CBSE Class 10 Elements of Business Unit IV: Selling and Distribution

Unit IV: Selling and Distribution

(a) Concept of purchase and sale
(b) Types of Cash, Credit, Hire purchase system and Instalment payment system

(a) Concept of Purchase and Sale:

Purchase:
Trade refers to buying and selling of goods and services with the object of earning profit. In other words, trade involves buying and selling of goods and services. Purchase of goods is a process through which ownership of some goods is acquired by a person called purchaser for a price.

Modes of Purchase:
A mode of purchase is a way of buying something by inspecting it, by evaluating samples or by description. Some of the other modes of purchase are:
(a) Purchase by inspection where the buyer inspects the product in person.
(b) Purchase by sample: This is where the buyer verifies and evaluates a sample before buying it.
(c)Purchase by description: The buyer in this mode purchases an item based on description or brand name.

Sale:
Sale is a transaction through which a seller transfers ownership of goods or services to another person for monetary consideration. A sales mode refers to a business’ overall approach to selling. There is no ideal model of sale which is dependent on many factors. Common models are:
(a) Business to Business or B2B model where sales are directed to another business organisation.
(b) Business to Consumer or B2C model where a business sells products to consumer chain.
(c) Mixed Model where a company undertakes both B2B and B2C sales in combination.

Wholesale Trade:
Wholesale trade is concerned with the activities of those persons or establishments which sell to retailers and other merchants and to industrial and commercial users but who do not sell to ultimate consumers. Wholesalers serve as an important link between manufacturers and retailers. They enable producers to reach a large number of buyers spread over wide geographical area through retailers – a process known as distribution of goods and services. They purchase in bulk and sell in small lots to retailers or industrial users. Wholesalers undertake various activities such as grading of products, packing into smaller lots, storage, transportation and promotion of goods. They also relieve the retailers from maintaining large stock of goods and extend credit facility to them.

Services of Wholesalers to producers as buyer of goods:
(i) Facilitating large scale production
(ii) Risk bearing through building large quantity of stock of goods
(iii) Financial assistance to manufacturers by making cash payments
(iv) Help in marketing function
(v) Facilitating production continuity

Retail Trade:
A retailer is a business enterprise that is engaged in the sale of goods and services directly to the ultimate consumers. The retailer normally buys goods in lots from wholesalers and sells them in small quantities to the ultimate consumers. The retailer is the final link between the wholesaler and the final consumer. There may be different ways of selling the goods – shop based, door-to-door selling, sale through vending machine, roadside stalls etc.

Services provided by retailers to manufacturers and wholesalers:
(i) Help in distribution of goods
(ii) Personal selling
(iii) Collecting market information
(iv) Help in sales promotion

Services provided by retailers to consumers:
(i) Regular availability of products
(ii) New product information
(iii) Convenience in buying being localised
(iv) After-sales service
(v) Credit facilities

(b) Types of Cash, Credit, Hire Purchase System and Instalment Payment System

Modes of Sale:

Cash Sale: Cash is the most common form of exchange in retail trade. Retailers sell their wares to most customers on cash basis. This is why retailers need comparatively lesser amount of working capital. General stores, Speciality shops, Street stall holders or itinerant traders – all sell their goods on cash terms.

Credit sale: Credit sale is an accepted business practice in wholesale trade. Wholesalers generally sell their wares to retailers offering them variable terms of credit. The terms depend on quantity lifted by the retailer and their payment status. This credit facility is of great help to retailers.

Instalment or hire purchase sale: Under these systems, purchase and sale of goods is rendered convenient though it works out to be little costly as the purchaser has to bear the cost of purchase i.e. interest on outstanding amount.

Difference between Instalment and Hire Purchase modes of sale:

1. Ownership: Ownership of goods are transferred only after final payment in hire-purchase system. Under instalment system ownership is passed immediately on signing the agreement for sale.
2. Termination: Under hire purchase, the hirer has right to terminate the purchase anytime but in instalment sale the buyer can only terminate the contract after final payment as ownership has already been transferred.
3. Default: In case of default under hire purchase the asset is transferred to the seller and previous payments are forfeited. But under instalment the asset is returned to the seller in case of default and the buyer has the right to receive back payments already made.

CBSE Class 10 Elements of Business Unit IV: Selling and Distribution – Completed

The following topics have been completed in Unit IV: Selling and Distribution:

(a) Concept of purchase and sale
(b) Types of Cash, Credit, Hire purchase system and Instalment payment system