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Profit and LossProfit and loss are discussed here. Ron is a shopkeeper. He buys his goods either from the factory directly or from the whole seller. He then tries to sell each of goods or item at a higher price to earn money. If he succeeds, he makes a profit or gain or else he suffers a loss. For example: 1. If Ron buys rice at $ 20 per kg and sells it at $ 23 per kg, he makes a profit of $ 3. (i.e., 23  20 = 3) Cost price (CP) = $ 20, Selling price (SP) = $ 23 Profit or Gain = $ 20 2. If Ron buys rice at $ 20 per kg and sells it at $ 18 per kg, he suffers a loss of $ 2 i.e., (20 – 18 = 2) Cost price (CP) = $ 20, Selling price (SP) = $ 18 Loss = $ 2 From this we understand: (i) The price at which a man buys his goods is called the Cost Price (CP). (ii) The price at which a man sells his goods is called the (iii) When the SP is greater than CP the man makes a Profit or Gain. (iv) When the SP is less than CP the man suffers a Loss. For example: 1. Ron bought rice worth $ 2000 and spent $ 200 for transporting it to his shop, $ 150 on getting it cleaned and $ 50 on packing. Then total CP = 2000 + 200 + 150 + 50 = $ 2400. (v) Transportation charges, labour charges, salaries etc. are called Overhead Expenses and these are always added to the cost price to get the total CP. Related Links : ● Profit and Loss.
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