Profit, Loss & Discount

Learning Objective: Solve business problems involving profit, loss, and taxation

A shopkeeper in Ason, Kathmandu buys a bag for Rs. 800 and sells it for Rs. 1,000. Did they make a profit or loss? How much? If they offered a 10% discount, what would the selling price be? And what about the 13% VAT that Nepal's government charges? These are everyday business calculations that every management student must master.

Key Terms

• Cost Price (CP): The price at which a seller buys a product. Example: Rs. 800
• Selling Price (SP): The price at which the seller sells the product. Example: Rs. 1,000
• Marked Price (MP): The original price tag on a product (before any discount). Example: Rs. 1,200
• Discount: Reduction from the marked price to attract customers
• Profit: When SP > CP. Profit = SP - CP
• Loss: When CP > SP. Loss = CP - SP

Profit and Loss Calculations

Profit Percentage = (Profit / CP) x 100 Loss Percentage = (Loss / CP) x 100

Worked Example 1: Profit

A mobile shop buys a smartphone for Rs. 25,000 (CP) and sells it for Rs. 30,000 (SP).

Profit = 30,000 - 25,000 = Rs. 5,000 Profit % = (5,000 / 25,000) x 100 = 20%

Worked Example 2: Loss

A fruit seller buys mangoes for Rs. 5,000 (CP) but they start to spoil and must be sold quickly for Rs. 3,500 (SP).

Loss = 5,000 - 3,500 = Rs. 1,500 Loss % = (1,500 / 5,000) x 100 = 30%

Discount

Discount = Marked Price - Selling Price Discount % = (Discount / MP) x 100 SP = MP - Discount

Worked Example 3: Discount

A clothing store in City Centre Mall marks a jacket at Rs. 4,000 and offers a 15% discount.

Discount = 15% of 4,000 = Rs. 600 SP = 4,000 - 600 = Rs. 3,400

Trade Discount vs. Cash Discount

• Trade discount: Given by manufacturers to wholesalers/retailers (not shown in books of account)
• Cash discount: Given for early payment of dues (shown in books of account)

Value Added Tax (VAT) in Nepal

Nepal charges 13% VAT on most goods and services. VAT is added to the selling price and collected from the consumer.

SP with VAT = SP + 13% of SP = SP x 1.13

Worked Example 4: VAT Calculation

A restaurant bill before VAT is Rs. 2,000.

VAT = 13% of 2,000 = Rs. 260 Total bill = 2,000 + 260 = Rs. 2,260

Worked Example 5: Combined Discount and VAT

A laptop has a marked price of Rs. 80,000. The shop gives a 10% discount, then adds 13% VAT.

Step 1: Discount = 10% of 80,000 = Rs. 8,000 SP after discount = 80,000 - 8,000 = Rs. 72,000

Step 2: VAT = 13% of 72,000 = Rs. 9,360 Final price = 72,000 + 9,360 = Rs. 81,360

Key Term: VAT (Value Added Tax) is a 13% tax applied on goods and services in Nepal, collected at each stage of production and sale, ultimately paid by the final consumer.

Summary

• Profit = SP - CP; Loss = CP - SP. Percentages are always calculated on CP.
• Discount is a reduction from the marked price. SP = MP - Discount.
• Nepal charges 13% VAT on most goods and services.
• In combined problems, always calculate discount first, then apply VAT on the discounted price.