Profit? Loss? Gross Sales? Do we need to know that??

Ofcourse we do! Math is essential in our daily lives.

I know counting is easy, adding and subtracting, we can even use the calculator for that, but Math is not merely plus or minus. We should also learn some terms to further understand it, especially when we are about to start our own businesses. Basic Math is needed to be digested in our minds because these terms will always be heard and used over and over again.

Our topic will be about Profit and Loss
To start off, we should first know these terms:
(as explained by our professor:)

• Profit - is the amount by which the sales are greater than the cost of goods sold and the operating expenses. Margin also means gain or profit.
• Gross Sales - is the actual amount received for selling the goods.
• Refunds - are amounts returned usually if goods are defective.
• Net Sales - are obtained when refunds are being deducted from the gross sales. 
• Costs of goods sold - also known as buying price, is the amount paid for articles bought including the buying expenses.
• Gross Profit - is the difference between the net sales and the cost if goods sold.
• Net Profit - is the difference between the gross profit and the operating expenses.

Now that we are familiar with the terms, here are the formulas:

1.  The formula in computing the profit:

                       

                       Gross Sales

              -       Sales Returns and Allowances

             _______________________________

                       Net Sales

             -        Costs of Goods Sold

            ________________________________

                       Gross Profit

            -         Operating Expenses

           _________________________________

                       Net Profit



How about the costs of goods sold? how do we compute cost of goods sold  for a period of time? 

• Inventory - itemized list of goods on hand.

   2. The formula in computing the costs of goods sold:

                       Beginning Inventory

              +      Purchases

             _______________________________

                       Goods for Sale

             -        Ending Inventory

            ________________________________

                       Costs of Goods Sold

Try to solve some problems related to this! It will be easy once you've fully understood it.
Hope this helped! See you in my next post.:)

Remember: You learn it, you EARN it!

checked by: Prof. Crisencio Paner