Income Statement Explained | Accoun...
Income Statement Explained | Accounting How To | How to Pass Accounting Class

Introduction to Profit and Loss

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Profit and Loss : In our daily life, we buy goods from the shopkeepers in the market which they buy either directly from the manufacturers or through the wholesalers. In order to earn money the shopkeeper sell goods at higher price than which they bought.

Cost price : The money paid by the shopkeeper to buy the goods from wholesaler is called Cost Price ( C.P)

Selling Price : The price at which the shopkeeper sells the goods is called Selling Price (S.P) or in short the money paid by us to shopkeeper is called Selling Price(S.P)

When Selling Price of an article is greater than Cost Price then there is Profit.

S.P > C.P -----> Profit
Profit = P = S.P - C.P

Example :

Jackson purchased a toy car at $125 $ and sold it at $ 138 $. State whether there is profit or loss and how much?

Solution:
Cost price = c.p = $125$
Selling Price = S.P = $138 $

As S.P >C.P, there is a profit.

P = S.P – C. P

P = 138 – 125

P = $ 13 $

When Selling Price of an article is less than Cost Price then there is Loss.

S.P < C.P -----> Loss
Loss = L = C.P - S.P

Example :

Ally purchased a bag for $230 $ and sold it at $175 $. State whether there is profit or loss and how much?

Solution:
Cost Price = C. P = $230 $

Selling Price = S.P = $175 $

As S.P < C.P, there is a loss.

L = C.P – S. P

L = 230 – 175

L = $ 55 $

Profit and Loss

Finding profit or loss percent
Finding cp when sp and Profit or Loss percent are given
Finding sp when cp and Profit or Loss percent are given
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