SUBJECT: BUSINESS STUDIES
CLASS: JSS 2
TOPIC: CAREER IN THE CAPITAL MARKET
BUYING AND SELLING
Buying means the acquisition of goods by paying out some money. The process of determining the price at which goods and services will be accepted to both buyers and sellers is called the methods of buying goods.
VARIOUS METHODS OF BUYING AND SELLING:
METHODS OF BUYING AND SELLING
There are various methods of buying commodities in the market. They can be bought through the following ways:
Buying By Description Or Grade: Some goods are sold by describing them to the buyers who can determine the quality of the goods bought from past-experience. However, it is better to sell or buy by grades where goods are given grades. Goods that are given grades or measurement include cocoa, garri, nails e.t.c.
Buying By Sample: In this case, the buyers are shown a part of an exact copy of the goods he/she wishes to buy e.g. textile, coffee, and sugar. The buyer can see or feel the qualities of the sample before purchase.
Buying By Auction: This is where the buyer is allowed to make an offer for goods, without considering the quality. This method of buying is called auction.
In Auction, usually the goods are sold to the person who offers the highest price (i.e. highest bidder). Examples of such goods include unclaimed goods at the port; banks at time auction the properties of its debtors.
Buying By Inspection: This is when the buyers see the actual goods he/she wishes to buy and may even test it e.g. Electronics, radio, television etc displayed in the show room.
Butchers also inspect animals or cows before purchase
PROCEDURES FOR BUYING AND SELLING
Procedures for buying and selling are in two forms:
Cash sales: for cash sales, payment for goods sold is made immediately. A receipt is issued to the buyer as evidence of payment.
Advantages of cash sales
Disadvantages of cash sales
Credit sales are the procedure for buying in which payment for goods bought are made at a later date. It is called deferred payment. Payment may be made within days, weeks or months depending on the agreement between the buyer and the seller. The buyer collects the goods while payment is made later.
Advantages of Credit sales
Disadvantages of credit Sales
Macmillan JSS2 Business Studies pg 21-22.
Calculation of turnover and net profit
CALCULATION OF COST OF SALES
Opening stock *
+ Purchases *
+ Carriage inward *
-Returns outward *
-Closing stock *
Cost of sales = **
Opening stock *
+ Purchases *
-closing stock *
Cost of sales **
Cost of sales= sales – Gross profit
When profit is expressed as a % of cost price is called mark up.
It is also the relationship between profit and cost of goods. The formula:
Cost of sales * 100/1
Mark up is an extra amount added to the direct or variable cost of producing goods to arrive at the selling price of those goods. For example, a 50 percent mark-up on a good with a direct cost of $1.00 would mean that the company would sell the good for $1.50. The mark-up covers indirect and overhead costs as well as profit.
Turnover = cost of sales + Gross profit
It is also known as SALES.
This is the excess of sales over the cost of sale.
Profit = sales – cost of sales
Profit, in business, the monetary difference between the cost of producing and marketing goods or services and the price subsequently received for those goods or services. Profit is an essential competitive feature of buying and selling in the economic system. The opposite of profit is loss, whereby the cost of producing certain goods or services is higher than the price a buyer is willing to pay for them.
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