Chapter 8: Profit, Loss and Discount

1. Fundamental Concepts of Profit and Loss

• Profit (Gain): Realized when the Selling Price (S.P.) of an item is higher than its Cost Price (C.P.).
• Loss: Realized when the Selling Price (S.P.) is lower than the Cost Price (C.P.).
• Crucial Rule: Both Profit percentage and Loss percentage are always calculated on the Cost Price (C.P.).

2. Overhead Expenses

• Definition: Extra costs incurred after the purchase of an item, such as transportation, labor, repairs, or packing.
• Total Cost Price: To find the actual profit or loss, these overheads must be added to the original purchase price to determine the Total Cost Price.

3. Mathematical Relations (S.P. and C.P.)

• If C.P. and Gain/Loss % are known, S.P. can be calculated directly using specific formulas.
• If S.P. and Gain/Loss % are known, C.P. can be derived by reversing the percentage calculation.

4. Discount and Marked Price

• Marked Price (M.P.): Also known as the list price or printed price; it is the price displayed on the item before any reduction.
• Discount: A reduction offered on the Marked Price to encourage sales or dispose of old stock.
• Basis of Calculation: Unlike profit/loss, Discount is always calculated on the Marked Price (M.P.).
• Successive Discounts: When two or more discounts are applied sequentially, the first is applied to the M.P., and the second is applied to the reduced price. These can be converted into a single equivalent discount.

5. Taxation and GST

• Sales Tax: A tax levied by the government on the sale of goods to fund public services like roads and hospitals. It is calculated on the sale price.
• Goods and Services Tax (GST): Introduced in India on July 1, 2017, to replace multiple indirect taxes under the principle of "one nation and one tax."
• GST Components:

  CGST (Central GST)	Levied on intra-state transactions; goes to the Central Government.
  SGST (State GST)	Levied on intra-state transactions; goes to the State Government.
  IGST (Integrated GST)	Levied on inter-state transactions (between different states).

• Current GST Rates: The standard applicable rates are 0%, 5%, 12%, 18%, and 28%.