Profit and Loss is one of the most important concepts in mathematics and commerce. It helps you understand how much money is gained or lost in a transaction. Whether you’re running a business, selling old items, or analysing financial decisions, these formulas explain the exact financial outcome. Knowing Profit and Loss also helps students score well in competitive exams and supports practical decision-making in real life.
Profit and Loss Formula Overview
| Concept | Formula | Explanation |
|---|---|---|
| Cost Price (CP) | – | Price at which an item is bought |
| Selling Price (SP) | – | Price at which the item is sold |
| Profit | SP – CP | Earned when SP > CP |
| Loss | CP – SP | Incurred when SP < CP |
| Profit % | (Profit ÷ CP) × 100 | Profit percentage on cost price |
| Loss % | (Loss ÷ CP) × 100 | Loss percentage on cost price |
What is Profit and Loss in Maths?
In mathematics, Profit and Loss describes the result of buying and selling goods or services. When the Selling Price (SP) is higher than the Cost Price (CP), the seller earns a profit. When SP is lower than CP, the seller faces a loss. These formulas help calculate how much is gained or lost and what percentage of the cost price it represents.
Profit and Loss plays a key role in business, trade, retail shops, stock markets, and personal transactions. It helps determine the correct selling price, evaluate performance, and make smarter financial decisions. Students also study this topic in school exams, CUET, SSC, Railway, Banking, and other competitive tests.
Examples of Profit and Loss Formula
Example 1: Profit Calculation
A person buys a mobile phone for ₹12,000 and sells it for ₹15,000.
- CP = ₹12,000
- SP = ₹15,000
- Profit = SP – CP = 15,000 – 12,000 = ₹3,000
- Profit % = (Profit ÷ CP) × 100 = (3,000 ÷ 12,000) × 100 = 25%
The person made a profit of ₹3,000, which is 25% of the cost price.
Example 2: Loss Calculation
A shopkeeper buys a refrigerator for ₹20,000 and sells it for ₹18,500.
- CP = ₹20,000
- SP = ₹18,500
- Loss = CP – SP = 20,000 – 18,500 = ₹1,500
- Loss % = (Loss ÷ CP) × 100 = (1,500 ÷ 20,000) × 100 = 7.5%
The shopkeeper incurred a loss of ₹1,500, which is 7.5% of the cost price.
FAQs on Profit and Loss Formula
1. What is the importance of Profit and Loss?
It helps businesses measure financial performance, set prices, and manage costs effectively.
2. Can profit or loss percentage be more than 100%?
Yes. For example, if an item is bought for ₹100 and sold for ₹250, the profit is ₹150, which is 150% profit.
3. On which price is profit or loss percentage calculated?
It is always calculated on the Cost Price (CP).
4. How is Profit and Loss applied in real life?
In shops, stock markets, real estate, investments, and personal sales like vehicles or gadgets.
5. How can businesses reduce losses?
By controlling expenses, negotiating better purchase rates, setting accurate selling prices, and balancing supply with demand.