PROFIT AND LOSS OR MARGIN

Hi! Readers,

Well let us start on the easiest part of Business Math as our professor said. The first topic that our professor taught us is “Profit and Loss” or “Margin”. The topic will help you in knowing important terms and formulas in getting the Margin.

TAKE NOTE:

     1.Profit – Something you earn, something you gain in business. The amount by which the sales are greater than the cost of goods sold and the operating expenses.

     2. Loss – Something you lose when it comes to business or when the Sales is less than the Cost of Goods Sold

FORMULAS IN GETTING THE PROFIT:

Net Sales = Gross Sales – Refunds and Allowances

Net Profit = Gross Profit – Operating Expenses

The formulas can either be shown in the following forms:

For Net Sales                                              For Gross Profit                             For Net Profit

              GROSS SALES                                               NET SALES                                  GROSS PROFIT

          -   REFUNDS AND ALLOWANCES        -     COST OF GOOD SOLD       -      OPERATING EXPENSES

______________________________               ____________________         _____________________

              NET SALES                                                    GROSS PROFIT                           NET PROFIT

TAKE NOTE:

1. Gross Sales  - is the actual amount received for selling the goods.

2. Refunds -  are amounts returned usually if goods are defective.

3.  Net sales -  are obtained when refunds are being deducted from the gross sales.

4. Costs of goods sold or buying price -  is the amount paid for articles bought including the buying expenses.

FORMULAS IN GETTING THE COST OF GOODS SOLD:

Available Goods = Beginning Inventory + Purchases

Costs of Goods Sold = Available Goods – Ending Inventory

The formulas can either be shown in the following forms:

For Available of Goods                                                              For Costs of Goods Sold

              BEGINNING INVENTORY                                                             AVAILBALE GOODS

+            PURCHASES                                                                            -      ENDING INVENTORY

____________________________                                                 ______________________

GOODS FOR SALE / AVAILABLE GOODS                                         COSTS OF GOODS  SOLD

TAKE NOTE:

1. Inventory - is an itemized lists of goods on hand.

2. Gross Profit - is the difference between the net sales and the cost of goods sold.

3. Operating expenses or overhead - are selling expenses such as salaries or wages, traveling expenses, rentals, water, electric bills, commissions, taxes.

4. Net Profit - is the amount obtained when all the selling expenses or other cost of doing business are deducted from the gross profit.

FORMULAS IN GETTING THE LOSS:

Gross Loss = Costs of Goods Sold – Net Sales

Net Loss = Gross Loss + Operating Expenses

The formulas can either be shown in the following forms:

For Gross Loss                                                                    For Net Loss

            COSTS OF GOODS SOLD                                        GROSS LOSS

_          NET SALES                                                         +     OPERATING EXPENSES

__________________________                              ________________________

             GROSS LOSS                                                             NET LOSS

Now let us try the formulas you have learned with these problems:

Problem 1.

       Mr. Aldwin Leynes had net sales amounting to P 10,085.75. The cost of goods sold was P 4,033.45. The operating expenses amounted to P 2,445. Find the net profit , or net loss, as the case maybe.

                                  Net Sales         P    10,085.75

                 Cost of Goods Sold   -             4,033.45

                                                    ________________

                                                                    6,052.30                 Gross Profit

                                                  -                 2,445.00                 Operating Expenses

                                                    ________________

                                                            P      3,607.30                  Net Profit

Problem 2.

         A bookstore owner had a stock of goods worth P 5,039.80 on June 30. His purchases after that date amounted to P 3,450. On July 31, his stock of goods on hand was P 4,100.50. How much was the cost of goods sold?

                          Beginning Inventory       P           5,039.80

                          Purchases                       +             3,450.00

                                                                  _________________

                                                                                   8,489.80          goods for sale

         -             4,100.50          Ending Inventory

       _________________

          P           4,389.30           Cost of Goods Sold

Now on your own solve these following questions and see if your answers are correct next week.

      1.At the beginning of the year the merchandising inventory of Almaric’s store was P 8,070. Purchase for 6 months amounted to P 10,721. At the end of 6 months, the inventory stood P 9,205. Find the cost of goods sold.

      2. A department store had gross sales amounting to P 896,954. The cost of goods sold was P 577.320.40, the operating expenses was P 49,285.98, and refund for defective goods amounted to P 25, 520. 49. Find a. Net sales b. Gross profit c. Net profit.

Knowing the terms and formulas makes math easy to understand hope you learned something

Thank you and have a nice day blogger J. See you next week

We will make math Easy!

_____________________
checked by prof. Crisencio M. Paner