Profit and loss are the terms related to business transactions. Now we will study the key concepts for profit and loss, which will make us understand this chapter better.
1. Cost Price:
The price at which a person buys a product is called Cost Price (C.P) of that product.
2. Selling Price:
The price at which a person sells a product is called the Selling Price (S.P) of that product.
When selling price of a product is higher than the cost price, profit is achieved, which is equal to the difference in selling price and the cost price.
When [When the S.P is more than the C.P, then there is a profit.]
Another synonymous term is used for profit is gain.
When selling price is less than the cost price, there is a loss in the transaction, which is equal to the difference of the cost price and selling price.
When [When the S.P is less than the C.P, then there is a loss]
It is to be noted that the profit or loss is always calculated on the cost price.