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d. Documents Used in Foreign Trade
Documents are the proof which helps to settle any kinds of disputes and can be used
as a evidence in the future. The following documents are used in foreign trade:
i. Inquiry letter ii. Reply to the inquiry or quotation letter
iii. Follow-up letter iv. Order letter
v. Letter of acknowledgement vi. Invoice
viii. Adjustment of complaint, etc.

Differences Between Foreign Trade and Home Trade

Basis Home Trade Foreign Trade
Meaning It is the act of buying and selling of It is the act of buying and selling of goods
goods between the traders of same between the traders of two different
county. countries.

Parties Buyer and seller are the parties Importer and exporter are the parties
involved involved in home trade. involved in foreign trade.
Types It has two types i.e. wholesale and It has three types, i.e. import, export and
retail trade. entreport.
Copies of Generally, three copies of invoice are Generally, four copies of invoice are
invoice prepared. prepared.
Currency used National currency is used for Foreign currency is used for payment.
payment.
Transportation The transportation cost is lower than The transportation cost is higher than the
cost foreign trade. home trade.

Letter of Credit Letter of credit (LC) is not compulsory Letter of credit (LC) is compulsory to open
to open in the home trade. in the foreign trade.

Modes of Generally, land transportation is used Generally, the air, water and land
transport to carry the goods. transportation is used to carry the goods.

3. Modes and Means of Payment

Modes and means of payment refer to the tools and devices through which the
payment of the value of trade is made. Transactions may be performed in cash or on credit
but the payments are made through the most reliable and common means and devices
for the sake of security of the payment. All the cash transactions are paid immediately
after the receipt of the goods. But in case of credit transactions, payment is made before
or at the due date. Banking services are available all over the world to promote business
and trade through which a number of means and methods are used as the facility to the
parties. Cash, money order, postal order, bankdraft, cheque, bill of exchange, credit card,
LC, hundi, etc. are the means of payment. The following are some of the common modes
and means of payment:

50 Aakar’s Office Practice and Accountancy - 10 Trade 51