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Meaning Of Buying And Selling (Business Studies)
What Is Buying And Selling?
Buying basically involves obtaining what you need from from a seller in a market. Trading of things is a vital part of buying and selling. You are going to understand every aspect of purchasing and selling after reading this essay.
Procedure For Buying And Selling
A set or standardized process for buying and selling things does not exist. Any firm’s procedure for buying and selling is determined by the system it adopts. But there are two sections where the buying and selling process is explained. They are; cash sales and credit sales of items
1. Cash sales
When the entire purchase price is paid at the time of sale, a cash sale is taking place. In cash sales, the buyer negotiates the price of the items to be purchased, pays cash, and receives the goods in exchange. Small businesses, such as sole traders, typically only accept cash. Small merchants typically sell consumables including vegetables, yams, beans, salt, and pepper on a cash-only basis.
Cash is also used to purchase other goods including home items, clothing, and footwear.
The seller issues a cash receipt to the buyer when payment in cash is made for products that were previously purchased on credit.
A receipt is a piece of paper that the seller, who has sold the buyer some products, it is issued to show that the buyer has paid cash for the goods or services they have purchased.
The seller would enter the details of the sales in his cash register when they are made in cash.
Therefore, a cash register is a record where a seller logs his daily cash sales. It includes the sale date, the items sold, how much was spent, and the overall number of sales for the day. The buyer’s name and address are absent from it.
2. Deferred Payment
Sales other than cash are referred to as deferred payments. In that case, the buyer is free to buy the products without making immediate payment. There are three categories of deferred payment:
- Credit Sales.
- Hire Purchase
• Credit Sales
In a credit sale, the buyer exchanges the products without making a cash payment right away. He might pay a portion of the invoice total right away. At the time of the transaction, a later date was set with the seller to receive payment of the credit’s full amount. The fact that the goods become the buyer’s property when the sale is complete is the most crucial aspect of a credit sale.
If the buyer doesn’t pay by the due date, the seller cannot recover the goods. In contrast to hire purchase, he can file a lawsuit to get his money back but not to get the products back.
Under a lease agreement, high-value industrial equipment is often supplied to the user (the lessee) in exchange for a recurring monthly rental payment. As long as the lessee owns the equipment, these rents are paid.
Most lease agreements give the lessee the choice to purchase the equipment once a certain amount of rent has been paid. The equipment becomes the lessee’s property if the option to purchase is implemented. He returns it if he decides not to buy it.
The fact that the lessee enjoys using the equipment, which he could not otherwise afford to buy completely, is what matters.
• Hire Purchase
A sort of credit sale called a “hire purchase” allows the buyer to utilize the items even when he hasn’t paid for them in full. In a hire purchase transaction, the buyer makes a small down payment or other agreed-upon initial payment on the spot. He is permitted to take up the item and begin using it as if it were his own.
The buyer will pay specified monthly or recurring installments until the total hire purchase price is paid. A purchase invoice is generated after the final payment, designating the buyer as the owner of the items.
The products are not the buyer’s property until the final instalment is paid. This means that if the buyer doesn’t make the payments as agreed, the seller has the right to take the items back.
Durable and expensive commodities like motor vehicles, particularly transport vehicles, industrial equipment, and machinery are typically sold in this manner. The money earned by the transportation industry is used to pay the installments.
Television sets, electrical generator sets, industrial machines, and other items are also sold in this a similar way.
If the buyer has already paid a larger portion of the hire purchase price then defaults on a payment, equity is created. The vendor either recovers or seizes the goods.
According to the legal principle of equity, the seller must sell the items and take the installment that the buyer has not yet paid. According to this regulation, after the seller has taken his money, he has to deliver the buyer the balance of the selling proceeds.
Methods Of Buying And Selling
Buyer and seller have to communicate, either physically or virtually, in order to negotiate the purchase of the desired items.
Whether it is a credit or cash transaction, there are a number of ways to conduct this negotiation. These approaches are:
- Selling by grading or description
- Selling by sample
- Selling by auction
- Selling by inspection
1. Selling by grade or description
A lot of things are sold based on their description or grade. The quality and quantity of these commodities are often described by the producer or manufacturer. Many products are purchased after reading their descriptions. We simply make our buy because we trust the description is accurate.
The producer explains the type of illness that the drug treats, and the seller purchases the drug based on the manufacturer’s description. This is how the majority of drugs are marketed. Tinned food items like milk, seafood, beverages, tomatoes in a can, soap, detergent, and other items can also be purchased by description.
On the other hand, certain commodities like palm wine, palm oil, cashew nuts, etc. may be marketed in accordance with their grades or quality. Their grades are shown in the presentation itself. The best of them are rated as grade A, and the remaining ones are rated as B, C, D, etc., in decreasing order of quality. As the grade declines, so does the price.
Both selling by description and selling by grades emphasize the quality of the goods, hence they are related.
2 Selling By Sample
This is a technique used in the sale of some agricultural items like rice, beans, cocoa, cashew nuts, etc. where a little portion of the goods are shown to illustrate how the rest look like. The sale of ready-made clothing, including gowns, jeans, shirts, and pants, is also done by sample.
The buyer may then request the type, color, or even size he desires after inspecting the samples. Sample sales are related to selling by grading because, in most cases, products sold by grading are first presented according to their qualities, and the seller then choose which quality or grade to purchase after carefully inspecting the displayed goods.
3. Putting Up For Auction
In an auction, the items are put on display for the general public or a group of people gathered for that reason to bid on them. As in bazaar sales, the commodities will ultimately be offered to the highest bidder.
The Auctioneer is the person in charge of running auction sales. The auctioneer often holds a license to conduct auctions. During the sales, the auctioneer would point at the item if it was bulky, raise the item for sale, or pronounce its name. (as in the case of a building, automobile or machine).
Then he would request bids from the general public or those present for that purpose. The commodities would eventually be sold to the highest bidder. (the individual who offers the highest price). Other items that can be sold at auction include used clothing, abandoned cars, foreclosed homes, items made by a corporation whose sales are declining and need to be disposed of, etc.
That is why auction sales involve items that must be sold regardless of price and not those that must be sold at a set price.
4. Selling By Inspection
This form of selling allows the customer to bargain and pay for the goods after carefully inspecting the items they wish to purchase.
Almost majority of the commodities are sold in an open-air market after inspection. Although the examination carried out in the open market frequently involves some type of comparison with like products.
Buyers examine the goods as they are presented in the market, moving back and forth as they search for the quality, kind, and color that they desire. If they locate one that attracts them during the inspection, they will pause to bargain and then make a purchase.
Excess property owned by the government, businesses, and people, among others, is sold through inspection.
In most situations, advertisements are placed in the newspaper or on the company notice board urging the public to tender. A date is scheduled for the inspection of the assets or property, and following a detailed examination of the goods, the purchasers choose the price to offer.