Profit and Loss 1 Concepts in Profit and

Profit and Loss 1 Concepts in Profit and Loss 2 Formulae of Profit and Loss

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

2. 1. Concepts in Profit and Loss Brokerage Commission Cost Price Profit Concepts in Profit and Loss Selling Price Cash Discount Trade Discount Marked Price

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 Rs 125 then he earns a profit of rs. 25. 3) Loss : The excess of cost price over the selling price is known as 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.

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.

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.

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 = 9) M. P. = S. P. - Cash Discount

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.

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%)

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.

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. at Profit - S. P. at Loss = 400 2 x = 400´ 5 2 x = 2000 x= Rs. 1, 000 C. P. of saree = Rs. 1, 000

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:

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

Exercises (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 Example 10) : (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 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 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 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 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