UPSKILL MATH PLUS
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Learn moreImagine you are in a race. Many hurdles come by. If you cross all the hurdles seamlessly, you save a lot of time. That is an advantage to you.
Similarly, if you get stuck in a hurdle, you would end up losing a few of your valuable time, making it a disadvantage for you.
In business, we call such advantages and disadvantages as profit and loss.
Example:
The dealer invests money on the goods and services. At the end of the business transaction, he either makes more money than the investment or lesser money than the investment.
The dealer can also make same invested amount. In that case, the invested amount and the amount made becomes equal. Therefore, there would be neither profit nor loss.
Profit:
When we invest money on a commodity, we make more money than the investment at the end of the sale. The excess money we make is the profit or gain.
Example:
The shoemaker invests Rs.15000 in his business, and he ends up making Rs.20000 at the end. The excess amount of Rs.5000 is the profit made by the shoemaker.
Amount invested = Rs.15000
Amount made = Rs.20000
Profit is when the amount made is higher than the amount invested.
So, Profit = Amount made - Amount invested
= 20000 - 15000
= Rs.5000
In this case, there is a profit of Rs.5000
When we invest money on a commodity, we make lesser money than the investment at the end of the sale. The lost amount of money is the loss.
Example:
The fruit-seller invests Rs.1000 in his business. But he makes only Rs.900 at the end of his business. Here, Rs.100 is the loss.
The amount invested = Rs.1000
The amount made = Rs.900
Here, the amount made is lesser than the amount invested.
Therefore, the fruit-seller has incurred a loss.
Loss = Amount invested - Amount made
= 1000 - 900
= Rs.100
Therefore, there is a loss of Rs.100.
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