Profit and Loss

Introduction To Profit And Loss

Have you ever sold old toys or bought snacks with your pocket money? Did you spend more or save some? This daily life experience is all about profit and loss! Whether you're running a lemonade stand or calculating prices in a shop, understanding profit and loss is super useful. In our daily life, the knowledge of profit and loss is essential in various aspects. In this blog we will explain what is profit and loss, its formulas, sample problems, and how to apply them in both math class and everyday life. We will also help you learn more interesting facts about selling and purchasing items along with ways to calculate the cost price, selling price, discount and marked price of products. By going through the sample problems provided in this page you can explore the concept, formulas and ways to solve question easily.

 

Table of Contents

• What is Profit and Loss?
• Basic Terms You Need to Know
• Profit and Loss Formulas
• Solved Example
• Profit and Loss Questions
• Common Misconceptions
• Conclusion
• FAQs On Profit and Loss

 

What is Profit and Loss?

In our daily life, we buy and sell many things. When we sell something, we may gain money (profit) or lose money (loss). This is called Profit and Loss.

Basic Terms You Need to Know

Definition of Profit:

Profit is the money made by an individual or company when they sell something for a price higher than its cost price or its creation cost. In simple words, profit occurs when the price of selling is higher than the cost price.

Definition of Loss:

Loss is the quantity of money that an individual or company loses when they sell a product or thing for lower than what they paid or created it for. That is, loss occurs when the cost price is greater than the selling price.

Cost Price

Cost price abbreviated as C.P, is the basic price of an article.

It is the price paid to purchase or produce a product in order to sell it.

In other words:

Cost Price is the money you pay to acquire something.

• It is the initial amount at which a product is offered.

• It may involve the cost of purchase, shipping, duty, and other expenses incurred to prepare the item for sale.

• It is employed in determining Profit or Loss upon selling the item.

Selling Price

Selling Price, abbreviated as S.P., is the price given when a commodity is sold to an individual.

In simple terms:

Selling Price is money you receive when selling something.

• It is the last price at which a good is sold.

• It can be equal to, greater than, or lesser than the Cost Price.

• It assists us in determining if we earned a profit or a loss.

Marked Price

Marked Price, abbreviated as M.P, is the price marked on the label or tag of an item prior to providing a discount.

In simple terms:

Marked Price is the price indicated on the product, normally prior to offering a discount.

• It is also referred to as the List Price or Label Price.

• This is the price fixed by the shopkeeper or seller.

• The Selling Price can actually be lower than the Marked Price in case of a discount.

Discount

The amount which is offered by the seller to reduce the selling price is called the discount.

While selling a product three conditions may arise:

1. Cost Price is less than selling price, i.e., C.P < S.P

2. Cost price is more than the selling price, i.e., C.P > S.P

3. Cost price is equal to the selling price, i.e., C.P = S.P.

Based on this condition the seller either makes a profit or a loss.

 

Profit and Loss Formulas

Here are the core profit and loss formulas used to solve most questions:

Solved Example

Practice different types of profit and loss questions to understand how profits, losses, and percentages work in math as well as in real life.

1. Solved Example: The cost price of an article is ₹74 and the selling price is ₹86 each. Find the profit made in selling 23 such articles.

Solution:

Step 1: The cost price of an article is ₹74.

Multiply 74 by 23 to get the cost price of 23 articles.

74 × 23 = 1,702

Step 2: The selling price of an article is ₹86.

Multiply 86 by 23 to get the selling price of 23 articles.

86 × 23 = 1,978

Step 3: Subtract 1,702 from 1,978 to get the profit.

Profit = Selling Price – Cost price 

= 1,978 – 1,702 = 276

Therefore, the profit made in selling 23 articles is ₹276.

 

2. Solved Example: Bhavan bought 20 boxes of gifts for ₹1,642. He sold each box for ₹58. Find the loss or profit made by him.

Solution:

Step 1: The selling price of 1 box = ₹58.

Number of boxes = 20

Total selling price = 58 × 20

                                  = 1,160

Step 2: The cost price of 20 boxes = ₹1,642.

The selling price of 20 boxes = ₹1,160

Loss = Cost Price – Selling Price

Loss = 1,642 – 1,160

          = 482

 

How to Calculate the Selling Price of a Product?

• If a seller provides a discount on the marked price, then the selling price is calculated as “Selling Price = Marked Price – Discount”.

• If the cost price and the profit are given then the selling price is calculated as “Selling Price = Cost Price + Profit”.

• If the cost price and the loss is given then the selling price is calculated as “Selling Price = Cost Price – Loss”.

1. Solved Example: The marked price of the washing machine was ₹29,780. The shopkeeper offers a discount of ₹5645 as a “Diwali Sale”. Calculate the selling price of the washing machine.

Solution:

Marked Price = ₹29,780.

Discount = 5645

Selling Price = 29,780 – 5645
                       = 24,135

2. Solved Example: The cost price of the articles is ₹24,906. The man sold the articles at a loss of ₹904. Find the selling price.

Solution:

Coat Price of an article = ₹24,906.

Loss = 904

Selling price = ₹24,906 – 904

                       = ₹24,002

 

How to Calculate the Cost Price of a Product?

• If an additional amount is spent on repairing or modifying an article then the total cost price of an article is equal to the sum of the price at which the article is bought and the additional price which is spent on the article”.

• If the selling price and the profit are given then the cost price is calculated as “Cost Price = Selling Price – Profit”.

• If the selling price and the loss are given then the cost price is calculated as “Cost Price = Selling Price + Loss”.

Solved Example: A man bought a motorbike for ₹25,000. He spent ₹3500 on paperwork, and ₹7000 for changing the motor parts. At what price should he sell the motorbike to make a profit of ₹3000.

Solution:

Step 1: Amount spent on paperwork = ₹3500
Amount spent on motor parts = ₹7000
Total additional cost = ₹3500 + ₹7000 = ₹10,500

Step 2: Cost price of the motorbike = ₹25,000.
Additional cost = ₹10,500
Total cost price = ₹25,000 + ₹10,500 = ₹35,500

Step 3: Total cost price = ₹35,500
Profit = ₹3000
Selling Price = ₹35,500 + ₹3000 = ₹38,500

 

Profit and Loss Practice Questions

1. A bag was sold for ₹900 with a profit of ₹100. Find the profit percentage.

2. A laptop was sold for ₹18,000 at a loss of ₹2,000. What is the loss percentage?

3. Selling Price = ₹750, Profit = ₹150. Find the Cost Price.

4. Selling Price = ₹420, Loss = ₹80. Find the Cost Price.

5. Cost Price = ₹1,000, Profit % = 25%. What is the Selling Price?

6. Meena bought 15 storybooks for ₹90 each and sold them all for ₹100 each.
   What is her total profit?

7. A shopkeeper sold a fan for ₹2,400 after giving a discount of ₹600.
   What was the marked price of the fan?

 

Common Misconceptions

1: Profit is always a good thing, and loss is always bad.

Reality: While profit usually means earning more money, it’s not always good if it involves cheating or overpricing. Similarly, a loss isn’t always bad—sometimes items are sold at a loss to clear old stock or attract more customers.

2: Profit = Selling Price – Marked Price

Reality: Profit is calculated as Profit = Selling Price – Cost Price, not the marked price. The marked price is often higher and only used to calculate discounts, not profit or loss.

3: If there is a discount, the seller always faces a loss.

Reality: Giving a discount does not always result in a loss. If the discounted selling price is still higher than the cost price, the seller still makes a profit.

4: Loss means losing all the money spent.

Reality: A loss means that the selling price is less than the cost price, but it doesn’t mean the entire amount is lost. It’s just the difference between cost price and selling price.

5: Profit or loss is always calculated on the selling price.

Reality: Profit and loss percentages are always calculated based on the cost price, not the selling price.
Example: Profit % = (Profit ÷ Cost Price) × 100

 

Conclusion

Mastering the concept of profit and loss is not only important for school but also for everyday life. Whether you’re selling an old comic or calculating your savings, learning about profit and loss formulas always help you to make smart choices.

Frequently Asked Questions on Profit and Loss

1. Why is it important to learn about profit and loss?

Answer: Learning about profit and loss helps us understand how to manage money. It teaches us whether we are gaining or losing money when we buy and sell things. This knowledge is useful in daily life and in running a business.

 

2. What is the difference between cost price and selling price?

Answer:

• Cost Price (C.P.) is the amount paid to buy or make an item.
  
  

• Selling Price (S.P.) is the amount for which the item is sold.
  If the selling price is more than the cost price, there is a profit. If it is less, there is a loss.

 

3. What is the profit and loss formula?

Answer:

Formulas used to find profit and loss are:

• Profit = Selling Price (SP) – Cost Price (CP) (if SP > CP)

• Loss = Cost Price (CP) – Selling Price (SP)

Formulas to find the percentage:

• 1. Profit% = (Profit ÷ CP) × 100

• 2. Loss% = (Loss ÷ CP) × 100

 

4. What is the P&L ratio formula?

Answer: The P&L ratio (Profit and Loss Ratio) compares profit to cost price and is usually written as:
P&L Ratio = (Profit or Loss ÷ Cost Price) × 100
It tells you how much profit or loss is made per ₹100 of investment.

 

5. What does P&L mean?

Answer: P&L stands for Profit and Loss. It shows whether a person or business is making money (profit) or losing money (loss) over a period of time.
Businesses often prepare a P&L Statement to track:
1. Revenue (money earned)
2. Expenses (money spent)
3. Net Profit or Net Loss

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