Calculate figures from a statement of profit or loss
Use revenue, cost of sales, gross profit, expenses and profit relationships; learners are not assessed on constructing the statement.
Section 5 · Financial information and decisions
Cambridge IGCSE (9–1) Business 0774, 2027–2029 Version 2, Topic 5. Use the supplied data and show calculation steps. Candidates are not assessed on constructing cash-flow forecasts or financial statements. Written practice is self-checked and does not certify exam readiness
Before you begin
- No previous finance study is assumed. Identify the time period, whether a figure is a stock or a flow, and the units before calculating or recommending.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
Revenue is $50,000 and cost of sales is $32,000. What is gross profit?
What you will learn
- Calculate missing statement figures
- Use the correct relationship
- Distinguish gross profit from profit
Follow the statement relationships
Revenue = selling price per unit × number of units sold. Gross profit = revenue − cost of sales. Profit = gross profit − expenses, or total revenue − total costs.
Cost of sales relates to the goods sold; expenses such as rent or administration are then deducted to reach profit in the simple statement used here. Use the categories and figures supplied rather than adding the same cost twice.
Use, do not construct, the statement
The 2027–2029 syllabus includes simple calculations based on a statement of profit or loss and decisions based on simple statements. It states candidates will not be assessed on constructing statements of profit or loss.
Read whether a question asks for revenue, cost of sales, gross profit, expenses or profit. Rearrange the relevant relationship, show the arithmetic and keep the time period consistent.
Pause and explain
What does the syllabus say about constructing a statement of profit or loss?
Worked example
Revenue is $84,000 and cost of sales is $51,000. Expenses are $19,000. Calculate gross profit and profit.
Show the worked solution
- Gross profit = revenue − cost of sales = 84,000 − 51,000.
- Gross profit = $33,000.
- Profit = gross profit − expenses = 33,000 − 19,000.
Answer Gross profit is $33,000 and profit is $14,000 for the period.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A firm sells 1,500 units at $24 each. Cost of sales is $27,000 and expenses are $6,500. Calculate revenue, gross profit and profit.
Give me a hint
Find revenue first, then deduct cost of sales and expenses in order.
Compare my reasoning
- Revenue = 1,500 × 24 = 36,000.
- Gross profit = 36,000 − 27,000 = 9,000.
- Profit = 9,000 − 6,500 = 2,500.
Revenue is $36,000, gross profit is $9,000 and profit is $2,500. Each figure follows the statement relationship for the same period.
Look for these in your work
- Revenue correct
- Gross profit correct
- Profit correct
A statement shows revenue $92,000, gross profit $37,000 and expenses $21,500. Find cost of sales and profit.
Give me a hint
Rearrange gross profit = revenue − cost of sales, then deduct expenses.
Compare my reasoning
- Cost of sales = 92,000 − 37,000 = 55,000.
- Profit = 37,000 − 21,500.
- Profit = $15,500.
Cost of sales is $55,000 and profit is $15,500. Gross profit is revenue less cost of sales; profit then subtracts expenses.
Look for these in your work
- Rearrangement correct
- Profit relationship correct
- Figures labelled
A manager compares two products. Product A has revenue $70,000, cost of sales $42,000 and expenses $18,000. Product B has revenue $60,000, cost of sales $30,000 and expenses $22,000. Which has higher profit and by how much?
Give me a hint
Calculate each product's gross profit and then subtract its expenses.
Compare my reasoning
- A: 70,000 − 42,000 − 18,000 = 10,000.
- B: 60,000 − 30,000 − 22,000 = 8,000.
- Compare the two profit figures.
Product A has profit of $10,000; Product B has $8,000. A's profit is $2,000 higher for the period, though a decision may also consider future demand, capacity and allocated costs.
Look for these in your work
- Both calculations correct
- Difference correct
- Decision evidence qualified
Common mistakes
- Subtracting expenses before finding gross profit
- Confusing cost of sales with all business costs
- Claiming statement construction is assessed
What can you explain now?
Revenue is $50,000 and cost of sales is $32,000. What is gross profit?
Compare with the explanation
$18,000
Subtract cost of sales from revenue.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
What is the relationship between gross profit, expenses and profit?
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.