UNIT––1

ARITHMETIC AND
PERCENTAGES

Written by: Muhammad Abbas Ali But

And Asif Naveed
Revised by: Ms. Saima Kashif

1
 CONTENTS

1.1 Percentages
1.2 Unitary Method
1.3 Ratio and Proportion
1.4 Compound Proportion
1.5 Profit, Loss, Mark up and Discount
1.6 Calculation of Zakat and Ushr
1.7 Income Tax
1.8 Conversion of Currencies
1.9 Types of Account
1.10 Online Banking
1.11 Types of Finance

2
 INTRODUCTION
Knowledge has been the need of human being since beginning. In this unit, you
will learn about some important topics e,g. Percentages, unitary method, ratio and
proportion, compound proportion, profit, loss, marked price, discounts,
calculation of Zakat and Ushr, income tax, conversion of currencies, types of
account, on line banking and types of finance. There is content knowledge of
these topics with examples of everyday life. All the topics in this unit are related
to our daily life. A common person needs information about these things. So
These concepts are very important in everyday life.

Objectives
After studying this unit the perspective teachers will be able to:
1. define, understand and use of the following terms.
i. Percentages
ii. Ratio and Proposition
iii. Profit and Loss
2. understand the concept of following terms and compute:

i. Profit
ii. Loss
iii. Discount
iv. Zakat
v. Ushar
vi. Income tax
3. convert the currency of a country in terms of anothers.
4. understand the concept of online banking, types of bank accounts.
5. know about types of finance. .

3
Percentage:
When a number is expressed as a fraction of 100 i.e, per 100 it is called
percentage. The word “Percentage” is derived from the Latin Word “Per Centum”
mean out of hundred. Its symbol is %. For example, 72% (read as “Seventy Two
72 50 100
Percent”) = , 50% = , 100% =
100 100 100

“Ancient Rome” long before decimal system, computations were often made in
1
fractions as a multiples of . It was a standard of that age. From the late 15th
100
century and in the early 16th century, these computations were included in
Arithmetic to profit and loss, interest rates etc. till 17th century.

 A percent can also be expressed as a Decimal or a Fraction.

A Half can be written as: 50% (percentage)

4
 50
 0.5 (Decima)
100
50 1
 (Fraction)
100 2

 How to calculate Percents?

We can calculate the percents of any number by multiplying the number
with percents.
60
e.g. 60% of 75 Marks = 75  =45 marks
100

 Determining Percentage:
45 is what percent of 75?
45
 100  60%
75
Conversion of Percentage to Fraction in the lowest form:
We can express the percentage into fraction in the lowest form.
50 5 1
e.g. 50%   
100 10 2
30 3
30 %  
100 10

Conversion of Fraction to Percentage:

We can convert fraction to percentage.
e.g.
5
9 9 100 45
    45 %
20 201 100 100

5
 20

2 2 100 40
   40%
5 5 100 100
1

Activity No. 1:
A. Express the following percentage as fraction in the lowest form.
1
(i) 72% (ii) 92% (iii) 15% (iv) 2 %
2
B. Express the following fractions as percentage.
3 2 1 1 3
(i) (ii) (iii) (iv) (v)
4 3 4 2 8

C. (i) Calculate 25% of 80.

(ii) 15% of 300 students failed. How many students failed?
(iii) If only 25 of the 600 students get “A” grade, what percent of
student got “A” grade?
D. Can you describe the figure in fraction, percentage and decimal?

1
E. I spend of my profit at advertisement. What percent do I use for
4
advertisement?

6
1.2. Unitary Method
This is the method of carrying out a calculation to find the value of a number of
items by first finding the cost of one of them.
It is a technique in Mathematics to solve particular types of problems. Unit
means one, in this method, we first find the value of one. To find the value of one,
when we have the value of many, we divid:
Steps: (i) Find the value of one unit.
(ii) Find the value of required units.
Example No.1: 5 pencils cost Rs. 15. How much does 1 pencil cost?
Solution: Cost of 5 pencils = Rs. 15
15
Cost of 1 pencil = = Rs. 3
5
Example No.2 5 buses carry 300 passengers. How many passengers can 9
buses carry?
Solution: 5 buses carry passenger = 300
300
1 bus carries passengers = = 60
5
9 buses carry passengers = 60x9 = 540
Example No.3 I got 686 marks out of 850 marks. What is the percentage
of may marks?
Solution: Marks out of 850 = 686
686
Marks out of 1 =
850
686
Marks out of 100 =  100% = 80.7%
850
Example No.4
5 workers can complete a work in 20 days. In how many days
same work will be completed if 10 workers are employed?
7
Solution: 5 workers complete the work in days = 20 days
1 worker complete the work in days = 20  5
20  5
10 workers complete the work in days = = 10 days
10

Activity 2
(A) If the price of 12 radios is Rs. 3780. Find the price of 30 such radios.
(B) If price of one dozen eggs is Rs. 108, then what will be the price of 200
eggs?
(C) Price of 15m cloth is Rs. 1012.50. What will be the price of 22 m of the
cloth?
(D) 10 men do a piece of work in 30 days. In how many days will 20 men do
this piece of work?
(E) 12 women do a work in 84 days. In how many days, will 14 women do the
same work?

Key Points: (Percentages & Unitary Method)

50
Percentage means per 100 i.e. 50% =
 100
1
Percent = 100
 Percentage can be expressed as a decimal or a fraction.
 In unitary method, first we find out the cost of one item, then we can find
out the cost of a number of items.
 The unitary method is a technique in elementary algebra for solving a
class of problems in variation. It consists of finding one of the variables to
a single unit i.e., 1, and then performing the operation necessary to alter it
to the desired value.

8
Self Assessment Exercise 1:
(i) What is 75% of 75?

(a) 56.25 (b) 55 (c) 50 (d) 60

(ii) Convert 60% to fraction in the lowest form.

6 3 5 60
(a) 10 (b) 5 (c) 3 (d) 100

2
(iii) Express 5 as percent.

(a) 80% (b) 20% (c) 40% (d) 60%

(iv) What percent of Rs. 400 is Rs. 92?

(a) 46% (b) 92% (c) 23% (d) 29%

(v) What is monthly rent of a house if its annual rent is Rs. 204000.

(a) Rs.19000 (b) Rs.18500

(c) Rs.18000 (d) Rs.17000

(vi) What is the price of 28 pencils if the pencil of one dozen pencils is Rs. 60?

(a) 140 (b) 150 (c) 125 (d) 120

(vii) A train covers 550 km distance in 11 hours. In 20 hours, how much

distance will the train cover.

(a) 1100km (b) 1000km (c) 1050km (d) 1155km

(viii) What is the price of 200 m long wire if the price of 10m long wire is Rs.
60?

(a) Rs.600 (b) Rs.1000 (c) Rs.1200 (d) Rs.2000

9
(ix) What is the price of 25 machines if the price of 5 machines is Rs. 75000?

(a) Rs.275000 (b) Rs.325000 (c) Rs.250000 (d) Rs.375000

(x) Ali bought 5 cycles for Rs. 2000. What will be the price of 50 cycles?

(a) Rs.20,000 (b) Rs.25000 (c) Rs.20500 (d) Rs.4000

10
 1.3 (a) Ratio:

Ratio is a comparison between two quantities of the same kind. It has no unit.

So it is a relation between two objects.

A symbol used to represent ratio is colon ( : ) . It can also be written in the form
of fraction. Suppose a and b are two quantities of the same kind.

Then the ratio between a and b is given as:

a
: b or
b

 The first quantity ‘a’ is called the antecedent and the second quantity ‘b’ is
called the consequent.
a b
 We cannot change the order of ‘a’ and ‘b’ i.e, a:b  b:a or 
b a
 The ratio should be in the lowest form.
 Ratio can be expressed in the form of:

i. 3:4 by using colon ‘:’

3
ii. as a fraction
4

iii. 0.75 as a decimal

iv. 75% as a percentage

v. 3 is to 4 as “is to”form.

 Ratio can also be written for more than two quantities. i.e a:b:c

Examples:

Convert the following ratios in the reduced or lowest form.

11
 2 5 1 1 1
(i) 16 : 20 (ii) 9 : 72 (iii) : (iv) : :
7 9 2 3 4

Solution:

2 5
(iii) :
7 9
9 : 72 Multiply by LCM i.e 63
2 5
Dividing by 9 63  : 63 
7 9
9 72
: 18:35
9 9
1:8
1 1 1
(iv) : :
2 3 4
Multiple by LCM i.e, 12.
1 1 1
12  : 12  : 12 
2 3 4
6:4:3
Activity 3 Fill the following table

a:b a
b
3:4 3
4
(i) 9:11 ?
(ii) ? 5
6
(iii) 2:9 ?

12
B. Simplify the following ratios.

3
(i) 25 : 60 (ii) 5: (iii) 2: 0.4 (iv) 50:75:125
5
1 1 1
(v) : : (vi) Rs. 100 : Rs. 500
4 5 8

C. Find the ratio and simplify

(i) 2kg and 400 grams

(ii) 1h and 20 minutes
(iii) One week and 21 days
(iv) 5m and 40cm

D. 200 students appeared in the exam and 50 students failed. What is the ratio
of:

(i) Pass students to fail students

(ii) Fail students to total students.

E. A triangle has angles of Rs. 60o, 30o and 90o. Find the ratio between the
angles of the triangle.

F. A person earns Rs. 60,000 per month while his monthly expenditure is Rs
45000. Find the ratio of :

(i) Income to expenditure

(ii) Income to saving
(iii) Expenditure to saving.

Proportion

The equality of two ratios is termed as Proportion. Its symbol is “::” or “=”.

13
 a c
If a:b= c:d or =
b d

then Proportion is a:b :: c:d or a:b = c:d

Here a and d are extremes while b and c are means of the proportion.

means
Mcons

a : b :: c : d
extremes
Extrcms

Product of means = Product of extremes

bc = ad

Examples:

A. Find the unknown value in the proportion.

Solution:

3: x :: 45 : 15

Product of extremes = product of extremes

x  45  3  15
3  15
x 
45
x 1

So the unknown values is =1

B. Find whether each of the following statements is a proportion or not

2 6 4 20
(i)  (ii) 
3 9 3 80

14
 a c
Solution (i) 
b d

Here a =2 , b=3 , c=6 , d=9

if ad = bc

(2)(9) = (3)(6)

18 = 18

2 6
So  is a proportion.
3 9

4 20
Solution (ii) 
3 80

Here a =4 , b=3 , c = 20 , d = 80

if ad = bc

(4)(80) = (3)(20)

320 ≠ 60

4 20
So  is not a proportion.
3 80

We can use cross-products to verify the proportion in this situation.

C. What value of n will make this a proportion?

6 n

15 25

6  25  n  15

6  25
n
15

10 = n

15
Activities 4 Find the value of x
14 x
(i) 
38 19
(ii) 40:60 :: 20:x
(iii) 15:60::x:2
(iv) x:3 :: 120:30
(v) 2:7 :: x:49

Types of Proportion

There are two types of proportions.

(1) Direct Proportion

(2) Inverse Proportion

Direct Proportion

A proportion in which one quantity increases as other quantity increases.

Similarly the decrease in one quantity causes the decrease in other quantity OR
Two quantities a and b , are in direct proportion if by whatever factor “a”
changes “b” changes by the same factor.

To understand the direct proportion, we see the table below.

No. of pens 1 2 3 4 5

Price of pens (Rs.) 10 20 30 40 50

We can observe that price increases in the same proportion as quantity increases.
So we can say that price is directly proportional to the quantity.

16
Examples: (i) The price of 5 chairs is Rs. 2000. What will be the price of
15 such chairs?

Solution: Let the price of 15 chairs = x

Chairs Price

5 2000

15 x

It is clear that the price of 15 chairs will be more than the price of 5 chairs.

It is direct proportion. 50

5 : 15 : 2000 : x

Product of extremes = Product of means

5x = 15 x 2000

x =

So the price of 15 chairs = x = Rs. 6000

Example (ii): A car travels 50 km in 4 liters. How far will it go by 20

liters of petrol.

Solution: Let the car travel in 20 liters = x km

Petrol (liter) distance (km)

4 50

20 x

17
 It is clear that the car will travel more distance in more petrol. So it is
direct proportion.

4 : 20 :: 50:x

4 50

20 x

50  20
x =
4

x = 250 km

So the distance travelled in 20 liter = 250 km.

Inverse Proportion:

A proportion in which one quantity increases by decreasing the other quantity and
first quantity decreases by increasing the second quantity. OR

Two quantities a and b are in inverse proportion if by whatever factor a changes,

b changes by the reciprocal of that factor.

Following table will show the relation of inverse proportion:\

Speed 60 120 180 30

(kmh)-1
1 1
Time (h) 1 2
2 3

Example (i): 4 men can repair a road in 6 days. In how many days 8 men do the
same job?

Solution: Let the no. of days = x

Men days

18
 4 6

8 x

It is clear that eight men do the same job in less time. So it is inverse
proportion.

4 x

8 6
46
x
8
3=x

So the number of days = 3

Example (ii): 72 persons have enough food for 9 days. After 2 days 12 more
persons joined, for how many days food will be enough for all of
them?

Solution: Let the number of days = x

Men days

72 7

84 x

72 : 84 :: x : 7

72  7  84  x

72  7
x
84

6 = x

So the no. of days = 6

19
Activity 5:
(A) A farmer has enough grains to feed 50 cattle for 12 days. He buys 10 cattle
more. For how many days will the grain last now?
(B) 24 people can construct a house in 15 days. But the owner would like to
finish it in 10 days. How many more workers will be needed.
(C) The price of 50 books is Rs. 2000. What would be the price of 30 such
books?
(D) If 10 cows give 60 liters milk, how much milk wecan get from 15 cows?

1.4 Compound Proportion

The proportion involving two or more quantities is called compound proportion.
OR
The relationship between two or more proportions is called compound proportion.

Example: (1) 195 men working 10 hours a day can finish a job in 20 days. How
many men will be employed to finish the same job in 15 days if
they work 13 hours a day?

Solution: Let the no. of men required = x

invers

Days Hours Men

invers

20 10 195

15 13 x
Days & Men (inverse proportion) Hours & (Men in-verse)
proportion).

25 : 20
 :: 195 : x
13 : 10 

20
 Product of extreme values = Product of mean values

15 13  x  20 10 195

20  10  195
x
15  13

x= 200 men

So the no. of men needed = 200 Men

Example: (2) A soap factory makes 500 units in 9 days with the help of 25
machines. Five machines became useless, how many units will be
made in 18 days with the help of remaining machines.

Solution: No. of working machines = 25

No. of useless machines = 05
No. of remaining machines 25-05 = 20
Let the no. of units =x
Direct

Machines Days Units

25 9 500

20 18 x
Machines & units direct proportion = Days & units direct Proportion

25 : 20
 :: 500 : x
9 : 18 
Product of extreme value = Product of mean value
25  9  x  20 18  500
20  18  500
x
25  9
x = 800 units

21
Activity 6:

(A) Five buffaloes give 250 liters of milk in a week. How many liters will 21
buffaloes give in 4 weeks?

(B) A factory produces 12000 plastic bottles by using 3 machines 8 hours a

day. One machine is out of order now. The owner wants to produce 15000
plastic bottles. How many hours the remaining machines have to work to
produce the required bottles?

(C) A contractor contract to build a house in 30 days. He employed 10 men to

1
build the house. After 20 days, they completed only of the total work.
3
How many more men will be required to finish the remaining work within
due time?

Key Points: (Ratio and Proportion Compound Proportion)

The comparison of one number to another number is called a ratio. It can

 a
be expressed by colon(:) or by division (÷) i.e. a:b or a ÷ b  
b.
 The first quantity is called antecedent and the second one is called the
consequent. It has no unit.
 The equality of two ratios is called proportion.

i.e., if a : b = c : d

then a : b :: c : d

 ad = bc

i.e, Product of extreme values = Product of mean values.

 There are two kinds of proportion.

22
 (i) Direct Proportion (ii) Inverse Proportion

 Two quantities, A and B, are in dire3ct proportion if by A changes, B

changes by the same factor.
 The graph of a direct proportion is a straight line.
 Two quantities, A and B, are in inverse proportion if by whatever factor A
Changes, B changes by the multiplicative inverse, or reciprocal, of that
factor.
 The relationship between two or more proportions is called compound
proportion.

Self Assessment Exercise 2:

(i) The unit of ratio is:

(a) kg (b) sec (c) none (d) m

(ii) The ratio between green and white part of Pakistani Flag is:

(a) 3:1 (b) 2:1 (c) 4:1 (d) 3:2

(iii) A company has 100 employees of which 70 are males and 30 are females.
What is the ratio of Male to Female.

(a) 70:30 (b) 30:70 (c) 100:70 (d) 7:3

(iv) Convert in the lowest form: 15 : 75

(a) 3:25 (b) 1:5 (c) 5:25 (d) 5:1

1 1 1
(v) Convert in the lowest from : : :
3 4 5
(a) 6:5:4 (b) 6:4:3 (c) 12:15:20 (d) 3:4:5

23
 x 12
(vi) Find the value of x. 
5 30
(a) 2 (b) 3 (c) 4 (d) 5

(vii) The price of 2 pencils is Rs.10. What will be the price of 15 such pencils?

(a) Rs.120 (b) Rs.150 (c) Rs.30 (d) Rs.75

(viii) 12 pens cost Rs. 84, find the cost of 36 pens.

(a) Rs.252 (b) Rs.432 (c) Rs.360 (d) Rs.225

(ix) 8 men can dig a trench in 15 hours. How long will 6 men tabe?

(a) 24 hours (b) 20 hours (c) 10 hours

(d) 12 hours

(x) 24 females complete a job in 20 days working 8 hours a day. In how many
days 10 females will complete the work for 12 hours a day?

(a) 28 days (b) 40 days (c) 32 days

(d) 24 days

24
1.5 Profit

(a) Profit is earned when the sale price of an object is greater than its
cost price. i.e,

Profit = Sale Price – Cost Price

If we denote profit by ‘P’, selling price by ‘SP’ and cost price by CP, then
we can write the above equation as:

P = SP – CP

If we want to calculate the percentage of profit, we can use the following

formulae.

Profit
Profit % =  100
Cost Price

Example: (1) An old car was purchased for Rs. 300,000/= and after two months
it was sold for Rs. 320,000/= Find the profit and profit percentage.

Solution: Cost Price = Rs. 300,000

Sale Price = Rs. 320,000

Profit = Sale Price – Cost Price

= 320,000 – 300,000

Profit = Rs. 20000

Profit
Profit % =  100
Cost Price

20000
=  100
300000

25
 20
Profit% = %  6 .7 % 20 %
3

1.5 (b) Loss

There is a loss, if cost price is greater than sale price. i.e,

Loss = Cost Price–Sale Price

Loss = CP–SP

To calculate the percentage of loss, we have the following formulae

Loss
Loss% =  100
Cost Price

Example (2): A boy bought a cycle for Rs. 3000 and sold it for Rs. 2700. What
was his loss %?

Solution: Cost Price = Rs. 3000

Sale Price = Rs. 2700

Loss = Cost Price-Sale Price

= 3000-2700

Loss = Rs. 300

Loss
Loss % =  100
Cost Price

300
Loss % =  100
3000

Loss % = 10 %

26
1.5 (c) Mark Up:

Mark up is difference between the cost of an object and its selling price. A marks
up is added to the cost to get a profit by the producer of the object. i.e

Mark up = Sale Price-Cost

Marked Price:

The printed price of an object is called marked price. The price is printed on the
tag or wrapper of the object by the manufacturer.

1.5. (d) Discount:

The difference between the marked price and the sale price is called
discount. i.e,

Discount = Marked Price – Sale Price

= MP – SP

We can also calculate discount % as :

Discount
Discount % =  100
Marked Price

Example (1): The marked price of a book is Rs. 1000 and Ali got it in Rs.950.
What discount he got? Also calculate its discount%.

Solution:

Marked price of a book = Rs. 1000

27
 Sale price of a book = Rs. 950

Discount = Marked Price – Sale Price

= 1000 – 950

= Rs. 50

Discount
Discount % =  100
Marked Price

50
=  100
1000

Discount % = 5%

Example (2): My friend got a 12 % discount when she bought her new laptop. If
the marked price was Rs. 40000, how much she got discount and
how much she paid for laptop?

Solution: Marked Price = Rs.40000

Discount % = 12 %

Discount = ?

Discount = Marked Price  12 %

12
Discount = 40000   4800
100

Sale Price = Marked Price – Discount

= 40000 – 4800

= Rs. 35200

So she paid for laptop = Rs 35200

and she got discount = Rs. 4800

28
Activity 7:

(A) A shopkeeper bought one dozen eggs for Rs. 60 and sold each egg for Rs.
4. Find the loss%?

(B) A mobile is sold for Rs. 5000 at the profit of 25 % Find the cost price.

(C) If 30% discount on Desktop computer is Rs. 2100. What will be the
marked price and sale price?

(D) 20% loss on a watch is Rs. 1200. Find the Cost and Sale Price of the
watch.

(E) A digital camera was sold for Rs. 8400 by giving a discount. If marked
price was Rs. 9900, find the discount%.

(F) A printer was sold by giving 60 % discount to clear the product. If the
customer paid only Rs. 9600 for the printer. Find the marked price of the
printer.

1.6 (a) Zakaat

There are five basic pillars of Islam. Zakaat is one of them. Every Sahib-e-
Nisab Muslim pays Zakaat to the poor and the needy at the rate of 2.5 %
1
or 2 %.
2

OR

There are two kinds of charities in Islam.

1
(i) The obligatory charity i.e, “Zakaat” at the rat of 2 %.
2

29
(ii) The voluntary charity i.e, “Sadaqah”

Who is Sahib-e-Nisab?

A Muslim who has the followings for a year.

Gold = 7.5 Tola

Or Silver = 52.5 Tola

Or Cash money as savings, equal to above value of gold or silver.

1
Sahib-e-Nisab should pay Zakat at the rat of 2 % according to the Holy Quran.
2
1
i.e, Zakat is the the part of the Nisab ( amount).
40

1
Example: (1) Calculate Zakat on the amount of Rs. 100,000/= at the rat of 2 %.
2

Solution:

Amount = Rs. 100,000

1 5 5
Rate of Zakat = 2 % = % =
2 2 200

5
Amount of Zakkat = 100,000  = Rs. 2500
200

Example: (2) What will you give as Zakat on the silver of amount Rs. 250,000

Solution: Amount = Rs. 250,000

1 5 5 1
Rate of Zakat = 2 % = % 
2 2 200 4

30
 1
Amount of Zakat = 250,000  = Rs. 6250
40

Example: (3) Fizza has 150 grams of gold. What would she give as Zakat if the
1
rate of 1 gram of gold is Rs. 5000? Rate of Zakat is 2 % .
2

Solution: Weight of gold = 150 grams

Rate of gold per gram = Rs. 5000
Total amount of gold = 150  5000
= Rs. 750,000
1 5 5 1
Rate of Zakat = 2 % = % = =
2 2 200 40
Amount of Zakat on 150 grams of gold
1
= 750,000 
40
= Rs. 18750.
1.6 (b) Ushr

1
th or 10%, Zakat of land irrigated by natural water resources. Fruits
10
and vegetables are not included in it. If the land is irrigated by artificial
1
sources (tubewells) then the rate of Ushr will be half i.e, th or 5% of
20
the agricultural product.

Example (1): Calculate the amount of Ushr on the production of 50000 wheat
crop by natural resources. The price of 40 kg wheat is Rs. 1000.

Solution: Weight of wheat = 50000 kg

Price of 40 kg wheat = Rs. 1000
1000
Price of 1 kg = = Rs. 25
40

31
 Price of 50000 kg wheat = 50000  25
= Rs. 1250000
 Crop is produced by natural resources.
 Rate of Ushr = 10%
10
Amount of Ushr = 1250000 
100
= Rs. 125,000

Example (2): What amount will the landlord pay as Ushr on the 5500 kg
production of rice by artificial sources? The price of 50 kg rice is
Rs. 4250

Solution: Weight of rice crop = 5500 kg

Price of 50 kg rice = Rs. 4250
4250
Price of 1 kg rice = = Rs. 85
50
Price of 5500 kg rice = 5500  85
= Rs. 467500
 Crop is irrigated by artificial resources.
 Rate of Ushr = 5%
5
Amount of Ushr = 467500 
100
= Rs. 23375
Activity 8:

(A) Mrs. Momina has gold of amount Rs. 12,50,000. Calculate Zakat on this
amount at the rate of 2.5 %.

32
(B) Calculate Zakat on 60 tola silver, gold of worth Rs. 500,000 and cash of
amount Rs. 900,000. The rate of silver is Rs. 5000 per tola and rat of gold
1
is Rs. 55000 per total. The rate of Zakat is 2 % .
2

(C) By natural resources, a landlord got Rs. 750,000 from a rice crop. What
will he pay as Ushr?

(D) A landlord has two crops. First one is irrigated by natural resources and
the second by artificial sources. First one is wheat crop. He gets Rs.
450000 from wheat crop and Rs. 600000 from second crop (of rice). What
would he pay as Ushr?

Key Points:

When the sale price is greater than cost price, we earn profit. i.e,

Profit
Prift = SP – CP Profit % =  100
CP .

 If coast price is greater than sale price, we have a loss

i.e., Loss = CP – SP.
Loss
Loss % =  100
CP

Profit or loss is always reckoned on CP.

 The difference between the sale price and the cost price of an object is
called mark up.
i.e, Mark up = Sale Price – Cost Price
 Mark up = SP – CP

33
 The difference between the marked price and the sale price is called
discount. i.e.,
Discount = MP – SP
Dicsount
Discount % =  100
Marked Price
 The printed price an oajbect is called marked price.
 Zakat is the 2.5% of the Nisab. (1/40th of Nisab)
 7.5 Tola Gold or 52.5 Tola Silver or equivalent cash money (savings)
for a year is a Nisab for Zakat.
 Zakat of land irrigated by natural water resources or by artificial sources is
called Ushr.
 The rate of Ushr is 10% if resources are natural.
 The rate of Usher is 5% if resources are artificial.
 Fruits and vegetables are not included in Ushr

Self Assessment Exercise 3:

(i) Ali buys an old motor cycle for Rs. 25000 and spends Rs 8000 on its
repairs. If he sells it for Rs.40,000, his profit % is:

(a) 21.21% (b) 28% (c) 40% (d) 25.5%

(ii) The cost price of 20 articles is the same as the selling price of x articles. If
the profit is 25 %, then the value of x is:

(a) 15 (b) 16 (c) 18 (d) 20

(iii) A man buys a cycle for Rs. 1400 and sells it at a loss of 15%. What is the
selling price of the cycle?

(a) Rs. 1090 (b) Rs. 1160 (c) Rs. 1190

34
 (d) Rs. 1202

(iv) some articles were bought at 6 articles for Rs. 5 and sold at 5 articles for
Rs. 6. profit % is:
1
(a) 30% (b) 33 % (c) 35% (d) 45%
3

(v) An article costs a manufacturer Rs. 120 to produce it, and he/she sells it to
a retailer for Rs. 150. Find his/her merke up % on cost.
(a) 25% (b) 20% (c) 30% (d) 35%

(vi) What will you pay, when a discount of 3% is allowed on marked price Rs/
10200?

(a) Rs. 9700 (b) Rs. 9894 (c) Rs. 9900

(d) Rs. 300

(vii) Amount of Zakat on a sum of Rs. 100,000 is:

(a) Rs.2000 (b) Rs. 3500 (c) Rs. 2500

(d) Rs.25000

(viii) Calculate Zakat on gold and Silver of worth equal To . Rs. 500,000 at the
rate of 2.5%.

(a) Rs.10500 (b) Rs.12000 (c) Rs.10,00

(d) Rs. 12500

(ix) Calculate the amount of Ushr on the production of rice of worth Rs.
1400,000 when irrigated by natural resources.

(a) Rs.140,000 (b) Rs.14000 (c) Rs.1400

(d) Rs. 70,000

(x) Calculate the amount of Ushr on the production of wheat or worth Rs.
972000 when irrigated by artificial sources.

35
 (a) Rs.97200 (b) Rs.48600 (c) Rs. 50000
(d) 45000
1.7 Income Tax

Tax:

Word “Tax” is taken from Latin word “taxare” means to change, to compute i.e,
“estimate”. It is an amount imposed on individuals by state/government on their
income, profits or on the cost of some goods or services.

Tax is of two types:

(i) Direct Tax

(ii) Indirect Tax

(i) Direct Tax:

It is charged on income, profits and property in the form of income tax and
property tax etc.

Indirect Tax: It is charged in the form of motor vehicle tax, goods and services
tax, General Sales Tax (GST) and Value Added Tax (VAT).

Income Tax: Income tax is charged on the total income from all sources during
the financial year. Every financial year starts from 1st July and ends on 30th June.
You are to submit your “Income Tax Return” till 30th September every year. If
you submit your Income Tax Return before due date i.e, 30th September 2012,
then 2011-2012 is a fiscal year and 2011 a tax year. Everyone whose income is
taxable has to submit a “Return” reflecting (showing) his/her income from all
sources during that fiscal (financial) year at the end of each fiscal year. The state
government grants exemption on some certain amount of income. This amount of
income is not taxable. This exempted amount of income is different for business
man and for salaried person.

36
The taxable income of a salaried person is his/her basic pay including all
allowances.

Example (1) Mr. Asif’s basic Pay (including all allowances) is Rs. 72,000 per
month. Find the income tax payable by him at the rate of 3.5%,
where the exempted amount is Rs. 350,000.

Solution: Mr. Asif’s monthly income = Rs. 72000

Mr. Asif’s Annual income = 72000  12
= Rs. 864000
Exempted amount = Rs. 350000
Taxable Income = 864000-350000
= Rs. 514000
35
Income Tax Rate = 3.5% =
1000
35
Payable Tax (amount) = 514000 
1000
= Rs. 17990.
Example (2) Mrs. Zobia Ali runs her boutique and her annual income is Rs.
690000. The exempted amount on her income is Rs. 190000/=
Calculate payable income tax on her income if the income tax rate
applicable to her tax payable income is 10 %

Solution: Annual income of Mrs. Zobia Ali = Rs. 690000

Exempted amount = Rs. 190000
Tax payable amount = 690000-190000
= 500000
Income Tax Rate = 10%
10
Payable Income Tax = 500000 
100
37
 = Rs. 50000.

Activity 9:

(A) The total taxable income of a person is Rs. 450000. calculate income tax
@ 4.5%.

(B) The total annual income of a person is Rs. 675,000. The exempted amount
of his income is Rs. 180,000. Calculate his income tax at the rate of 7.5%
and Rs. 12000 has already been deducted at some source as income tax.

(C) The basic pay including all allowances of Mrs. Zahra is Rs. 45000 per
month. Find the income tax payable by her @ 2.5% where the exempted
amount is Rs. 350,000.

(D) The total annual income of Mrs. Marium is Rs. 555000. The exempted
amount of her income tax is Rs. 190,000. Calculate her income tax @ 5%.
If she is given rebate Rs. 4500 and Rs. 5000 has already been deducted at
some sources as income tax.

38
1.8 Conversion of currencies

Every country has its own currency. In economics, currency is a generally

accepted medium of exchange. These are usually the coins and bank notes of a
particular government. Followings are the currencies of different countries.

Country Currency

Pakistan Pak Rupee

India Indian Rupee

China Yuan

Afghanistan Afghani

Iran Iranian Rial

USA American Dollar

UK Pound Sterling
We can buy and sell foreign currencies from banks or money changer. The banks
and money changer display the exchange rates of different currencies every day.
The rate of every currency fluctuates daily and some times more than once in a
day. We can convert the currency of our country with the currency of other
country and vice versa.

Example 1: Convert 100,000 Pak Rupees into US Dollar

Solution: Amount in Pak Rupees = Rs. 100,000
Rate of US Dollar = Rs. 95
100000
Amount in US Dollar =  1052.63
95
Example 2: Convert 1000 US Dollars into Pak Rupees

39
Solution: Amount in US Dollar = 1000 US Dollar
Rate of US Dollar = Rs. 95
Amount in Pak Rupees = 1000 x 95
= Rs. 95000

Example 3: Convert 550 US Dollar to Pound Sterling

Solution:- Amount in US Dollar = 550
Rate of US Dollar = Rs 95
Amount in Pak Rupees = 550 x 95
= Rs. 52250
Rate of Pound Sterling = Rs. 153.78
52250
Amount in Pound Sterling =
153.78
= 339.77 GBP

40
Activity 10

(A) Convert 500 Saudi Riyal to Pak Rupees, The rate of Saudi Riyal is
Rs.25.25

(B) Convert 1200 Euro to Pak Rupees. The Rate of Euro is Rs. 122.93

(C) Convert 1500 Euro to US Dollars. The rate of Euro is Rs. 122.93 and of
US Dollar is Rs. 95.

41
1.9 Types of Account

First, we discuss some terms here to understand accounts.

Account:

It is a facility provided by the bank to the user (account holder) to deposit his/her
money with the bank and withdraw it whenever he/she needs.

Commercial Banking:

It is defined as the facilities of bank to its clients in the form of accepting

deposits, giving loans or other services. Bank collects the savings of its clients
and firms in the form of deposits in different account.

There are many types of accounts in Pakistan but here we shall discuss only three
major types of accounts.

1. Saving Account and PLS Saving Account

2. Current Account

3. Fixed Account.

1. Saving Account:

Bank offers saving account to the public to encourage their small savings.
Students, salaried persons and small traders can open saving account. These small
savings of the public can make huge amount at the bank. The bank pays nominal
interest half yearly on the basis of monthly balance. The saving account is subject
to Zakat in Pakistan.

Saving Account can be opened with minimum amount of money but banks
demands at least Rs. 500 OR Rs. 1000 to open a saving account. The account
42
holder is allowed to with draw a limited amount of his/her money without any
prior notice. For the large amount or amount above this limit bank requires a prior
notice of a week. It is only to discourage withdrawals and encourage savings. The
banks normally waive off the notice period to facilitate their clients. Now banks
have set a minimum level of saving at the saving account. If the balance falls
below the minimum level, the bank charges Rs. 50 from the account.

PLS Saving Account:

PLS stands for profit and loss sharing. PLS Saving Account was introduced here
in the banks of Pakistan on 1st January 1981. In fact, it was the step towards
Islamization (Islamic) of banking i.e, interest free banking. Separate counter
started operating in all nationalized banks. It brought a great change in the history
of Pakistani Banking. People showed great interest in PLS Saving Account and a
large sum has been deposited in these accounts.

We can open PLS Saving Account with a small amount (i.e Rs. 100 only). We can
withdraw small amount from our PLS Saving Account any time through cheques
but if we want to withdraw our whole amount, then prior notice is required by the
bank. The profit or loss is credited or debited at the end of each half/full year, by
the bank. The statement of PLS Saving Account is sent to the accountholder after
every six months.

2. Current Account:

A Current Account is called running account because it continuously in operation.

It is useful for businessmen who often make payments. In this account, the
account holder is allowed to deposit or withdraw money at any time without prior
notice to the bank. The bank is bound to honour these cheques.

43
Current Account was introduced by the Goldsmiths of England. All commercial
bank open this account due to its advantages. The bank does not pay any interest
on the deposits rather it charges its services called “Incidental Charges”. The
cheque book is issued to the account holder to withdraw or transfer money at any
time.

We can open current account in Pakistan with a minimum amount ranging from
Rs. 1000 to Rs. 10,000 according to bank policy. The requirement of maintaining
minimum balance also depends upon the bank policy. It varies from bank to bank.

The dictionary of Economic and Commerce defines Current Account as:

“The type of a bank account required if a customer wishes to make

payments by cheques”.

2. Fixed Account: (Fixed Deposit Account or Time Deposit Account)

Fixed Account can be opened with commercial bank. In this account the money is
deposited for the fixed period of time by the customer. The range of time period
may be from 3 months to 5 years. Banks easily invest this amount and earn profit.
At the completion of fixed time period, the bank pays the principal amount along
with profit to the customer. The rate of profit (interest) on Fixed Account is also
higher than Saving Account. The rate of interest varies directly with time period,
i.e, longer the time period of deposit, higher will be the rate of profit (interest) and
vice versa.

The bank does not issue cheque book to the customer and customer cannot
withdraw his/her money before fixed period of time. If the customer wishes to
withdraw his/her money before fixed time period, he/she will have to pay penalty
imposed by the bank. This account is suitable for those person who can save
money for some time and want a higher rate or profit (interest. May be these

44
people do not want to take risk in business or cannot do business. For example,
retired persons in Pakistan. They get a large amount of money at the time of
retirement and then open Fixed Account.

6.10 On-line Banking:

Online banking is the most modern service provided by the banks. It facilitates
account holders to access their account with the help of internet. So the account
holders need to have computer with internet facility. It is also called internet
banking or E-Banking. The banks provide facility of online in different forms. In
Pakistan only some banks provide full online banking facility to the account
holder. i.e, the account holders can easily access their accounts by sitting any time
anywhere in the world. It means the account holders can enjoy all facilities of
banking like transactions, balance inquiry, statement, bill payments, cheque book
request etc. This facility is provided for 24/7, i.e., 24 hours and 7 days week, that
means any time. All the transactions are executed in real time, with the help of
electronic telecommunication.

The account holder of any specific bank can make transactions at any branch of
the same bank throughout the country. If the account holder has ATM Card or
Debit Card of his/her bank, he/she can use ATM to make transactions transfer or
withdraw money from any ATM throughout the country in real time. The most
important thing is that there is no extra charges for all these modern facilities
Some banks only charge annual fee for ATM card.

ATM Card or Debit Card:

It is a plastic card magnetically encoded by the bank. The accountholders of

online bank may get ATM Card from his/her bank on request. It is a payment card

45
used at ATM to make transactions or withdrawn money. It can also be used for
purchasing at POS (Point of Sale). The bank allots a pin code to account holder to
make transactions.

ATM (Automated Teller Machine)

ATM is a computerized cash machine. It gives cash facility to ATM card holders
at any time without cashier. It also provides other facilities like balance inquiry,
bill payment, transfer funds, mini statement etc. If we want to use ATM, we need
ATM card. Simply we insert our ATM Card into ATM (machine) and then enter
pin code of our ATM card to enjoy any facility the ATM may provide. Every
ATM is linked with database of the online banks throughout the world. We can
use our ATM Card at anywhere in the world and can purchase or withdraw
money. If the currency is different from our bank account, then withdraw money
will be automatically converted to US dollar exchange rate, and the same amount
equal to US Dollar will be deducted from our bank account, So it is a great
facility for the account holders or users. The machine is very easy and friendly to
use. In Pakistan, these machines also provide Urdu Software to facilitate the
common people.

We see ATMs at banks (inside the premises of banks), shopping centers, petrol
stations, restaurants, railway stations, airports etc.

Credit Card:

Credit card is a plastic card issued by banks to customers granting a line of credit.
Credit card provides a loan to its user upto fixed pre-set (pre-agreed) amount for a
specific period without interest and after this period with an interest in the form of
monthly installments. Credit cards are widely accepted everywhere in developed

46
and developing countries. The user of credit card can purchase things and
withdraw cash upto fixed limit. If the user withdraws money, the interest applies
at the same time, but in the form of purchasing interest does not apply before the
due date of billing. The bill of credit card can be paid in full without interest
before or on due date and also be paid in parts but with interest.

Some banks charge annual fee on credit card. Annual fee is different for different
banks but some banks do not charge any annual fee to increase the business or
facilitate the users.

There are two types of credit card.

(i) Visa Card (ii) Master Card

Visa Card can be offered to all users but Master Card is only offered to valued
customers having high credit line.

47
Key Points:

 The amount imposed on individuals by state on their income, profits or on

the cost of some goods or services is called tax.
 Tax is of two types: (i) Direct Tax (ii) Indirect Tax
 Direct Tax is charged on income, profits and property.
 Indirect Tax is charged as motor vehicles tax, goods and service tax, GST
and Value Added Tax (VAT).
 Income tax is charged on the total income from all sources during a
financial year.
 Financial year starts from 1st July and ends on 30th June.
 We can exchange the currency of one country with the currency of the
other country.
 Every country has its own currency in the form of coins and bank notes.
 Us Dollar is an international standard of currency for trading.
 Account is a facility provided by the bank to the account holder (user) to
deposit money with the bank and withdraw it whenever needs.
 Banks offer saving Account to the public to encourage their small savings.
 We can open Saving Account with minimum amount of money as banks
demand.
 The Saving Account is subject to Zakat in Pakistan.
 A Current Account is called running account.
 Current Cccount is useful for businessmen.
 A Current Account holder can deposit or withdraw money at any time
without prior notice to the bank.
 The banks do not pay any interest on the deposited of current account.
 In a fixed deposit account, the money is deposit for the fixed period of
time. (from 3 months to 5 years).

48
 The bank does not issue cheque book to fixed account holder.

Self Assessment Exercise 4

(i) Word “Tax is taken from ______word
(a) Latin (b) Greek (c) English (d) Persian
(ii) Direct Tax is:

(a) Income Tax (b) GST (c) Value Added Tax

(d) motor vehicle tax.

(iii) Indirect Tax is:

(a) Profit Tax (b) Property tax (c) GST

(d) Income Tax

(iv) The financial year is:

(a) 1st Jan- 31 Dec (b) 1st April –31st March

(c) 1st June – 31st May (d) 1st July –30th June

(v) Mr. Ali’s annual income is Rs. 500,000 and the exempted amount is Rs.
350,000. Find his income tax @ 3.5%

(a) Rs. 5250 (b) Rs.5000 (c) Rs. 17500

(d) Rs. 15000

(vi) The total taxable income of Mrs. Shazia is Rs. 900,000 and the exempted
amount is Rs. 350,000. Find her income tax @ 4.5%

(a) Rs. 40500 (b) Rs. 24750 (C) Rs. 25500

(d) Rs. 30600

49
(vii) Convert 1800 GBP to Pak Rupees. The rate of GBP is Rs. 153.78

(a) Rs.11.67 (b) 171000 (c) Rs. 266804

(d) Rs. 221274

(viii) Convert Rs. 5,00,00,000 to Euro. Rate of Euro is Rs. 122.93

(a) 40564.45 Euro (b) 526315.79 Euro

(c) 325139.81 Euro (d) 406735.54 Euro

(ix) Which account was introduced on 1st January 1981 in Pakistan?

(a) PLS Saving Account (b) Saving Account

(c) Current Account (d) Fixed Account

(x) Which account is useful for businessmen?

(a) Saving Account (b) Current Account

(c) Fixed Account (d) PLS Saving Account.

50
1.10 Types of Finance

Finance:

In simple word we can say that the managing of money matters is called finance.

According to Robert Sarnoff:

“Finance is the art of passing currency from hand to hand until it finally
disappears.”

OR

According to the dictionary:

“The management of money, banking, investments and credit is called

finance”

Type of Finance:

There are two types of finance:

(1) Debit Financing (2) Equity Financing

1. Debit Financing:

In this financing, the money is borrowed from financial institutions or banks. The
Principal amount is returned along with markup (interest). It is paid in
installments on monthly basis. In Pakistan, it is the most popular financing
method.

Lease Financing:

51
It is used to buy equipment. It ranges from 3 years to 5 years.

Running Finance/Working Capital Finance

It is used on a revolving basis. The customers pay markup on amount utilized and
for the period when it is outstanding.

2. Equity financing OR (Owner’s Funds)

In this type the owners of the business provide funds from their own pocket. So
there is no interest but you have to share the profit with your financier, so it is the
best for all times to come. It requires much hard efforts to find investor for this
type of financing. It is long term fiancing. The owner can freely control his/her
business without any interference. In this financing, the firm has to pay more
income tax as compared to the Debt Financing.

52
Key Points: (On-line Banking, Types of Finance)

 On-line banking is the facility to connect centralized computer system

directly for authorization of tramsctin. Balance inquiry, statement, bill
payments, cheque book request etc for 24/7 i.e, 24 hours and 7 days (at
any time)
 ATM is a computerized cash machine to facilitate ATM card holders in
getting each and other facilities, without cashier.
 Credit card grants a line of credit to its holder. It provides a loan to its
holder (user) upto fixed pre-set amount for a specific period with out
interest. After specific period interest starts.
 Credit cards are widely accepted every where.
 There are two types of credit cards:
(i) Visa Card (ii) Master Card
 Visa card is offered to all users but Master card is only offered to value
customers having high credit line.
 The managing of money matters is called finance.
 Finance is the art of passing currency from hand to hand until it finally
disappears.
 There are two types of finance:
(i) Debt Financing (ii) Equity Financing
 When money is borrowed from financial institutions or banks it is called
debt financing.
 When owners of the business provide funds from their own pocket, it is
called equity financing.

53
Self Assessment Exercise:

(i) The modern facility provided by the banks is:

(a) on-line banking (b) loans (c) commercial banking

(d) cheque books

(ii) We can get the facilities of ATMs, if we have:

(a) money (b) ATM cards (c) Credit card

(d) account

(iii) Which machine (device) is installed by the banks to dispense cash to its
account holders?

(a) computer (b) Scanner (c) ATM (d) CDM

(iv) Which card grants a line of credit to its uers?

(a) ATM card (b) Secret card (c) Marriage card (d)
Credit card

(v) We can make shopping without having amount in our account with the
help of:

(a) ATM Card (b) Credit card (c) Debit card

(d) CDM

(vi) We can withdraw money from ATM if we have:

(a) Account (b) Money (c) Debit card

(d) Credit card

(vii) We can deposit our cheques and money in the:

(a) ATM (b) Automatic machine (c) Computer

(d) CDM

(viii) The managing of money is called:

54
 (a) banking (b) mark up (c) mark down

(d) finance

(ix) We borrow money from banks in ___ financing.

(a) Debt (b) Equity (c) Long term

(d) Medium term

(x) If owners of the business, provide funds from their own pocket than it is
___________ financing.
(a) Debt (b) Equity (c) Lease (d) Running

55
Activities:

Answer Key of Activates:

Activity 1
18 1
(A) (i) (ii) 23/25 (iii) 3/20 (iv)
25 40
3
(B) (i) 75% (ii) 66 % (iii) 25% (iv) 50%
3
1
(v) 37 %
2
1
(C) (i) 20 (ii) 45 (iii) 4 %
6
1
(D) Fraction = 1/3 , percentage = 33 % Decimal = 0.33
3
(E) 25 %

Activity 2

(A) Rs. 9450 (B) Rs. 1800 (C) Rs. 1485

(D) 15 days (E) 72 days

Activity 3

(A) (i) 9/11 (ii) 5:6 (iii) 2/9

(B) (i) 5 : 12 (ii) 25 : 3 (iii) 5:1 (vi) 2:3:5

(v) 10 : 8 : 5 (vi) 1:5

(C) (i) 5:1 (ii) 3:1 (iii) 1:3 (iv) 25 : 2

(D) (i) 3:1 (ii) 1:4

56
(E) 2:1:3

(F) (i) 4:3 (ii) 4:1 (iii) 3:1

Activity 4

(A) (i) 7 (ii) 30 (iii) 1/2 (iv) 12 (v) 14

Activity 5

(A) 10 days (B) 12 workers (C) Rs. 1200

(D) 90 Liters

Activity 6

(A) 4200 l (B) 15 hours (C) 30 men

Activity 7

(A) 20% (B) Rs.4000

(C) MP=Rs.7000, SP=Rs. 4900 (D) CP=Rs.6000, SP=Rs.4800

(E) 15.15% (F) Rs.16000

Activity 8

(A) Rs. 31250 (B) 42500 (C) 75000 (D) Rs. 75000

57
Activity No.9

(A) Rs. 20250 (B) Rs.25125 (C) Rs.4750

(D) Rs.8750

Activity 9

(A) 19.80SR (B) 9.76 Euro (C) 1941 US Dollars

Self Assessment Exercise 1

(i) a (ii) b (iii) c (iv) c (v) d

(vi) a (vii) b (viii) c (ix) d (x) a

Self Assessment Exercise 2

(i) c (ii) a (iii) d (iv) b (v) c

(vi) a (vii) d (viii) a (ix) b (x) c

Self Assessment Exercise No.3

(i) a (ii) b (iii) c (iv) d (v) a

(vi) b (vii) c (viii) d (ix) a (x) b

Self Assessment Exercise 4

(i) a (ii) a (iii) c (iv) d (v) a

(vi) b (vii) c (viii) d (ix) a (x) b

58
Self Assessment Exercise 5

(i) a (ii) b (iii) c (iv) d (v) b

(vi) c (vii) d (viii) d (ix) a (x) b

59