Profit & Loss 

We often come across these newspaper headlines- 

Profit is a monetary gain earned from any transaction where selling price is more than the cost price. Loss is the expense incurred by the seller where cost price is more than selling price. 

But then what is selling price and cost price? 

Let us look at an example- 

John is a vendor who sells fruits. He buys them from the wholesale market and sells them to his customers. 

The price at which John buys fruits from the wholesale market is called its cost price i.e. how much cost did John incur to buy the fruits. 

The price at which John sells the fruits to his customers is called its selling price i.e. at what price did John sell the fruits. 

But why will he buy something which he wants to sell? This is because he wants to earn money. But how? 

He buys the fruits at a lower price from the market and sells them at a higher price to his customers. 

The difference between these prices is his gain or the profit he has earned on selling. 

When the S.P > C.P, there is a profit 

Profit = Selling Price – Cost Price 

Alternatively, Cost Price = Selling Price – Profit  

And            Selling Price = Cost Price + Profit 

But what if he sold at a lower price and bought at a high price from the wholesale market. 

This is the case where he would have incurred a loss. Loss is nothing but cost incurred without getting anything in return. 

When the C.P > S.P, there is a loss 

Loss = Cost Price – Selling Price 

Alternatively, Cost Price = Selling Price + Loss 

And            Selling Price = Cost Price - Loss 

If S.P = C.P, then it is neither profit nor loss i.e. S.P – C.P = 0 and this point is called breakeven point. 

S.P of the clock = Rs. 620 

Since, S.P > C.P, so Sam will incur a profit. 

Profit of Sam = Rs. 620 – 590 = Rs. 30 

Thus, Sam had a profit of Rs. 30. 

C.P of the washing machine = Rs. 9130 

S.P of the washing machine = Rs. 8790 

Since, C.P > S.P, so Kevin will incur a loss. 

Loss of Kevin = Rs. 9130 – 8790 = Rs. 340 

Solution 

S.P of the book = Rs. 320 

Profit = Rs. 60 

C.P of the book = S.P – Profit = Rs. 320 – 60 = Rs. 260 

Thus, C.P of the book was Rs. 260. 

C.P of the sack of rice = Rs. 1920 

Transportation Cost = Rs. 60 

Transportation cost is an overhead expense for Jack. These are the expenses incurred over and above the original cost to get the product to the place of sell or to make additions to the product to be able to sale it. 

Now, Total C.P = Rs. 1920 + 60 = Rs. 1980 

S.P of the sack of rice = Rs. 2020 

Since, S.P > C.P, so Jack will incur a profit. 

Profit of Jack = Rs. 2020 – 1980 = Rs. 40 

Thus, Jack had a profit of Rs. 40. 

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