Loss – When Selling Price Is Less Than Cost Price
A loss occurs when something is sold for less than it cost. Just as with profit, the loss is expressed as a percentage of the cost price so that different transactions can be compared fairly.
Businesses deliberately sell items at a loss more often than people realise — clearance sales, perishable stock nearing its expiry date, and “loss leader” products (priced below cost specifically to draw customers into a shop who then buy other, profitable items) are all everyday examples. Retailers track loss percentage just as carefully as profit percentage, since knowing exactly how much value is being given away is essential for deciding whether a sale or write-down is still commercially sensible.
Key Terms
| Term | Meaning |
|---|---|
| Cost Price (CP) | What you paid to buy or make the item |
| Selling Price (SP) | What you sold the item for |
| Loss | CP minus SP (when CP is greater than SP) |
| Loss % | Loss expressed as a percentage of the cost price |
Formulas
Loss = Cost Price minus Selling Price. Loss % = (Loss / Cost Price) times 100.
Worked Examples
Loss = 900 - 675 = 225. Loss % = (225 / 900) times 100 = 25%.
Loss = 12000 - 9600 = 2400. Loss % = (2400 / 12000) times 100 = 20%.
Loss amount = 15% of 500 = 75. SP = 500 - 75 = 425. Or: SP = 500 times 0.85 = 425.
SP = CP times 0.90. CP = 357 / 0.90 = 396.67.
Loss vs Profit Comparison
| Profit | Loss | |
|---|---|---|
| When | SP greater than CP | SP less than CP |
| Amount | SP - CP | CP - SP |
| % Formula | (Profit/CP) x 100 | (Loss/CP) x 100 |
| Multiplier | 1 + rate/100 | 1 - rate/100 |
Key Takeaways
- Loss = CP minus SP. CP is always greater when there is a loss.
- Loss% is always calculated on the cost price.
- To find SP given CP and loss%: SP = CP times (1 - loss%/100).
- To find CP given SP and loss%: CP = SP / (1 - loss%/100).