Definition of Trading Company Accounting and Examples
A trading company is a business activity that makes a purchase of goods for resale without the production process (processing / changing forms). For more details, let's refer to the review below.
Trading Company
Definition of a Trading Company
In general, a trading company is a company whose main activities are buying, storing and reselling merchandise without adding value to it. What is meant by added value is processing or changing the shape or nature of the goods, in such a way that it has a high selling value.
Trading companies, in an operational activity get income, but the income derived from the sale and purchase of goods transactions. Trading companies have the main activity of selling and selling merchandise in the form of raw materials, semi-finished goods, or finished goods. Apart from that, traded goods are in the form of agricultural products, plantations, forest products, and manufactured industrial products.
Characteristics of a Trading Company
Trading companies can be distinguished from other types by looking at the special characteristics inherent in a trading company. The characteristics of a trading company are as follows:
The main income comes from selling merchandise.
The main costs come from the cost of goods sold and other business costs.
In his account there is a merchandise inventory account.
As an intermediary between producers and consumers.
Between items purchased and goods sold are the same or there is no change.
The main goal is to make a profit by selling the trade at a higher price compared to the purchase price.
From the characteristics of the trading company it can be concluded that the main activity of the trading company is buying and selling.
Types of Trading Companies
Trading companies are grouped into two, as follows:
1. Types of Trading Companies Based on Empowered Products
Production Goods Trading Company, which is a company that trades products of raw materials (raw materials) which as a basic material in the manufacture of products or production equipment to produce another product. Such as logs and sawing machines.
Finished Goods Trading Company, which is a company that trades a final product or in its final form that is ready for human use. Such as books, sepulul, television and others.
2. Types of Trading Companies
Based on the Types of Consumers Involved:
Large Trading Company (Wholesaler), a company that directly buys a product from a factory in large quantities. The company then sells its goods to some traders with an intermediary whose sales volume is quite large. For example: Wholesale
Intermediary Trading Company (Middleman), which is a company that purchases goods in bulk for resale to retailers in moderation. For example: sub-wholesaler.
Retailer Trading Company, which is a company directly related to consumers. Consumers can buy retail or products offered. Retailers we often see in our environment. For example: stalls, kiosks and supermarkets.
SAMPLE TRADING COMPANY
Try to think about it! Are shoe stores a trading company? The answer is yes, because the store buys shoes from the factory and resells them without reprocessing. How is the supermarket? Is it a trading company? To better understand examples of trading companies, do the following exercise by checking (.).
SAMPLE TRADING COMPANY
How? Are you having trouble completing exercise 1 above? Well, to check the answers to the exercises you are working on, you can match them with the following answer keys available.
Answer to exercise 1
Answers SAMPLE TRADING COMPANY
To add to your knowledge, in addition to the examples given above, you can still get examples in everyday life, because there are so many trading companies in your neighborhood. Now it continues with various trading company transactions.
Example of a Trading Company Transaction with Terms of Delivery and Payment Terms
Jan 5 Purchased merchandise for Rp. 5,500,000, - from PT. Honest Surabaya, with the terms 2/10 n / 30 Invoice Number 017. The freight cost is Rp. 250,000, - FOB Shipping point.
Jan 8 merchandise sold Rp. 7,000,000 to the Fa. Honest Bandung Invoice Number 008 EOM requirements.
Jan 9 Resubmitted merchandise purchased on January 5 for Rp. 500,000 due to damage.
Jan 10 Received merchandise that was sold last January 8 for Rp. 1,000,000 because the quality does not match the order.
January 11 Paid purchase invoice No. 017 dated January 5 last for PT. Honest Surabaya.
Jan 15 Received repayment of Invoice Number 008 from the Fa. Be honest on the 8th of January.
The above example is a transaction written in the form of a record of events. What is the form of writing if it is made in proof of transaction ?. Well, you can learn the following example in the form of transaction evidence at the company "UD. JAYA ”Jakarta Jl. New 225 Jakarta.
To understand the terms of delivery of goods and payment terms in the sale and purchase agreement, do the following exercise!
What do the conditions mean: n / 60
2. What does it mean to condition: 4/10 2/15 n / 30
3. Transaction:
a. Purchase of merchandise on February 2, 2000 for Rp. 2,000,000, - on condition that the EOM. What is the deadline for payment of the purchase invoice?
b. March 14, 2000 Sales of merchandise Rp. 3,000,000, with a condition of 3/10 n / 40. March 30 repayment is received. Are any deductions calculated? Explain briefly!
c. January 21, 2000 purchases of merchandise Rp. 5,000,000, on condition that 4/10 n / 60. On January 25, 2000 a purchase return of Rp. 1,000,000. - If on January 30, 2000 the invoice is paid, are there deductions calculated? Explain briefly!
After you have tried exercise 3 above, are there any difficulties? If not, great! If you still feel that there are difficulties then you can see and check the difficulty by matching your work with the answer key provided below.
Answer Exercise 3
1. n / 60 means, with this condition the invoice must be paid no later than 60 days after the delivery of the goods and the amount paid is the final amount stated on the invoice.
2. 4/10 2/15 3/30 means, with this condition it is stated that if the invoice is paid within 10 days after the transaction date is given a 4% discount, and if the repayment is between 11 days to 15 days from the date the transaction is given a 2% discount, while the repayment limit is no later than 30 days after the transaction date.
3. a. The latest payment deadline for invoices is February 29, 2000, because February 2000 is 29 days old.
b. No deductions are received, because the deduction period is 10 days after the transaction date (March 14, 2000), so the cut-off period is March 24, 2000.
c. Get a 4% discount, because the invoice is still in the discount period. The deduction period is 10 days after January 21, namely January 31, 2000, while the repayment is done on January 25, 2000.
Main Activities of Trading Companies
Trading companies have the following main activities:
Purchase. Purchasing activities at a trading company include the purchase of company assets, the purchase of merchandise and the purchase of other goods related to the business activities.
Spending money. Spending money is used to buy goods and services, pay taxes, pay off debts, expenses, and others.
Sales. The company sells merchandise, the company will get income.
Receipt of money. Sales of merchandise will be followed by receipt of money. Transactions for receiving money can be obtained from paying off receivables, selling merchandise, and others.