# Profit and Loss calculation: Fake currency

A store buys an item for $\$50$. They price it then, at$\$80$ ($\$30$profit margin). A customer buys the item from them with a fake$\$100$ note.

The store returns $\$20$to the customer. My question is, how much loss did the store incur? Is it (1)$\$50 + \$20 = \$70$; or

(2) $\$80 + \$20 = \$100$? (2) seems to be correct. But what exactly is the definition of loss here? Should it be calculated on the store's selling or cost price? - ## 2 Answers On the cost price. In fact you see that when he sells at \$80 he has a gain of \$30, since 80-50 = 30. - Figured it out. Loss = Cost Price - Selling Price  Prospective gains do not feature into loss computation In this case, Selling price = -$20 (which he returned)
Cost Price = $50  Overall loss =$70

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That is correct. One can do it more concretely. Store owner handed over a $\$50$bill to buy the item, and a$\$20$ dollar bill to the customer. So she is $50+20$ out of pocket. – André Nicolas Jan 31 '13 at 23:11