# The basics of profit, loss and VAT

When you sell something for a higher price than you bought it for, you are making a profit. However, when you are selling something for a lower price than you bought it for, you are making a loss. In other words, you are losing money. To determine the percentage profit you made in a transaction, you can make use of two methods.

In the example of you buying a bar of chocolate for R10 and selling it for R13, you can apply the first method by getting the difference between the new amount and the old amount, and that total you have to divide by the old amount. That will give us an answer of 3-tenths. Now you still do not have a percentage. As percentage means “out of 100” you can make use of equivalent fractions and change the 3-tenths to 30-hundredths. 30-hundredths are the same as 30%.

In the second method, you still have to get the difference between the new amount and the original amount and divide that by the original amount. However, to change the answer to percentage, you can multiply by 100. So, when you get an answer of 30, you have to know it is 30%.

Determining percentage loss works similarly. Just ensure you are interpreting the answer correctly. Also, watch this video if you are uncertain about VAT. This video on the basics of profit, loss and VAT, will definitely enhance your understanding of the topic.

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