Profit & Loss: Fundamentals, Cost Price & Marked Price

1. Commercial Definitions & Core Principles

Cost Price (CP): The total financial expenditure incurred to purchase, manufacture, transport, and prepare goods for sale (including freight, cartage, and handling).
Selling Price (SP): The net revenue received when goods are sold to the customer.
Marked Price (MP / List Price): The tag or catalog price before any discount is deducted.

Fundamental Mathematical Equations of Profit and Loss

When SP > CP Profit (Gain) Condition:

Profit = SP - CP
Profit % = (Profit ÷ CP) × 100

When CP > SP Loss Condition:

Loss = CP - SP
Loss % = (Loss ÷ CP) × 100

Marked Price Discount Relationship:

Discount = MP - SP
Discount % = (Discount ÷ MP) × 100

2. Master Formulas for Finding SP and CP Directly

To Find Selling Price (SP):

When there is a Gain: SP = CP × [ (100 + Gain%) / 100 ]
When there is a Loss: SP = CP × [ (100 - Loss%) / 100 ]

To Find Cost Price (CP):

When there is a Gain: CP = SP × [ 100 / (100 + Gain%) ]
When there is a Loss: CP = SP × [ 100 / (100 - Loss%) ]

3. Commercial Worked Problem

Question: A retailer marks goods at 40% above Cost Price and allows a trade discount of 15% on the Marked Price. Calculate his actual net profit percentage.

Step-by-Step Solution:

Assume a baseline Cost Price (CP):
- Let CP = ₹100
Calculate Marked Price (40% markup on CP):
- Markup = 40% of ₹100 = ₹40
- MP = 100 + 40 = ₹140
Calculate Discount allowed (15% on Marked Price):
- Discount = 15% of ₹140 = (15 / 100) × 140 = ₹21
Determine Selling Price (SP):
- SP = MP - Discount = 140 - 21 = ₹119
Determine Profit & Profit Percentage:
- Profit = SP - CP = 119 - 100 = ₹19
- Profit % = (Profit ÷ CP) × 100 = (19 ÷ 100) × 100 = 19%
- Conclusion: The retailer earns an actual net profit of 19%.

Profit & Loss: Fundamentals, Cost Price & Marked Price | B.Com Notes