Trade

Subject: Accountancy

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Overview

Trade is the core of the business. Trade is the process of exchanging goods and services for money. This note has information about trade.
Trade
Trade
Trade

Trade is the act of buying and selling goods services with the objective of earning profit. It acts as the bridge between customers and manufactures. The person who engages in the job of buying and selling is called trader. Trade may be either home or foreign trade.

The following is a main definition of trade: -

“Trade refers to the sale, transfer or exchange of goods or services.” – A. N. Agrawala

Terms and Conditions of Trade

  1. Types of goods
    The buyer/ importer and seller/ exporter must have a mutual agreement regarding the types of goods. It includes the names of goods, brand, size, color, batch, quality, etc. All those information should be mentioned by the buyer/ importer clearly.

  2. Quantity of goods
    Quantity of goods
    Quantity of the goods

    The quantity of good means the number, weight and measurement of goods. The buyer/ importer while making order of the goods should clearly mention the required quantity of goods. On the other hand, the seller/ exporter should also dispatch the goods exactly as per the order.

  3. Price of the goods
    The seller/ exporter should clearly mention the per unit price of the goods in the quotation letter. It is the major term of foreign trade on the basis of which the buyer/ importer decides to make the order of goods.

  4. Discount
    The seller/ exporter and buyer/ importer must be very clear about the types and rate of discount. It is the facility provided by the seller/ exporter to the buyer/ importer. The type of discount i.e. trade discount or cash discount and rate of discount should be clearly mentioned in the quotation.

  5. Terms of payment
    Payment
    Payment
    The buyer/ importer and seller/ exporter should make an agreement regarding the terms of payment i.e. cash or credit. The seller/exporter may provide the facility of partial payment. If the seller/ exporter has provided credit facility for the whole amount, the duration of credit and payment date must be mentioned clearly.

  6. Delivery
    The date, place and method of delivery should be clearly mentioned in the contract. The exporter should deliver the goods to the buyer/ importer according to the terms and conditions of the contract. Timely delivery of the goods ensures credibility and reputation of the seller/ exporter.

  7. Insurance
    Insurance
    Insurance

    Insurance is the agreement made with the insurance company for compensating the loss of goods occurred due to the risk of fire, accident, theft or damage. It should be decided whether goods are to be insured then which one will be the insurer and who pays the insurance charges.

  8. Packing
    Packing of goods
    Packing of goods

    The packing of goods is one of the important terms of trade. The buyer/ importer and seller/ exporter should agree upon the right type of packing. They should agree upon whether the packing charge is t be borne by the buyer/ importer or seller/ exporter. The proper packing protects the goods and makes the outlook of the product attractive.

  9. Transportation
    Transportation
    Transportation

    The buyer/ importer should give clear instruction regarding the carriage of goods. In the absence of clear instruction, the seller/ exporter should dispatch the goods using appropriate means of transportation which is safest, fastest and the cheapest. Further, both parties should be definite for the payment of carriage of goods.


Types of Trade

Trade is of following two types:

  1. Home trade
  2. Foreign trade
Things to remember
  • Trade is the core of the business.
  • Trade is the process of exchanging goods and services for money. 
  • The buyer/ importer and seller/ exporter must have mutual agreement regarding the types of goods. 
  • The buyer/ importer and seller/ exporter should make an agreement regarding the terms of payment i.e. cash or credit.
  • It includes every relationship which established among the people.
  • There can be more than one community in a society. Community smaller than society.
  • It is a network of social relationships which cannot see or touched.
  • common interests and common objectives are not necessary for society.
Questions and Answers

Trade refers to the act of buying and selling. It is the process of exchanging goods and services for money.

Trade is the core of the business. It helps to continue production and distribution of goods and services. It directs the goods from one place of consumption through the ownership transfer.

According to A.N. Agrawala,“Trade refers to the sale, transfer or exchange of goods or services.”

From the above definition it is clear that trade is the process of exchanging goods and services for money. It includes the act of supplying raw materials to the producers and finished goods to the consumers with the view to earn profit. The person who engages in the job of buying and selling is called trader.

The following are the terms and conditions of trade:

  1. Types of goods
    The buyer/ importer and seller/ exporter must have a mutual agreement regarding the types of goods. It includes the names of goods, brand, size, color, batch, quality, etc. All those information should be mentioned by the buyer/ importer clearly.
  2. Quantity of goods
    The quantity of goods means the number, weight and measurement of goods. The buyer/ importer while making order of the goods should clearly mention the required quantity of goods. On the other hand, the seller/ exporter should also dispatch the goods exactly as per the order.
  3. Price of the goods
    The seller/ exporter should clearly mention the per unit price of the goods in the quotation letter. It is the major terms of foreign trade on the basis of which the buyer/ importer decides to make the order of goods.
  4. Discount
    The seller/ exporter and buyer/ importer must be very clear about the types and rate of discount. It is the facility provided by the seller/ exporter to the buyer/ importer. The type of discount i.e. trade discount or cash discount and rate of discount should be clearly mentioned in the quotation.
  5. Terms of payment
    The buyer/ importer and seller/ exporter should make an agreement regarding the terms of payment i.e. cash or credit. The seller/exporter may provide the facility of partial payment. If the seller/ exporter have provided credit facility for the whole amount, the duration of credit and payment date must be mentioned clearly.
  6. Delivery
    The date, place and method of delivery should be clearly mentioned in the contract. The exporter should deliver the goods to the buyer/ importer according to the terms and conditions of the contract. Timely delivery of the goods ensures credibility and reputation of the seller/ exporter.
  7. Insurance
    Insurance is the agreement made with the insurance company for compensating the loss of goods occurred due to the risk of fire, accident, theft or damage. It should be decided whether goods are to be insured then which one will be the insurer and who pays the insurance charges.
  8. Packing
    The packing of goods is one of the important terms of trade. The buyer/ importer and seller/ exporter should agree upon the right type of packing. They should agree upon whether the packing charge is to be borne by the buyer/ importer or seller/ exporter. The proper packing protects the goods and makes the outlook of the product attractive.
  9. Transportation
    The buyer/ importer should give clear instruction regarding the carriage of goods. In the absence of clear instruction, the seller/ exporter should dispatch the goods using appropriate means of transportation which can be safest, fastest and the cheapest. Further, both parties should be definite for the payment of carriage of goods.

Trade is the process of exchanging goods and services for money. It includes the act of supplying raw materials to the producers and finished goods to the consumers with the view to earn profit. The person who engages in the job of buying and selling is called trader.

The following are the terms and conditions of trade:

  1. Types of goods
    The buyer/ importer and seller/ exporter must have a mutual agreement regarding the types of goods. It includes the names of goods, brand, size, color, batch, quality, etc. All those information should be mentioned by the buyer/ importer clearly.
  2. Quantity of goods
    The quantity of goods means the number, weight and measurement of goods. The buyer/ importer while making order of the goods should clearly mention the required quantity of goods. On the other hand, the seller/ exporter should also dispatch the goods exactly as per the order.
  3. Price of the goods
    The seller/ exporter should clearly mention the per unit price of the goods in the quotation letter. It is the major terms of foreign trade on the basis of which the buyer/ importer decides to make the order of goods.
  4. Discount
    The seller/ exporter and buyer/ importer must be very clear about the types and rate of discount. It is the facility provided by the seller/ exporter to the buyer/ importer. The type of discount i.e. trade discount or cash discount and rate of discount should be clearly mentioned in the quotation.
  5. Terms of payment
    The buyer/ importer and seller/ exporter should make an agreement regarding the terms of payment i.e. cash or credit. The seller/exporter may provide the facility of partial payment. If the seller/ exporter have provided credit facility for the whole amount, the duration of credit and payment date must be mentioned clearly.
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