Cost Price and Selling Price & Formula

                                                 

                 PROFIT AND LOSS                

Introduction 

Imagine you decide to sell homemade chocolate cookies. You spend ₹500 buying flour, butter, sugar, and chocolate. After baking and selling all the cookies, you collect ₹750 from your customers.

Now ask yourself:

Did you earn money? If yes, how much?

Or imagine another situation.

You buy a second-hand bicycle for ₹3,000 hoping to sell it for more. But after waiting for weeks, no one is willing to pay more than ₹2,500.

What happened? Did you lose money?

These two simple situations introduce one of the most useful concepts in mathematics and business Profit and Loss.

Whether it is a small tea shop, a clothing store, an online business, or a multinational company, every business calculates profit and loss every day. Even if you have never owned a business, you have already experienced this concept whenever you buy and sell something.

In this guide, we will understand Profit and Loss from the very beginning using easy explanations, real-life examples, stories, and practical calculations.

What is Profit?

Think about a fruit seller named Ravi.

Every morning, Ravi wakes up early and visits the wholesale market. One day, he buys 100 apples for ₹2,000. His plan is simple. He wants to sell these apples in his shop for a higher price so that he can earn money.

Throughout the day, customers buy apples from him. By evening, he has sold all the apples and collected ₹2,600.

Now let's compare the two amounts.

Money spent = ₹2,000

Money received = ₹2,600

Since Ravi received ₹600 more than he spent, he has earned extra money. This extra money is called Profit.

In simple words, profit is the reward for selling something at a price higher than its cost. Every business aims to make a profit because it helps pay salaries, expand the business, and provide income to the owner.

Think of profit as the "extra money left in your pocket" after recovering all your expenses.

Example

Cost Price = ₹2,000

Selling Price = ₹2,600

Profit = ₹2,600 − ₹2,000 = ₹600

What is Loss?

Not every business earns money every day. Sometimes products remain unsold, prices fall, or goods get damaged. In such situations, a seller may have to sell an item for less than what it originally cost.

Let's continue with Ravi's story.

The next week, Ravi again buys apples for ₹2,000. Unfortunately, heavy rain keeps customers away, and many apples begin to spoil. To avoid wasting them, he sells everything for only ₹1,700.

Money spent = ₹2,000

Money received = ₹1,700

This time Ravi receives ₹300 less than he spent.

This shortage of money is called Loss.

A loss does not always mean someone made a mistake. It can happen because of competition, market conditions, weather, changing customer demand, or unexpected events.

Example

Cost Price = ₹2,000

Selling Price = ₹1,700

Loss = ₹300

What is Cost Price?

Imagine you're opening a small stationery shop.

Before you can sell a notebook, you first have to buy it from a wholesaler. Suppose you purchase one notebook for ₹80.

That ₹80 is not the selling price. It is simply the amount you invested to own the notebook.

This amount is called the Cost Price (CP).

The Cost Price includes the money spent to purchase an item. In some businesses, it may also include transportation charges, packaging costs, and other expenses before the product is ready to be sold.

So whenever someone asks,

"How much did it cost you?"

they are asking for the Cost Price.

Cost Price Using Profit Percentage

Formula

$$CP=\frac{SP\times100}{100+\text{Profit \%}}$$

​

Cost Price Using Loss Percentage

Formula

$$CP=\frac{SP\times100}{100-\text{Loss \%}}$$

Selling Price (SP) = ₹1,800

Loss = 10%

$$CP=\frac{\mathrm{1800}\times 100}{100-\text{10}}$$

$$\mathrm{<span\; style="font-size:\; medium;">C</span>}\mathrm{<span\; style="font-size:\; medium;">P</span>}<span\; style="font-size:\; medium;">=</span>\frac{\mathrm{<span\; style="font-size:\; medium;">180000</span>}}{\mathrm{<span\; style="font-size:\; medium;">90</span>}}$$

                                           CP= 2000₨

What is Selling Price?

Now imagine a customer walks into your shop and buys that notebook for ₹100.

The amount the customer pays is called the Selling Price (SP).

The Selling Price is simply the amount for which an item is sold.

Whether the customer pays more than your cost or less than your cost determines whether you make a profit or a loss.

Selling Price Using Profit Percentage

Formula

$$SP = CP \times \left(1+\frac{\text{Profit \%}}{100}\right)$$ 

Selling Price Using Loss Percentage

Formula

$$SP = CP \times \left(1-\frac{\text{Loss \%}}{100}\right)$$

Cost Price (CP) = ₹800

Profit = 25%

$$SP=CP\times (1+\frac{\text{Profit \%}}{100})$$

$$\mathrm{<span\; style="font-size:\; small;">S</span>}\mathrm{<span\; style="font-size:\; small;">P</span>}<span\; style="font-size:\; small;">=</span>\mathrm{<span\; style="font-size:\; small;">800</span>}<span\; style="font-size:\; small;">\times </span><span\; style="font-size:\; small;">(</span>\mathrm{<span\; style="font-size:\; small;">1</span>}<span\; style="font-size:\; small;">+</span>\frac{\text{<span style="font-size: small;">25</span>}}{\mathrm{<span\; style="font-size:\; small;">100</span>}}<span\; style="font-size:\; small;">)</span>$$

$$\mathrm{<span\; style="font-size:\; small;">S</span>}\mathrm{<span\; style="font-size:\; small;">P</span>}<span\; style="font-size:\; small;">=</span>\mathrm{<span\; style="font-size:\; small;">800</span>}<span\; style="font-size:\; small;">\times </span><span\; style="font-size:\; small;">(</span>\mathrm{<span\; style="font-size:\; small;">1</span>}<span\; style="font-size:\; small;">+</span>\frac{\text{<span style="font-size: small;"> 0.25</span>}}{}<span\; style="font-size:\; small;">)</span>$$

$$\mathrm{<span\; style="font-size:\; small;">S</span>}\mathrm{<span\; style="font-size:\; small;">P</span>}<span\; style="font-size:\; small;">=</span>\mathrm{<span\; style="font-size:\; small;">800</span>}<span\; style="font-size:\; small;">\times </span><span\; style="font-size:\; small;">(</span>\mathrm{<span\; style="font-size:\; small;">1</span>}\frac{\text{<span style="font-size: small;">.25</span>}}{}<span\; style="font-size:\; small;">)</span><span\; style="font-size:\; small;"><br></span>$$

$$\mathrm{<span\; style="font-size:\; small;">S</span>}\mathrm{<span\; style="font-size:\; small;">P</span>}<span\; style="font-size:\; small;">=</span>\mathrm{<span\; style="font-size:\; small;">1000₨</span>}$$

Why are Profit and Loss Important?

Some say,

"Why should I learn Profit and Loss? I'm never going to open a shop."

The truth is, this concept is useful almost everywhere.

Whenever you buy and sell old books, a bicycle, a mobile phone, or even trade items online, you are using Profit and Loss without realizing it.

Business owners use it to decide prices.

Investors use it to check company performance.

Shopkeepers use it every day.

Online sellers on platforms like Amazon and Flipkart calculate profit before listing products.

Even your parents compare the price of groceries to save money.

In short, Profit and Loss is not just a mathematics chapter it is a life skill.