So,
our Business Math lessons started last week and I never thought that
Business Math has a huge relevance to my course. I've realized that
I'll be using this in the near future. Prof. Paner has taught us the
basics in Business Math. The terms you'll mostly encounter with your
business and while studying this subject. Let me share you a few
things that I've learned in our first week!
Profit
and Loss
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.
The
formulas in computing profit are as follows;
Net
Sales = Gross Sales – Refunds and Allowances
Net
Profit = Gross Profit – Operating Expenses
The
net sales and profit may also be given in scheme diagram as follows:
Gross
Sales
-
Sales Returns and Allowances
Net
Sales
-
Costs of Goods Sold
Gross
Profit
-
Operating Expenses
Net
Profit
1. Gross
Sales is
the actual amount received for selling the goods.
2.
Refunds are amounts returned usually if goods are defective.
3.
Net sales are obtained when refunds are being deducted
from the gross sales.
4.
Costs of goods
sold or buying price is the amount paid for articles bought including
the buying expenses.
To
compute for the cost of goods sold for a period of time, we have the
formula as follows:
Available
Goods = Beginning Inventory + Purchases Costs of Goods Sold =
Available Goods – Ending Inventory
The
above may be diagrammed as follows:
Beginning
Inventory + Purchases Goods For Sale - Ending Inventory
Costs of Goods Sold
5.
Inventory is an itemized
lists of goods on hand.
6.
Gross Profit is the difference between the net sales and the
cost of goods sold.
7.
Operating expenses or overhead are selling expenses such as
salaries or wages, traveling expenses, rentals, water, electric
bills, commissions, taxes.
8.
Net Profit is the amount obtained when all the selling
expenses or other cost of doing business are deducted from the gross
profit.
In
case the sales are less than the cost of goods sold, there is a loss.
The formulas in computing losses are as follows:
Gross
Loss = Costs of Goods Sold – Net Sales Net Loss = Gross Loss +
Operating Expenses
The
relationship of the terms of loss may be diagrammed schematically as
follows:
Cost
of Goods Sold - Net Sales Gross Loss + Operating Expenses
Net Loss
That's
a lot to take in right? But I think this will help me a lot in
understanding business.:)
Watch
out for my next post!
XX,
FMG
