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Chapter Profit and Loss. F.Y.B.Com Sub- Business Mathematics and Statistics Prof- P.A.Navale Dept. of Commerce. 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.
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Chapter Profit and Loss F.Y.B.Com Sub- Business Mathematics and Statistics Prof- P.A.Navale Dept. of Commerce
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.
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.
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.
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.
Formulae in Profit and Loss • Profit = S.P.-C.P. • Loss = C.P.-S.P. • S.P = C.P.+Profit • S.P = C.P.-Loss • C.P = S.P. – Profit • C.P. = S.P. + Loss • S.P. = M.P. - Trade Discount • Cash Price = S.P. - Cash Discount • 9) M.P. =
Formulae in Profit and Loss • Important Points to be Remembered : • Percentage of profit or loss is always calculated on C. P. • Commission or discount is always calculated on S. P. • 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 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
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: (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 (Example ): (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:
