Profit & loss
Profit & loss · discount · simple & compound interest
12 min read · Updated 2026-05-26
What is Profit and loss?
Profit and loss is the arithmetic of buying and selling: profit or loss is the gap between selling price and cost price, taken as a percentage of cost price, while discount is taken on marked price. Simple interest is linear at SI = PRT/100 and compound interest exponential at A = P(1 + R/100)^N, doubling money in roughly 72/R years.
The story
It is 1 April 2024. A small kirana owner in Pune buys 20 kg of rice at Rs.40/kg (CP = Rs.800). He marks it up by 50% (MP = Rs.60/kg). Diwali season comes; he offers a 20% discount. SP = Rs.48/kg. His total sale = Rs.960. Profit = Rs.160 on Rs.800 = 20% profit.
Now look at this from the CSAT exam standpoint:
Q: A shopkeeper marks up rice by 50% and gives 20% discount. Profit percentage?
A candidate without the shortcut formula sets variables, computes step-by-step (~60 sec). A candidate WITH the shortcut: 50 - 20 - (50×20/100) = 20% in 6 seconds.
Across 12-15 profit/loss/interest questions in a CSAT paper, that's a 10-minute saving — enough to attempt and verify 8 extra questions.
By the end of this unit, the markup-discount-profit trinity and SI vs CI will be 30-second operations. We also cover the most common UPSC interview question: "How do you explain compound interest to a class 10 student?"
Why this matters for UPSC
For CSAT (Prelims Paper-II, qualifying 33%):
- 8-12 questions per paper are profit/loss/discount or interest.
- Banking + economy CDS-style questions in GS-III often use interest concepts.
- Real-life utility: Every CSAT aspirant will use SI/CI every day post-civil-services entry (PF, GPF, NPS, home loans, fixed deposits).
This unit is uniquely useful in life. Even if you skip CSAT, master interest formulas.