Examples of Trading Companies: Definition, Characteristics, Types, and Characteristics
Examples of Trading Companies: Definition, Characteristics, Types, and Characteristics – In this discussion, we will explain about trading companies. Which includes the definition of trading companies, types of trading companies, characteristics of trading companies and examples of trading companies which will be discussed in full and easy to understand. For more details, please see the review below carefully.
Examples of Trading Companies: Definition, Characteristics, Types, and Characteristics
Let's discuss the meaning of a trading company first.
Definition of Trading Company
A trading company is a company whose main activities are buying, storing and reselling merchandise without adding value. In this case added value is like processing and changing the nature or form of the original goods in such a way that the goods have a high selling value.
In its operations, the trading company generates income but the income generated comes from buying and selling goods. The main activity of a trading company is buying and selling commodities in the form of raw materials, semi-finished goods or finished goods. In addition, goods traded consist of agricultural, plantation, forestry products, and processed or manufacturing industrial products.
Characteristics of a Trading Company
The trading company has the main activity of buying and selling merchandise. Merchandise can be in the form of raw materials, semi-finished goods and finished goods. Merchandise can be in the form of agricultural, plantation, and industrial processing (manufacturing) products.
Trading companies are known as “Merchandise Inventory” accounts. Meanwhile, service companies do not provide merchandise inventory accounts, because service companies do not sell and buy merchandise. Another difference can be seen in the way of generating profits and losses.
A merchandising company income statement is prepared by comparing sales to cost of goods sold. The difference between sales and cost of goods sold will result in a gross profit. To calculate net profit, gross profit must be deducted from administrative expenses and selling expenses. For service companies, profit and loss calculations do not include cost of goods sold, but by calculating the difference between income and operational costs.
Types of Trading Companies
In a trading company, there are two types. The first is based on the official product and the types of consumers involved. The following are the types of trading companies, namely:
Based on the Empowered Product
- Production Goods Trading Company is a company whose trading activities are in the form of raw material products, raw materials to make products or production equipment to produce other products. Like logs and chainsaws
- Finished Goods Trading Company is a company whose trading activities are in the form of final products (finished goods) ready to be used for human consumption. Examples include books, shoes, sandals, computers, LED TVs, PCs and so on
Based on Types of Consumers involved
- Large Trading Company (Wholesaler) namely companies that directly buy products from factories in large quantities. This company then sells these goods to several traders with intermediaries whose sales volume is quite large. For example wholesale
- Intermediary Trading Company (Middlemane) that is, a company that purchases in large quantities and then resells them to retailers in moderate quantities. For example a large trading company is a sub-wholesaler.
- Retailer Trading Company (Retailer) namely companies that have a direct relationship with consumers where consumers can buy in retail or in the middle. For example, such as stalls, kiosks, supermarkets, minimarkets, department stores, and others.
There are various other types of trading companies based on their scope.
Based on the scope, trading companies are divided into two types, namely large traders and small traders.
- Wholesalers: Is a trader who buys merchandise from manufacturers and sells it to small traders in batches.
- Small Traders: Are traders who buy goods from wholesalers and sell them to consumers in retail.
Characteristics of a Trading Company
The characteristics of a trading company are as follows:
-
Forms of Traded Products
Products traded in trading companies are tangible goods so that they can be felt. For example furniture, rice, cupboards and so forth. -
There is no change in the form or nature of the traded product
The main behavior of a trading company is to buy and sell merchandise without any changes or additions to its form and nature. -
Special Account
There are special accounts obtained by trading companies, such as accounts for cost of goods sold, merchandise stock, sales discounts and returns and so on. -
Calculation of Profit or Loss
The profit and loss calculation pattern for a trading company is not the same as for a service company, because there is a special account. In service companies, profits are obtained by reducing income with expenses.
Trading Company Purpose
Maximize the profit that will be generated. Profit or profit is the difference between the amount received by the company to sell goods or services to customers and the amount spent to produce and sell goods or services.
Types of Trading Company Transactions
The types of transactions that often occur in trading companies include the following:
- Purchase of merchandise on credit
- Purchase of merchandise in cash
- Purchase return
- Discount
- Purchase freight charges
- Sale of merchandise on credit
- Sales of merchandise for cash
- Sales returns
- Sales discounts
Trading Company Accounts
The following are special accounts for trading companies, namely:
- Purchase: used as a record of merchandise purchase transactions
- Sales: used as a record of merchandise sales transactions
- Purchase returns: used to record the return of merchandise that has been purchased.
- Sales returns: used to record the return of merchandise that has been sold.
- Purchase Discounts: this is used to record the receipt of a discount from a seller
- Sales Discount: this is used to record the receipt of the discount from the buyer
- Purchase Transportation Fee: used to record payment of transportation costs for goods that have been purchased
- Sales Freight Costs: used to record payment of freight costs for goods that have been sold.
- Merchandise Inventory: used to record the value of merchandise inventory at a time / period.
In addition to the special accounts described above, trading companies have general accounts such as cash, equipment, equipment, capital, accounts receivable and so on.
Trading Company Main Activities
Main Activities of Trading Companies are as follows:
- Purchasing, purchasing activities carried out in a trading company include purchasing assets companies, purchasing merchandise, and purchasing other goods related to business activities the.
- Spending Money, spending money is used to buy goods and services, pay taxes, pay off debts, expenses, and so on.
- Sales, the company sells merchandise, the company will earn revenue.
- Receipt of money, Sales of merchandise will be followed by receipt of money. Money receipt transactions can be obtained from the settlement of receivables, sales of merchandise, and others.
Example of a Trading Company
Examples of trading companies are shops, showrooms, supermarkets, minimarkets, stalls, and so on.
Thus has been explained about Examples of Trading Companies: Definition, Characteristics, Types, and Characteristics hopefully can add to your insight and knowledge. Thank you for visiting and don't forget to read our other articles.
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