We Learn About Profit and Loss

Hi readers! 

Learning business can never be without "Math". Yes. You heard right. Math. I know a lot of you, including me, don't like Math or "Business Math" at all. However, like what the title of my blog says, "Business Math Can Be Sweet". And to reward you, in this first blog post of mine, I'll share what we learned in class last Wednesday about Profit and Loss. I'll make it as sweet as cupcake and as easier as possible for your sake. :)

To begin, let's get familiarized with the terms. You don't need to memorize the meaning, however it will be of great help when you exert effort in understanding it. Also, Pay attention to the meaning of the terms because sometimes it gives secret formulas...

TERMS:

• Profit - also means "margin". It is the amount by which the sales are greater than the cost of goods sold and the operating expenses. (In filipino term, it is what you call, tubo) 

• Gross Sales - The actual amount received for selling

• Refunds - are the amounts returned usually if goods are defective

• Net Sales - obtained when refunds are deducted from the gross sales (There's a secret formula hidden! Net sales = Gross Sales - Refund)

• Cost of Goods Sold - also called "buying price".It is the amount paid for articles bought including the buying expenses.

• Inventory - itemized list of goods on hand

• Gross Profit - is the difference between the net sales and cost of goods sold (Another secret formula! Gross Profit = Net Sales - Cost of Goods Sold)

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

• Net Profit - is the amount obtained when all the selling expenses or other cost of doing business are deducted from the gross profit. (hint! hint! A secret formula! Net Profit = Gross Profit - Operating Expenses)

Now that you are familiarized with the terms, it's time to get to know the formulas. Understand and memorize it! Don't get scared with the term, memorize... believe me memorizing the formulas comes in very handy during tests and exams. It will be easier to memorize now that you have understood the terms above. 

FORMULAS:

Net sales = Gross Sales - Refunds & Alowances

Net Profit = Gross Profit - Operating Expenses

Available Goods = Beginning Inventory + Purchases

Cost of Goods Sold = Available Goods - Ending Inventory

Gross Loss = Costs of Goods Sold - Nets Sales

Net Loss = Gross Loss + Operating Expenses

Let's put your newly acquired Profit and Loss knowledge to the test! Written below are the two problems given to us by our professor :)  

1. At the beginning of the year, the merchandise inventory of Almaric's store was P8,070. Purchase for 6 months amounted to P10,721. At the end of 6 months, the inventory stood P9,205. Find the cost of goods sold.
2. A department store had gross sales amounting to P896,954. The cost of goods sold was P577,320.40; the operating expenses were P49,285.98, and refunds for defective goods amounted to P25,520.49. Find; a). net sales, b). gross profit, c). net profit

The Answers will be posted next week! I hope I had helped you make Business Math easier :) Thank you for reading! please feel free to comment if you have any questions, concerns and suggestions. 

This is Kat, believing that, Bussiness Math Can Be Sweet! :)


The articles posted in this blog has been done with professional guidance.View our professor's CV for evidence:  CRISENCIO M. PANER'S CV