2. Profit and loss

Profit and loss

Recall: Profit and loss

1. Cost Price:

The price at which a person buys a product is called Cost Price (C.P) of that product.

2. Selling Price:

The price at which a person sells a product is called the Selling Price (S.P) of that product.

3. Profit:

When selling price of a product is higher than the cost price, profit is achieved, which is equal to the difference in selling price and the cost price.

Profit=S.P−C.P

When S.P≻C.P [When the S.P is more than the C.P, then there is a profit.]

Another synonymous term is used for profit is gain.

4. Loss:

When selling price is less than the cost price, there is a loss in the transaction, which is equal to the difference of the cost price and selling price.

Loss=C.P−S.P

When S.P≺C.P [When the S.P is less than the C.P, then there is a loss]

Important!

It is to be noted that the profit or loss is always calculated on the cost price.

Formula for profit and loss

1. To determine the percentage of profit:

  % Profit = Profit/Costprice×100

2. To determine the percentage of loss:

    % Loss = Loss/Costprice×100

3. To determine the selling price/cost price for profit:

• If the profit percentage and cost price is given, we can find out selling price(S.P) of that product using the below formula.

   S.P=(100+Profit%)/100×C.P.

• Instead of cost price, if the selling price is given and asked to find out cost price, by slightly rearranging the formula we can determine the cost price of the product.

   C.P=100/(100+Profit%)×S.P.

4. To Determine the selling price/cost price for loss:

• If the loss percentage and cost price is given, we can find out the selling price(S.P) of that product using the below formula.

   S.P=(100−Loss%)/100×C.P.

• Instead of cost price, if the selling price is given and asked to find out cost price, by slightly rearranging the formula, we can determine the cost price of the product.

        C.P=100/(100−Loss%)×S.P.

Introdution to discounts

To increase the sale and also to clear the old stock during the festival seasons, shopkeepers offer a certain percentage of rebates on the marked price of the articles. In other words, this rebate is known as a discount.

The reduction in market price to increase the sale or to dispose of old goods is known as the discount.

Usually, discounts are express as a percentage of the marked price. The customer or buyer pays the difference between the Marked price and the discounted price.

 Thus, we have Discount=Marked Price × Rate of discount

What is marked price and selling price?

• Actually, In big shops and departmental stores, we see that every product is tagged with a card with a price written on it. The price marked on it is called the marked price.
• Based on this marked price, the shopkeeper offers a discount of a certain percentage. The price payable by the customer after deduction of discount is called the Selling price(S.P).

Therefore S.P=Marked price−Discount

Introduction to GST

Goods And Services Tax- GST

• The goods and services tax (GST) is a value-added tax levied on most goods and services sold for domestic consumption.
• The GST is remitted by the consumers and the traders and is one of the sources of income to the government.

Key Takeaways: 

• GST is an Indirect tax.
• The GST is shared by the Central and State Governments equally.
• GST is destination based Tax.

Types of GST:

• Central GST, (CGST),
• State GST (SGST),
• Integrated GST (IGST) and for union territories, there is UTGST.

Products Under GST:

• The products such as hair oil, toothpaste, soap, computers and processed food, etc., come under GST.
• All these kind of products comes under the tax slab of 5%,12%,18%  and 28%.

 Exempted Products On GST:

• There are also many products like eggs, honey, milk, salt, etc., which are exempted from GST.
• Products like petrol, diesel etc., do not come under GST and they are taxed separately.

Introduction to overhead expenses and successive discounts

1. Overhead Expenses

Consider a situation that you're going to shop with your father to  buy articles like machinery, furniture, electronic items, etc. These products are bought with some expenses on repairs, transportation and labour charges. These expenses are included in the Cost price and which is called as Overhead expenses.

Therefore, Total cost price=Cost price + Over head expenses

2. Successive  Discounts:

• In the case of  Successive  Discounts, the second discount is calculated on the reduced price after deducting the first discount from the marked price.
• Similarly, the third discount is calculated on the reduced price after deducting the second discounts and so on.

Example:

Consider that you're going to buy a book for  ₹100 with successive discounts of 5% and 10%. Therefore the shop keeper first discount 5% of the total amount, which is as follows.

=Totalprice×5%=100×5100=5Thereducedprice=100−5= ₹95

 Then this book also has a second discount of 10%. So now we have to do the percentage calculation with the amount which is reduced from the first discount, which is as follows.

=Reducedpricebyfirstdiscount×10%=95×10100=9.5Thefinalpriceofthebookaftertwosuccessivediscounts=95−9.5= ₹85.5