Profit and Loss 

formula is used in mathematics to determine the price of a commodity in the

market and understand how profitable a business is. Every product has a cost price and
selling price. Based on the values of these prices, we can calculate the profit gained or the
loss incurred for a particular product.
For example, for a shopkeeper, if the value of selling price is more than the cost price of a
commodity, then it is a profit and if the cost price is more than the selling price, it becomes a
loss.

Profit(P)
The amount gained by selling a product with more than its cost price.

Loss(L)
The amount the seller incurs after selling the product less than its cost price, is mentioned as a
loss.

Cost Price (CP)

The amount paid for a product or commodity to purchase it is called a cost price. Also,
denoted as CP. This cost price is further classified into two different categories:
Fixed Cost: The fixed cost is constant, it doesn’t vary under any circumstances
Variable Cost: It could vary depending as per the number of units
Selling Price (SP)
The amount for which the product is sold is called Selling Price. It is usually denoted as SP.
Also, sometimes called a sale price.
Marked Price Formula (MP)
This is basically labelled by shopkeepers to offer a discount to the customers in such a way
that,

Discount = Marked Price – Selling Price

And Discount Percentage = (Discount/Marked price) x 100

Profit and Loss Formulas

Now let us find profit formula and loss formula.
The profit or gain is equal to the selling price minus cost price.
Loss is equal to cost price minus selling price.

Profit or Gain = Selling price – Cost Price

Loss = Cost Price – Selling Price
The formula for the profit and loss percentage is:

Profit percentage = (Profit /Cost Price) x 100

Loss percentage = (Loss / Cost price) x 100
SP = [(100 + Gain%) / 100] * CP
SP = [(100 – Loss %) / 100]*CP

Profit and Loss Examples

 If a shopkeeper brings a cloth for Rs.100 and sells it for Rs.120, then he has made a
profit of Rs.20/-.
 If a salesperson has bought a textile material for Rs.300 and he has to sell it for
Rs.250/-, then he has gone through a loss of Rs.50/-.
 Suppose, Ram brings a football for Rs. 500/- and he sells it to his friend for Rs. 600/-,
then Ram has made a profit of Rs.100 with the gain percentage of 20%.
These are some common examples of the profit and loss concept in real life, which we
observe regularly.

Question Bank:
1. A shopkeeper has bought 1 kg of apples for 100 rs. And sold it for Rs. 120 per kg.
How much is the profit gained by him?
2. For the above example calculate the percentage of the profit gained by the
shopkeeper.
3. A man buys a fan for Rs. 1000 and sells it at a loss of 15%. What is the selling price
of the fan?
4. A man sold a fan for Rs. 465. Find the cost price if he incurred a loss of 7%.
5. In a transaction, the profit percentage is 80% of the cost. If the cost further increases
by 20% but the selling price remains the same, how much is the decrease in profit
percentage?
6. The cost price of 20 articles is the same as the selling price of x articles. If the profit is
25%, the what is x?
7. The percentage profit earned by selling an article for Rs. 1920 is equal to the
percentage loss incurred by selling the same article for Rs. 1280. At what price should
the article be sold to make 25% profit?
8. Sam purchased some dozens of toys at the rate of Rs. 375 per dozen. He sold each one
of them at the rate of Rs. 33. What was his percentage profit?
9. On selling 17 balls at Rs. 720, there is a loss equal to the cost price of 5 balls. The
cost price of a ball is:
10. When a plot is sold for Rs. 18,700, the owner loses 15%. At what price must that plot
be sold in order to gain 15%?
Simple Interest
Simple interest is a quick and easy method to calculate interest on the money, in the simple
interest method interest always applies to the original principal amount, with the
same rate of interest for every time cycle. When we invest our money in any bank, the
bank provides us interest on our amount. The interest applied by the banks is of many types
one of them is simple interest. Now, before going deeper into the concept of simple interest,
let's first understand what is the meaning of a loan.
A loan is an amount that a person borrows from a bank or a financial authority to fulfil
their needs. Loan examples include home loans, car loans, education loans, and personal
loans. A loan amount is required to be returned by the person to the authorities on time with
an extra amount, which is usually the interest you pay on the loan.
Simple interest is calculated with the following formula: S.I. = P × R × T, where P =
Principal, R = Rate of Interest in % per annum, and T = Time, usually calculated as the
number of years. The rate of interest is in percentage r% and is to be written as r/100.
Principal: The principal is the amount that initially borrowed from the bank or invested.
The principal is denoted by P.
Rate: Rate is the rate of interest at which the principal amount is given to someone for a
certain time, the rate of interest can be 5%, 10%, or 13%, etc. The rate of interest is denoted
by R.
Time: Time is the duration for which the principal amount is given to someone. Time is
denoted by T.
Amount: When a person takes a loan from a bank, he/she has to return the principal
borrowed plus the interest amount, and this total returned is called Amount.
Amount = Principal + Simple Interest
A = P + S.I.
A = P + PRT
A = P(1 + RT)

1. Michael's father had borrowed $1,000 from the bank and the rate of interest was 5%.
What would the simple interest be if the amount is borrowed for 1 year? Similarly,
calculate the simple interest if the amount is borrowed for 2 years, 3 years, and 10 years?
2. How much time will it take for an amount of ₹900 to yield ₹81 as interest at 4.5%per
annum of simple interest?
3. Arun took a loan of ₹1400 with simple interest for as many years as the rate of interest.
If he paid ₹686 as interest at the end of the loan period, what was the rate of interest?
4. A sum fetched a total simple interest of ₹929.20 at the rate of 8% per annum in 5 years.
What is the sum?

Compound Interest
Compound interest, or 'interest on interest', is calculated with the compound interest
formula.
The formula for compound interest is A = P(1 + r/n) (nt), where P is the principal balance, r is
the interest rate, n is the number of times interest is compounded per time period and t is the
number of time periods.

 A = the future value of the investment/loan, including interest

 P = the principal investment amount (the initial deposit or loan amount)
 r = the annual interest rate (decimal)
 n = the number of times that interest is compounded per unit t
 t = the time the money is invested or borrowed for
Questions:
1. A sum of Rs. 50,000 is borrowed and the rate of interest is 10% per annum. What is
the compound interest for 5 years?
2. Find the amount if Rs. 10,000 is invested at 10% p.a. for 2 years when compounded
annually?
3. The CI on a sum of Rs 1000 in 2 years is Rs 440. Find the rate of interest?
4. A man deposited $100000 in a bank. In return, he got $133100. Bank gave interest
10% per annum. How long did he keep the money in the bank?