 2500-2000
Profit = Rs. 500
If the C. P. is 2000, the profit is Rs. 500
If the C. P. is 100 ?
(Percentage of Profit = 25%)
100 500
25%
2000 1
 

10. Exercises
Example 2): (To find out C. P)
Shilpa sold a saree at 20% profit, If it had been sold at 20% loss, the selling price would have
been Rs. 400 less. Find the cost price of the saree.
Solution:
Let the cost price of the saree be Rs. x
Taking into consideration all facts we can frame equation as follows.
i) When the saree is sold at 20% profit.
S. P.
x 5x x
x
5 5

  
6x
5

20
C. P. Profit x x
100
    

11. Exercises
ii) When the saree is sold at 20% loss
S. P. =
But it is given in the problem that there is a difference of Rs. 400 in two S. P.
S. P. at Profit - S. P. at Loss = 400
2x = 400´5
2x = 2000
x= Rs. 1,000
C. P. of saree = Rs. 1,000
20
C. P. Loss x x
100
    
x 5x x
x
5 5

  
4x
S. P.
5

6x 4x
400
5 5
 
6x 4x
400
5



12. Exercises
Example 3): (To find average C.P.)
By selling 200 Radio’s for Rs. 55,000 a trader loses 12%, what is the average cost of each Radio ?
Solution:

13. Example 4) : (To find out S.P. and C. P.)
A sells a T. V set to B at a profit of 10%. B sells it to C at a loss of 15% and C sells it to D for
Rs. 16,830 making a profit of 20% : At what cost price A has purchased the T. V. set.
Solution:
Exercises

14. Example 5) : (Trade Discount)
A dealer allows 10% Trade Discount on the List Price of certain articles and yet makes a profit
25% on each article. Find the C. P. of the article when List Price is Rs. 50.
Solution:
Exercises

15. Example: 6) (Trade Discount and Cash Discount)
Rajesh Purchased a Calculator whose list price is Rs. 360. The trader allowed 10% Trade Discount
and 2% cash discount. How much net amount Rajesh has to pay?
Solution:
Exercises

16. Example 7) (To Find Out Percentage of Loss)
A T. V. set costing Rs. 18,000 was sold for Rs. 15,500 after two years find the percentage of loss ?
Solution:
Exercises

17. Example: 8) (To Find Out Profit and Percentage of Profit)
A Flat costing Rs. 3,00,000 was sold for Rs. 3,30,000 after two years. Find the percentage of
profit ?
Solution:
Exercises

18. (Example 9): (To Find Out Marked price)
A dealer in furniture buys chair at Rs. 340 each. At what price should he mark them for sale so
that he may earn a profit of 25% after giving 15% discount ? (P.U.Oct. 2001)
Solution:
Exercises

19. Example10) : (To Find Out Marked Price)
At what price should goods coasting Rs. 48250 be sold through an agent so that after paying
him a commission of on slaes, a net gain of 20% should be made ?
Solution:
Exercises

20. Example 11) :(To find out Marked price)
At what price should an article costing Rs. 510 be sold so that after giving 5% cash discount, a
profit of 20% is made? (P.U.April 2001)
Solution:
Exercises

21. Example 12): (To Find Out Cost Price)
A Camera when sold for Rs. 875 resluted in a loss of 7% what was the cost price of the camera ?
Solution:
Exercises

22. Example 13): (To Find Out C. P)
An article was sold for Rs. 1425 resulted in a loss of 5%. What was the cost price of an article ?
Solution:
Exercises

23. Example 14): (To Find Out C.P)
A Man sold two machines at Rs. 990 each. On one he gained 10% & on the other he loses 10%.
Find the percentage of profit or loss in the total transaction? (P.U April 2001)
Solution:
Exercises

24. Exercises