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When a person purchases an item at one price and then sells it at a different price, he makes a profit or loses money.
Profit: Profit is defined as the amount obtained from any business activity. When a shopkeeper sells a product, his goal is to make a profit by gaining some benefit from the buyer.
Loss: The loss percentage formula is a mathematical formula for calculating the percentage loss in any business. It’s also known as a percentage loss. The difference between the cost price and the selling price is defined as a loss. And the percentage loss is the loss expressed as a percentage of the actual cost price.
Let’s take a look at each of these terms individually to see what they mean.
There are a number of terms that are associated with the entire transaction process. For instance, the article’s cost price (C.P.), its selling price (S.P.), its discount, its marked price, its profit, and its loss.
Cost price: The cost price of an item refers to the price at which it is bought or purchased. (C.P.)
Selling Price: The selling price is the price at which an item is sold. (S.P.)
Marked price: The marked price is the price that the seller has written on the article’s label. It is a discounted price offered by the seller. It is sold at a decreased price known as the selling price after the discount is applied to the marked price.
Discount: Shopkeepers offer discounts to customers to combat business competition and increase product sales. A discount is a rebate or an offer made by a shopkeeper to entice customers to buy something. The discount is always applied to the article’s marked price.
Formulas for Profit and Loss
Formula for Profit
There is a profit in the transaction if the selling price of an item is higher than its cost price.
Profit = Selling price- Cost price
Formula for Loss
There is a loss in the transaction if the selling price of an item is less than the cost price. The following is the basic formula for calculating the loss: Cost Price – Selling Price = Loss
Loss= Cost price – Selling price
Note: There is no profit or loss when the selling price is equal to the cost price.
Profit And Loss statement
A profit and loss (P&L) statement is a financial statement that summarises revenue, costs, and expenses for a specific time period, usually a quarter or financial year. These documents reveal a company’s ability or inability to generate profit by increasing revenue, lowering costs, or both. The cash or accrual basis is frequently used in these statements.
The profit and loss statement, along with the balance sheet and cash flow statement, is one of three financial statements that every public company issues on a quarterly and annual basis. It is the most popular and widely used financial statement in a business plan because it shows how much profit or loss a company generated.
Profit and Loss Statement’s Structure
The profit and loss statement of a company is presented over a period of time, usually a month, quarter, or fiscal year.
The following are the main categories found on the P&L:
- Earnings (or Sales)
- Cost of Goods Sold (Cost of Goods Sold) (or Cost of Sales)
- General & Administrative Sales, General & Administrative Sales, General & Administrative Sales, General (SG&A) Expenses
- Technology in Marketing and Advertising/Research and Development
- Interest Charges
- Taxes
- Net income
Example of Profit And Loss
Example: A cloth seller purchased 35 shirts for Rs 280 each. He got Rs. 308 for each of them. Calculate his profit percentage.
Solution: The profit percentage for one unit is the same as it is for all units. As a result, the calculations should only be done for one unit.
CP = Rs. 280
SP=Rs. 308
Profit =308 – 280 = Rs. 28
For this, you’ll need to use the profit percentage formula.
Profit percentage = 100 x 28 x 280 = 10%
Conclusion
The profit and loss account details an organization’s income and expenses that result in a net profit or loss. The profit and loss statement is a financial statement that summarises revenue, costs, and expenses for a specific time period. The P&L statement, along with the balance sheet and cash flow statement, is one of three financial statements that every public company issues quarterly and annually.
