Profit and Loss: Complete Guide to Formula, Account, and Aptitude Questions

Profit and loss is an essential topic in business, accounting, and competitive exams. Whether you want to understand what is profit and loss account or master aptitude questions, this guide covers everything you need.

What is Profit and Loss?

Profit occurs when the selling price (SP) exceeds the cost price (CP). Loss happens when the selling price is less than the cost price.

Profit = Selling Price – Cost Price
Loss = Cost Price – Selling Price

Profit and Loss Formula

Use these formulas to calculate profit and loss percentages:

Profit Percentage:
Profit % = (Profit / Cost Price) × 100
Loss Percentage:
Loss % = (Loss / Cost Price) × 100
Selling Price:
SP = CP ± Profit or Loss

What is a Profit and Loss Account?

A profit and loss account (or income statement) shows revenues, expenses, and net profit or loss over a specific period. It helps assess a business's performance.

Profit and Loss Aptitude: Solved Questions

Here are solved profit and loss questions to practice:

Example 1:

Question: If a shopkeeper buys an item for ₹500 and sells it for ₹600, what is the profit percentage?

Solution:
Profit = 600 – 500 = ₹100
Profit % = (100/500)×100 = 20%

Example 2:

Question: A trader bought goods for ₹400 and sold at a 15% loss. What is the selling price?

Solution:
Loss = 15% of 400 = ₹60
Selling Price = 400 – 60 = ₹340

Example 3:

Question: An article costs ₹250 and is sold at a profit of 12%. Find the selling price.

Solution:
Profit = 12% of 250 = ₹30
SP = 250 + 30 = ₹280

Example 4:

Question: A shopkeeper sold an item for ₹880 at a loss of 12%. What was the cost price?

Solution:
CP = 880 × (100/88) = ₹1000

Example 5:

Question: An item is sold for ₹540 at a profit of 8%. What is the cost price?

Solution:
CP = 540 × (100/108) = ₹500

FAQs on Profit and Loss

Q1: What is profit and loss in simple words?
Answer: It is the difference between selling price and cost price. Profit occurs if the selling price is higher than the cost price, and loss occurs if the selling price is lower.
Q2: What is a profit and loss account?
Answer: A profit and loss account is an accounting statement showing all incomes and expenses to calculate net profit or net loss over a period.
Q3: What is the profit and loss formula?
Answer: Profit = Selling Price – Cost Price. Profit Percentage = (Profit ÷ Cost Price) × 100.
Q4: How do you calculate loss percentage?
Answer: Loss Percentage = (Loss ÷ Cost Price) × 100.
Q5: Why is profit and loss important?
Answer: Profit and loss helps businesses measure performance and guides financial and pricing decisions.
Q6: What are common profit and loss aptitude questions?
Answer: Typical questions involve finding cost price, selling price, profit percentage, or loss percentage.
Q7: How to improve in profit and loss aptitude?
Answer: Practice formulas daily, solve mock tests, and analyze previous exam papers.
Q8: Is profit and loss account the same as an income statement?
Answer: Yes, both terms refer to the same financial statement summarizing profits and losses.
Q9: How is profit recorded in accounts?
Answer: Profit is credited to the profit and loss account in the ledger.
Q10: Where can I get more practice questions?
Answer: You can find practice sets in aptitude books, online courses, and educational websites.