The formulas for calculating Profit and Loss are:
- Profit = Selling Price (SP) – Cost Price (CP)
Profit % = (Profit ÷ CP) × 100 - Loss = Cost Price (CP) – Selling Price (SP)
Loss % = (Loss ÷ CP) × 100
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 financial outcome of buying and selling goods or services.
- Profit occurs when Selling Price (SP) is greater than Cost Price (CP).
- Loss occurs when SP is less than CP.
This concept is widely used in business, trade, and daily life to evaluate financial performance, make pricing decisions, and calculate earnings or losses.
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.
