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Profit loss and discount is one of the most important and frequently tested topics in quantitative aptitude. It is asked in almost every competitive exam including CAT, SSC CGL, SSC CHSL, Bank PO, Bank Clerk, Railway RRB and CSAT. A strong understanding of profit loss and discount concept, formulas and tricks is essential for scoring well in these exams. In this post we cover everything from the basic definition of cost price, selling price, profit and loss percentage formulas, overall loss formula when two articles are sold at same selling price, marked price and discount concept, selling price formula, and banker’s discount including true discount and banker’s gain — all explained with clear formulas and solved examples.

📚 What You Will Learn in This Post

What is Cost Price and Selling Price — Definition and Difference

Profit and Loss Formula — Percentage Profit and Percentage Loss

Ratio Method — Solving Profit and Loss Problems Using SP:CP Ratio

Overall Loss Formula — When Two Articles Sold at Same Selling Price

Marked Price and Discount — Definition and Selling Price Formula

Banker’s Discount — Formula and Definition

True Discount and Banker’s Gain — Formula and Solved Examples

                                                 Profit Loss and Discount

Cost Price (CP):- The price at which the article is bought.
Selling Price(SP):- The price at which the article is sold
Profit or gain:-
profit or gain = SP – CP
% Profit = \(\frac{{SP – CP}}{{CP}}\)×100%
Loss:- When CP is greater than SP
Loss = CP – SP
% Loss = \(\frac{{CP – SP}}{{CP}}\)×100%

● profit or Loss is always calculated on the basis of cost price unless otherwise mentioned in the problem.

● If Profit is then ProfitCP+10 SP∴ SP : CP = 10 : 9● If Loss is then LossCP-3 SP∴ SP : CP = 3 : 7

● while solving questions we compare actual value with the ratio value to find out the required value of answer.
Ex:-   If              CP = 200                     Profit = 40%                   SP = ?

⟹ Profit = 40% = ProfitCP2001 40×80Profit

∴ SP = 200 + 80 = 280
Ex:- If \(6\frac{1}{4}\)% profit fetches a profit of Rs. 75 on an article then find the cost price of the article.
Sol:

= ProfitCPCP Profit16 11200 Answer×75×75

Ex:- If 30% Loss on selling an article makes the trader to suffer a loss of Rs. 90 then find the selling price of the article.
Sol:-

Loss = 30% = LossCP901 9∴ SP = 10 - 3 = 7×963 Answer

Ex:- By selling an article for Rs. 500, a man loses 25%. At what price will he sell in order to gain 25% ?
Sol:-

CP is 100% Answer(100 + 50)(100 - 25)

● When two different articles sold at same selling price and when % gain on first article = % Loss on second article = x%
So, always there is overall loss in the transaction.
overall % Loss = -\({\left( {\frac{x}{{100}}} \right)^2}\) = – \(\frac{{{x^2}}}{{100}}\)%
Ex:- Two mobiles were sold for 12500 Rs. each. On one a gain of 25% is made and on other, a loss of 25% is made. How much % loss or gain is made in the whole transaction ?
Sol:- 
  overall % loss = – \(\frac{{{{25}^2}}}{{100}}\) = – 6.25%           Answer

Discount and Marked Price(MP):-

Merchant Purchasesan article at Rs. CHe marks the articleat Rs. M which is higherthan cost price CHe allows a discountof d% on marked pricem and sell it to customerCost Price(CP)Marked Price(MP)Customer Priceget a % profit

Selling Price (SP) = MP(1 – %discount)

● Discount = MP – SP
\(\% D = \frac{D}{{MP}} \times 100\)
So Discount is given on marked price.


(i). Banker’s discount (B.D.) = \(\frac{{Bill\;amount \times rate \times time}}{{100}}\)
(ii). Banker’s gain (B.G.) = Banker’s discount (B.D.) – True Discount (T.D.) = \(\frac{{{{(T.D.)}^2}}}{{\Pr esent\;Worth\;(P.W.)}}\)
(iii). Ture discount (T.D.) = \(\frac{{B.D. \times 100}}{{100 + rate \times time}} = \frac{{bill\;amount \times rate \times time}}{{100 + rate \times time}} = \sqrt {P.W. \times B.G.} = \frac{{B.G. \times 100}}{{rate \times time}}\)
(iv).  Present worth = Bill amount – Ture discount
(V). Sum = \(\frac{{S.I. \times T.D.}}{{S.I. – T.D.}}\)

❓ Frequently Asked Questions on Profit Loss and Discount

Q1. What is cost price and selling price?

Cost price is the price at which an article is bought and selling price is the price at which the article is sold. When selling price is greater than cost price there is a profit. When cost price is greater than selling price there is a loss. This is the fundamental concept of profit and loss in accounting and is the starting point for all profit loss questions in competitive exams.

Q2. What is the formula for percentage profit and percentage loss?

Percentage profit = ((SP – CP) / CP) × 100 and percentage loss = ((CP – SP) / CP) × 100. Both profit and loss are always calculated on the basis of cost price unless otherwise mentioned in the problem. These formulas are the most frequently asked in CAT, SSC CGL, Bank PO and Railway RRB exams.

Q3. How to solve profit and loss problems using ratio method?

In the ratio method we express profit or loss as a ratio of SP to CP. For example if profit is 10% then SP:CP = 110:100 = 11:10. If loss is 30% then SP:CP = 70:100 = 7:10. We then compare actual values with ratio values to find the required answer. This method makes solving profit and loss problems much faster in competitive exams.

Q4. What is the overall loss formula when two articles are sold at same selling price?

When two articles are sold at the same selling price and the percentage gain on the first article equals the percentage loss on the second article which is x percent then there is always an overall loss in the transaction. The overall percentage loss = x² / 100 percent. For example if both gain and loss are 25% then overall loss = 625/100 = 6.25%. This formula is very frequently asked in competitive exams.

Q5. What is marked price and discount?

Marked price is the price written on the article by the merchant which is higher than the cost price. Discount is the reduction given on the marked price. Selling price = MP × (1 – discount percentage/100). Discount percentage is always calculated on the marked price and not on the cost price. This distinction is very important in competitive exam questions on profit loss and discount.

Q6. What is banker’s discount?

Banker’s discount is the simple interest on the face value of a bill for the period from the date of discounting to the date of maturity. The formula is Banker’s Discount = Bill Amount × Rate × Time / 100. Banker’s discount is always greater than true discount because it is calculated on the bill amount while true discount is calculated on the present worth.

Q7. What is the difference between true discount and banker’s gain?

True discount is the difference between the bill amount and its present worth. Banker’s gain is the difference between banker’s discount and true discount. The formula for banker’s gain is BG = BD – TD = TD² / PW where PW is present worth. True discount formula is TD = BD × 100 / (100 + rate × time). These formulas are asked in CAT, SSC CGL and Bank PO exams.

Q8. Where can I practice profit loss and discount questions?

After understanding the concept you can practice on our Profit and Loss Exercise page which contains a large number of solved practice questions. You can also check our Percentage Concept and Mixture and Alligation Concept pages for related topics.