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# How do I calculate profit and loss?

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To calculate profit and loss, evaluate revenue, cost of goods sold and the expenses incurred, then subtract cost of goods sold and expenses from sales. A positive result denoted profit, while a negative result indicates loss.

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1. Calculate revenue

Calculate the income generated for the entity. The income is in the form of sales made if the entity trades or in the form of fees if a service is involved. Invoices and bills issued are the primary sources for getting revenue figures.

2. Calculate cost of goods sold

Calculate the cost of goods sold if the entity is part of a trading scenario. Use the formula Cost of goods = Opening stock + Purchases - Closing stock.

3. Calculate Expenses

Expenses include all costs that were incurred in order to make sure that revenue was generated. Calculate fixed costs which the entity incurred despite the level of its activities. Make a list of all such costs and sum the figures to obtain a value for expenses.

4. Calculate profit and loss

Add the cost of goods sold and expenses, then subtract the sum from revenue. A positive value indicates surplus amount and is called profit, while a negative answer points towards a deficiency and is termed as loss.

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## Related Questions

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Divide the profit by the selling price to find the gross margin percentage for any items, according to Calculator Soup. The profit is the revenue an item brings in less the cost.

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Sales revenue equals the quantity of units sold multiplied by the price of a single unit. For example, a pencil company that sold 22 pencils for \$1 each has a sales revenue of \$22.

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Accounting Tools from CPA Steven Bragg indicates that the formula for net credit sales is sales on credit in a given period minus sales returns and sales allowances. If a company has \$100,000 in net credit sales but experiences \$34,000 in returns and allowances, its net credit sales are \$66,000.