Page 30 - Office Practice and Accounting 10

3 Trade

Trade
Trade is the form of business activities in which purpose of financial earning and
benefit is sought. It refers to the sale, transfer or exchange of goods and services
and constitutes the central activities around which the other business functions like
banking, transportations, insurance, packaging, ware housing and advertising cluster.
Thus, economic function of trade is to buy goods in the place where they are made
and to sell them to the place where they are required.
Trade can be divided into two parts:
i. Home Trade
ii. Foreign trade

Home (or Internal) Trade
Home trade refers to the act of buying and selling of the goods and services within
the geographical territory of a country. It is quite simple in nature. Payment can be
made in the country’s own currency or in form of bank draft, cheque, telegraphic
transfer, etc. This trade is also known as internal or domestic trade. Home trade can
be performed as retail and wholesale trade. Home trade generally takes the following
course.
The goods turned out by producers are sold in bulk to wholesale merchants. These
wholesale merchants sell them to retail merchants. The latter distribute them over
the length and breadth of the country among the actual consumers through their
numerous establishments infesting every nook and corner of the land.
It is obvious from the above that home trade may be either wholesale trade or retail
trade. Wholesale trade or retail trade refers to the selling of goods in bulk. Producers
of goods sell them generally to big merchants, called wholesale merchants, who sell
the goods in bulk to small shopkeepers, called retail merchants. Retail trade refers to
the selling of goods in small quantities to actual consumers. Neither the producers
nor the wholesale merchants have direct contact with actual consumers of goods.
The consumers purchase goods in small quantities to their requirements from retail
traders. Middlemen, wholesale merchants and retail merchants thus intervene
between the producers of goods and their actual consumers. Hence they are known
as middlemen. Middlemen increase the price of the goods that pass through their
hands.

24 Office Practice and Accounting 10