BUSINESS MATH
PROFIT AND LOSS
Q2 W2
COST
How much the seller buys the item is the
cost of the item. It is termed cost of goods
sold or cost of sales.
PROFIT
• It refers to the amount left of the selling price
after all costs and expenses had been deducted.
It is computed using the formula:
P/L = SP - CP, where, SP is the selling price,
CP is the cost price, and
P/L is the profit or loss
Hence, Profit = Selling Price - Cost Price
EXAMPLE
Jackson purchased a toy car at ₱2,625 and
sold it at ₱4,038. How much is the profit or
loss?
PROFIT
In the problem, Jackson purchased a toy car at ₱ 2,625.00 (cost
price) and sold it at ₱ 4,038.00 (selling price). To get the profit or
loss, we simply subtract the selling price with the given cost price.
Profit = Selling Price - Cost Price
= 4,038 - 2, 625 Note: If the answer is negative,
= 1,413 it can be labeled as loss.
LOSS
Loss occurs when the cost and expenses exceed
the selling price or sales.
Loss = Selling Price - (Cost Price + Expense)
EXAMPLE
Yuki bought a notebook set for ₱440.00.
She spent ₱18.00 for transportation fee.
She sold her notebook set to her
classmate for ₱450.00. How much is the
profit or loss?
LOSS
In problem, Yuki bought a notebook set for ₱ 440.00. She spent ₱
18.00 for transportation fee (expense). She sold her notebook set
to her classmate for ₱450.00. To get the loss, we must add the
cost and expenses then subtract it to the selling price.
Loss = Selling Price - (Cost Price + Expense)
= 450 - (440 + 18)
Note: If the answer is positive,
= 450 - 458
it can be labeled as profit.
= -8
GROSS PROFIT
Also known as Gross Margin, it appears on a
company's income statement and can be
calculated using this formula:
Gross Profit = Revenue (sales) - Cost of goods sold (cost of sales)
EXAMPLE
A small company earned ₱210,000.00 in
revenue by selling photo cards, and has
₱17,000.00 costs of goods sold. How much
is the gross profit?
GROSS PROFIT
In problem, a small company earned ₱ 210,000.00 in revenue by
selling photo cards, and has ₱ 17,000.00 costs of goods sold.
Gross Profit = Revenue (sales) - Cost of goods sold (cost of sales)
= 210,000 - 17,000
= 193,000
OPERATING EXPENSES
refers to the expenses incurred to run the business.
Expenses refer to operating expenses (administrative
and selling expenses) and financial expense (interest
and other finance charges) may appear on a
company’s income statement.
OPERATING PROFIT/LOSS
refers to the profit from business operations that
appear on a company’s income statement. Thus,
Operating Profit/Loss = Gross Profit - Operating Expenses
EXAMPLE
Haru Merchandising has a gross profit of
₱85,110.00 and incurred an operating
expense of ₱28,305.10. How much is the
operating profit?
OPERATING PROFIT/LOSS
In problem, Haru Merchandising has a gross profit of ₱ 85,110.00
and incurred an operating expense of ₱ 28,305.10.
Operating Profit/Loss = Gross Profit - Operating Expenses
= 85,110 - 28,305.10
= 56,804.90
NET PROFIT/LOSS
Net profit forms part of a business’ income statement.
It is what is left after all the costs of a business have
been added up and taken from its sales revenue. As
such,
Net Profit/Loss = (Operating Profit + Other Income) – Other Expenses
EXAMPLE
JK co. concluded its other income, other
expenses and operating profit to
₱6,500.00, ₱2,090.00 and ₱13,550.00
respectively. How much is the net profit?
NET PROFIT/LOSS
In problem, JK co. concluded its other income, other expenses and
operating profit to ₱6,500.00, ₱2,090.00 and ₱13,550.00
respectively.
Net Profit/Loss = (Operating Profit + Other Income) – Other Expenses
= (13,550 + 6,500) - 2090
= 20,050 - 2,090
= 17,960
INCOME STATEMENT FOR A TRADING FIRM
A trading or merchandising firm buys goods that it sells. The account used to
report the selling price of the merchandise is sales while gross sales refers
to total sales.
An income statement is the financial statement that shows the results of
operation, that is, if it earns a profit or incurs a loss for a given period of
time. Generally, a firm prepares financial statement on a monthly basis. For
tax purposes, it is prepared quarterly and annually. It details the sales
(revenue), the cost of sales (cost of goods sold), the operating expenses, and
other expense and/or other income, if any.
INCOME STATEMENT FOR A TRADING FIRM
Below is a sample income statement of a trading firm.
