# The Basic of Profit and Loss- Explained with Examples

In this post basic of Profit and loss are to be explained with examples. It is used to determine whether or not a transaction is profitable. Before we proceed to the profit and loss formula, we must first define the terms ‘selling price’ and ‘cost price.’

## What is Cost Price

The cost price of a product is the price at which it is purchased.

## What is Selling Price

The selling price of a product is the price at which it is sold.

## What is the basic of Profit

If the selling price is higher than the cost price, the difference is referred to as profit. . In other words, if a product is sold for a higher price than it was purchased for, a profit is made.

## What is the basic of Loss

If the selling price is less than the cost price, the difference is referred to as loss. In other words, if a product is sold for less than the price at which it was purchased, the transaction results in a loss.

## Profit and Loss Formula

When the selling and cost prices are known, the basic profit or loss can be calculated using formula:

Profit = Selling price (S.P.) – Cost price (C.P.)

Loss = Cost price (C.P.) – Selling price (S.P.)

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### Basic examples on Profit and Loss

Let us calculate the profit in a transaction where a product is purchased for \$20 and sold for \$50.

In this case, the cost price is \$20 and the selling price is \$50.

Profit is calculated as the difference between the selling price and the cost price.

According to Profit Formula:

Profit = Selling price (S.P.) – Cost price (C.P.)

P= 50 – 20 = 30.

Therefore, a profit of \$30 is earned in the transaction.

Let us calculate the loss if a product is purchased at \$60 and sold at \$40.

In this case, the cost price is \$60 and the selling price is \$40.

As per Loss Formula:

Loss = Cost price (C.P.) – Selling price (S.P.)

Loss = 60 – 40 = 20.

Therefore, the loss incurred in the transaction is of \$20.

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1. April 11, 2022

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