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Profit and Loss

The document discusses key concepts in business math related to profit and loss. It defines profit as selling an item for more than its cost, while loss is selling it for less than cost. It provides a formula to calculate profit/loss as selling price - cost. It also discusses how to identify gross profit and net profit/loss, including formulas to calculate cost of goods sold, net sales, gross profit, and net profit/loss by subtracting expenses from gross profit. Sample problems demonstrate applying these formulas and concepts to calculate various profit and loss metrics.

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795 views18 pages

Profit and Loss

The document discusses key concepts in business math related to profit and loss. It defines profit as selling an item for more than its cost, while loss is selling it for less than cost. It provides a formula to calculate profit/loss as selling price - cost. It also discusses how to identify gross profit and net profit/loss, including formulas to calculate cost of goods sold, net sales, gross profit, and net profit/loss by subtracting expenses from gross profit. Sample problems demonstrate applying these formulas and concepts to calculate various profit and loss metrics.

Uploaded by

john
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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BUSINESS MATH

PROFIT AND LOSS


HOW DOES PROFIT DIFFER FROM LOSS?
Selling an item at a price less than they
paid when they bought it.
NEGATIVE VALUE

Selling more than what they paid when


they bought it.
POSITIVE VALUE
HOW TO IDENTIFY PROFIT AND LOSS?

Selling Price - Cost

Profit/Loss
14
To avoid loss in
any business, 14

12 • the NS should 12
be high
10
enough to 10

8 cover the CGS, 8


• operating
6
expense (OE), 6

4 • possible 4

deductions,
2
2
• taxes, and
0 • profit 0
NET SALES (NS) COST OF GOODS
NET SALES (NS) COST OF GOODS
SOLD (CGS) objective. SOLD (CGS)

GROSS PROFIT
NET LOSS
GROSS PROFIT/LOSS = NS – CGS
(SALES RETURNS AND
NS = GS – ALLOWANCES +
DISCOUNTS)

NP/L can be computed using the formula:

NP/L = GP/L - OE
Determining the CGS
It is a must for any business to determine
its profits (or losses) periodically. To
calculate P/L, the CGS during a particular
period is needed. To calculate the CGS, add
purchases to the beginning inventory
(BI) and then subtract the ending
inventory (EI).

CGS = AGS - EI
Available Goods for Sale = BI + Purchase
PROBLEM 1:
At the beginning of a certain year, the inventory
of Liz’s Skin Care & Spa was Php175,364.21,
and purchases during the year amounted to
Php50,789.64. At the end of that year, the
manager had checked that they have
remaining inventory of Php75,643.89.
Determine the CGS.
Given:
BI = Php175,364.21
Purchases = Php50,789.64
EI = Php75,643.89
CGS = ?
PROBLEM 2:
Your cousin has a mini-grocery store and according
to him, he made purchases amounting to
Php250,000 last year. As far as he remembers, his
store’s ending inventory last year was only
Php125,000. What was the beginning inventory of
his grocery store if the CGS reflected in the financial
statement was Php545,750?
NET SALES AND GROSS SALES
indicates the refers to the total
amount of sales amount of goods
after deducting or service (w/o
sales returns, deductions yet),
allowances, and
discounts.

NS = GS – (SRA + D)
Net sales Gross sales sales returns,
allowances
Discounts
PROBLEM 1:
A specialty store had gross sales amounting
to Php1,250,000 and sales returns of
Php269,708. How much were the net sales of
the specialty store?

NS = GS – (SRA + D)
Net sales Gross sales sales returns,
allowances
Discounts
PROBLEM 2:
If a wholesaler’s net sales last year were
Php3,648,800, his gross sales were
Php3,820,100 and his sales returns and
allowances amounted to Php120,450,
how much discount was given last year?
DETERMINING THE GROSS PROFIT (GP)
Gross Profit is the amount left from the
net sales after deducting the CGS.

GP = NS - CGS
PROBLEM 1:
If the CGS by the specialty store was
Php580,243, what was the gross profit
of the specialty store whose net sales
were Php980,292?

GP = NS - CGS
PROBLEM 6:
How much were the net sales of your ice
cream house if your CGS and GP were
Php85,675 and Php54,900 respectively?
Determining the NP/L
Net profit or Net loss is the amount left after
subtracting all the operating expenses from the
gross profit. A positive value indicates that net
profit is obtained. This is the result when the
gross profit is greater than the operating
expenses.

NP/L = GP - OE
PROBLEM 1:
If the operating expenses of the specialty store
include salaries and wages of Php156,798, rent
expense of Php75,000, water and electric bills of
Php15,000, and miscellaneous of Php4,500, what
is the net profit of the specialty store if its gross
profit was Php400,049?

NP/L = GP - OE
PROBLEM 2:
On the second month of operation, you strictly
monitored and controlled the operating
expenditures of your pizza house. Because of this,
you were able to achieve a net profit of Php22,750
for the month. How much was the operating
expenses for the month if your gross profit was
Php51,595?

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