Profit and Loss: Basic Concepts, Formulas, Tricks, Questions & Example

Profit and loss are fundamental concepts that we frequently come across in everyday language. Whenever a transaction takes place, individuals often assess whether it resulted in a profit or a loss. When we purchase products, we instinctively evaluate the gain or loss associated with the transaction.

Understanding the key terms related to Profit and Loss is essential, especially for aspirants preparing for competitive exams. These exams often feature questions on this topic, and a clear grasp of the concepts can make solving these questions straightforward; otherwise, they might become time-consuming. In this article, we cover the basic terms, formulas, concepts, tricks, questions, and examples related to profit and loss.

Profit & Loss For Bank Exams

Profit & Loss is one of the favorite topics of the examiner which is commonly asked in the banking examinations. Profit & Loss is asked in the prelims as well as the mains exam with a difference in the difficulty level. Instead of doing it again & again, clear your concepts once and then practice profit & loss questions. Most of the candidates make a mistake by directly jumping on the short tricks instead of learning the core concepts therefore we will provide all the formulas of profit & loss and also try to clear your concepts. Keep reading this article to check profit & loss questions & examples.

Profit and Loss: Basic Terms

Here we have provided below some of the basic formulas of profit & loss which will help you in solving questions quickly.

Cost Price

The price at which an article is purchased is called its cost price (C.P.)

Selling Price

The price at which the article is sold is called its selling price (S.P.)

Profit

When the selling price is more than the cost price then it is called profit

Loss

When the selling price is less than the cost price then it is called loss

Marked Price or List Price (MP or LP) and Discount

Marked price is the price that is marked on the product or that is quoted in the price list. It is the price at which the product is quoted or intended to be sold. However, the seller can decide to give discounts to the buyer and the actual selling price might be different from the marked price. Given that there is no discount, the marked price is the same as the selling price.
The amount of discount given will always be calculated on the marked price. This can be expressed as Discount Percent= MP-SP/MP×100

Profit Loss: Formulas

• Profit/Gain = Selling Price – Cost Price
• Loss = Cost Price – Selling Price
• Cost Price = Selling Price ( No profit No loss)
• Gain Percentage = (Gain × 100)/(C.P.)
• Loss Percentage = (Loss × 100)/(C.P.)

Profit and Loss: Tricks

Well, tricks are nothing but a way to reduce the steps to calculate the answer, if you know the basics then only you can understand the logic behind the tricks. So we have provided below some profit & loss tricks that you can use while solving similar types of questions

1. Profit, P = SP – CP; SP>CP
2. Loss, L = CP – SP; CP>SP
3. P% = (P/CP) x 100
4. L% = (L/CP) x 100
5. SP = {(100 + P%)/100} x CP
6. SP = {(100 – L%)/100} x CP
7. CP = {100/(100 + P%)} x SP
8. CP = {100/(100 – L%)} x SP
9. Discount = MP – SP
10. SP = MP -Discount
11. When two different articles are sold at the same selling price getting a gain of x% on the first and a loss of x% on the second, then the overall loss in the transaction is given by (x/10)² %. (Note: In such questions, there is always a loss.)
12.  A merchant uses faulty measures and sells his goods at a gain/loss of x%. The overall % gain/loss(g) is given by (100+g)/(100+x)=(True measure)/(Faulty measure). (Note: If the merchant sells his goods at cost price, then x = 0.)
13. A merchant uses y% less weight/length and sells his goods at gain/loss of x%. The overall % gain/loss is given by [((y+x)/(100-y))×100]%

Profit & Loss: Dishonest Dealer Concept

Dishonest Dealers and faulty weights are important topics in profit and loss generally asked in all competitive exams. In this topic, we come across such types of problems in which the shopkeeper sells the items at a cost price but still, he makes a profit on those items. This can be only possible if he gives less quantity to the customer than the indicated on the product. A dishonest merchant shows he is selling the product at a cost price for the welfare of the customer but in that, he reduced its weight.
For example, if a shopkeeper sells a 1-liter packet of milk at its cost price but he gives only 800 ml of milk in that packet. In this case, he is giving 800 ml of milk to a customer and charging an amount of 1000 ml to the customer. Hence, we can say that 800 ml is the cost price and 1000 ml is the selling price. So, he is getting a profit of 200 ml of milk on selling 800 ml of milk.

Percentage profit = ((Selling Price – Cost Price)/(Cost Price))×100
Percentage profit = ((1000-800)/800)×100 = 25%

Profit and Loss: Questions