THE SYSTEM OF SALES(CHAPTER I)

THE SYSTEM OF SALES
INTRODUCTION
CHAPTER I
WRITTEN BY:
SYED AQEEL RAZA
MASTER OF COMMERCE & ARTS

CHAPTER I
THE SYSTEM OF SALES 1-2
- BARTER SYSTEM 3-10
o Double coincidence wants
o Absence of common measure of value
o The lack of divisibility
o The problem of storing wealth
o Difficulty of deferred payments
o Problem of transpiration
- CURRENCY SYSTEM 11-17
o Local Currency
o Foreign Currency
o Banks and financial institutions
 Current Account
 Profit & Loss sharing Account
 Foreign Exchange
- KIND OF BSUIENSS: 18-30
o Manufacturing
 Land
 Building
 Plant & machinery
 Furniture & Fixtures
 Office Equipment
 Other Assets
 Atmosphere
 Manpower
 Basic Facilities
o TRADING
o SERVICE BUSINESS:

TYPE OF BUSINESS ORGANISATIONS: 31-37
o Business Entity
o Sole proprietorship
o Partnership
o Companies/Corporations
o Franchise
o Non-profitable organization
- NATURE OF BUSINESS TRANSACTIONS: 38-39
o Cash Transactions
o Credit Transactions
INVOLMENT OF TRANSACTIONS: 40-41
o Sales Transactions
o Purchase Transactions
- TYPE OF SALES: 42-46
o Cash Sales
o Credit Sales
- KIND OF SALES: 47-53
o Consignment Sales
o Export Sales
- SALES ESSENTIALS: 54-6
o What is to sell?
o Where is to sell?
o Who is to sell?
o What are receivable and payable?

INTRODUCTION1
THE SYSTEM OF SALES
The sale means to exchange of goods or services for money
equivalent to the value of goods or services and the system
of sale which tells us how to sell and make arrangement to
sell product and services which we want to sell in the market
or to the person who requires it.
Everything is involving around need either of living or non-
living but non-living dependent to living things as water and
food are non-living but need for living. Animals fulfill their
needs by nature and have not any dwelling but we can say
that they are dependent on man and the man is the master
of them and because of it, he takes advantage from their
efforts means to use them in travelling, loading and eating
their meats as well as using their flash, skin, bone etcetera in
making wearing and of day to day thing and like this plants,
water and materials on earth are used by human and these
give benefits for human being and for getting benefit from
them, the man has to care by means of his wisdom and
thoughts. The God has given wisdom to man than others
and because of the reason he utilizes the materials found on
or in the Earth and gives different shapes and invention for
human’s need and when the man feels the need of his own,
he has to acquire by any means.
Anything has physical value comes from the system of sales.

INTRODUCTION2
The world consists with every type of people color wise,
body wise and face wise but has common in need as
they feel apatite and the apatite removes with food,
requires covering their bodies which are fulfilled by cloths
and like this many needs of the man which are in
common.
The man when did not know doing sale and had not
money for buying the goods needed to him but the
concept of it was different as the money is guaranteed by
the state of its value equivalent to the goods which buyer
wants to buy and in the time when money had no value,
the person who had need thing but had not with him he
had to acquire it from others and for getting them he had
to give thing which he had extra in need to him and from
this the way the need was exchanged to need and this
called barter system where goods or services are directly
exchanged for other goods or services without using the
medium of exchange.
Many systems of buying and selling are being made and
broken from the time of the ancient man and modern
man in this modern world wherein I shall discuss up to
possible mental approach on systems which I think
covers all the system for trading and selling the goods
and services;
The need makes the system of sales.

INTRODUCTION3
BARTER TRADE
The sale is changed by value.

INTRODUCTION4
Barter system
This is an old method of exchange goods and
services long before the currency was invented but
the use of it is coming back because of having more
sophisticated to aid in trading, for instance, the
Internet. In ancient times, this system involved people
in the same area, however, today barter system is
globalizing. This system does not involve currency
which is one the advantages and the value of the
items can be negotiated with the other party as the
trading in this manner is done through online auctions
and swap markets. A simple example of a barter
trading would be when a carpenter builds a fence for
a farmer and instead of paying the carpenter cash for
labor and materials, the farmer could give him
foodstuff equivalent to the worth of cash.
Due to lack of money, bartering became popular in
the 1930s during the Great Depression. It was used o
obtain food and various other services. It was done
through groups of people who acted similarly to
banks. If any items were sold, the owner would
receive credit and the buyer’s account would be
debited.
The changing of goods for goods is the barter system.

INTRODUCTION5
Everything has two aspects good and bad or
advantage and disadvantage and like this, there may
be advantages and disadvantage in bartering as;
A complication of bartering is determining how
trustworthy the person you are trading with him. The
other person does not have any proof or certificate
that they are legitimate and there is no consumer
protection or warranties involved. This means that
services and goods you are exchanging may be
exchanged for poor or defective items.
On the positive side, there are great advantages to
bartering as you do not need money to barter and
flexibility in bartering, for example, the related product
can be traded such as portable tables in exchange for
laptops, homes can now be exchanged when people
are traveling, which can save both parties money. For
instance, if your parents have friends in another state
and they need somewhere to stay while on a family
vacation their friends may trade their home for a week
or so in exchange for your parents allowing them to
use your home.
I think the barter system is the name of changing values for values.

INTRODUCTION6
The advantage of bartering is that you do not have to
make the part with materials items. Instead, you can
offer a service in exchange for an item. In bartering
two parties can get something they want or need from
each other without having to spend any money.
The advantages in bartering is summarizing as;
i. It is a simple system devoid of the complex
problems of the modern monetary system.
ii. There is no question of over or underproduction (or
of unemployment or over-hill employment) under the
barter system since goods are produced just to meet
the needs of the society.
iii. The problems of international trade, such as
foreign exchange crisis, adverse balance of
payments, do not exist under the barter system.
iv. There is no problem of concentration of economic
power into the hands of a few rich persons under the
barter system because there is no possibility of
storing the commodities.
Money is no problem in the barter system.

INTRODUCTION7
v. Personal and natural resources are ideally utilized to
meet the needs of the society without involving any
wastage.
vi. The barter system also reaps the benefits of division
of labor because it represents a great step forward from
a state of self- sufficiency hi which every man has to be a
jack of all trades and master of none.
The Barter system involves various difficulties and
inconveniences in discussing below:
DOUBLE COINCIDENCE OF WANTS:
Under the barter system, a double coincidence of wants
is required for exchange. In other words, the wants of the
two persons who desire to exchange goods must
coincide. For example, if person A wants to acquire
shoes in exchange for wheat, then he must find another
person who wants wheat for shoes.
Such a double coincidence of wants involves great
difficulty and wastage of time in a modern society, it
rarely occurs. In the absence of a double coincidence of
wants, the individuals under barter system are compelled
either to hold goods for long periods of time or to make
numerous intermediary exchange' ii order to get finally
the goods of their choice.
Two persons are required in bartering.

INTRODUCTION8
ABSENCE OF COMMON MEASURE OF VALUE
Even if it is possible to have the double coincidence of
wants, the absence of a common measure of value
creates a great problem because a lot of time is
wasted to strike a bargain. Since there is no common
measure in terms of which the value of a commodity
can be expressed, the problem arises how much
wheat should be exchanged for how many pairs of
shoes.
The absence of a common measure of value is a
problem in the barter system.
THE LACK OF DIVISIBILITY:
In a barter system, all the goods cannot be divided or
subdivided and require the equal value of the goods
which are bartering. For example, if the price of a
horse is equal to 10 shirts, then a person having one
shirt cannot exchange it for the horse because it is not
possible to divide the horse into small pieces without
destroying its utility.
The bartering requires the equal value of the goods.

INTRODUCTION9
THE PROBLEM OF STORING WEALTH:
In barter system, there is no money to purchase or sell
commodities and the commodities are the value of wealth of
an owner who uses to barter them and for which the owner
has to face the problem of storing his commodities which
may be whatsoever and if he stores for a long time, the cost
of storing has to bear the individual. The wealth stored in the
form of specific goods has fear to be looted, created jealousy
and enmity among the neighbors or relatives.
The wealth is in the form of goods in bartering.
DIFFICULTY OF DEFERRED PAYMENTS:
Under the barter system, future payments are written in
terms of specific goods which create many problems of
which Chandler has mentioned three such problems:
a. It may create controversy regarding the quality of goods
or services to be repaid in future.
b. The parties may be unable to agree on the specific
goods to be used for repayments.
c. Both parties run the risk that the goods to be repaid
may increase or decrease in value over the period of
the contract.
The future payment is made under goods for goods.

INTRODUCTION10
PROBLEM OF TRANSPORTATION
The difficulty in barter system is that goods and
services cannot be transported conveniently from one
place to another. For example, it is not easy and
without risk, for an individual to take heaps of wheat
or herd of cattle to a distant market to exchange them
for other goods with the use of money, the
inconveniences or risks of transportation are
removed.
The movement of goods is another problem in bartering.

INTRODUCTION11
CURRENCY SYSTEM
Currency is the best replacement for goods.

INTRODUCTION12
CURRENCY SYSTEM
The barter trade is a system where the value of goods
or services is exchanged between two persons but
the currency system is the replacement of it wherein
the currency is guaranteed by the state. The currency
donates the value of the goods which is being sold by
the seller and the purchased satisfies that which he
purchased is equivalent to the value of the goods.
The satisfaction of values between buyer and seller
under currency system is the replacement of
bartering.
Currency including coins and paper notes which is
issued by a government and circulated in the country
in the form of money used as a medium of exchange
for goods and services. The currency has the value
equivalent to the value of goods and services which
are buying and selling under guaranteed by the
government.
Each country has its own currency which specifies to
a nation. The central bank of a country has the sole
right to issue currency notes and coins for circulation.
The currency is the measure of assessing the value of goods.

INTRODUCTION13
LOCAL CURRENCY
A local currency is a currency that can be used in the
country where it has been issued and the central bank
of it has given the guarantee of its value. The local
currency works as a complementary currency to a
national currency aims to spend within a local
community, especially with locally owned business
which is usually not legal tender.
The local currency has the boundary.
FOREIGN CURRENCY
A foreign currency is a currency print in a different
country not to be used to buy goods and services in
any country other than the one in which it is printed. In
case of buying and selling of goods, it exchanges in
the country where it will be spent according to foreign
currency rate of the day.
The foreign currency is outsourcing currency.

INTRODUCTION14
BANKS AND FINANCIAL INSTITUTIONS
An institution that issues currency notes and coins for
country’s economic and under which sub-banks
provide the great varieties of financial services to its
customers under which customers keep their money
in banks with an agreement and banks hold money on
behalf of their customers, which is payable to them on
demand either by appearing at the bank for
withdrawal or by writing a cheque to a third party.
Banks use the money of their customers in loans to
businesses and individuals to pay for operations,
mortgages, education expenses and any number of
other things and perform other services for a fee.
The banks are empowered by law to receive deposits
in cash or cheque, make loans, and issue promissory
notes payable to the bearer, known as bank notes.
Bank provides different types of accounts to their
customers according to their investment.
Businessmen and individuals open their accounts to
operate cash according to their requirement;
The controller of currency is said to the financial institution.

INTRODUCTION15
Current Account
The current account is mainly opened for the business
man or by the individual who wants to deposit and
drawing money from a bank without interest. It is also
known as demand deposit account.
In current account, the amount can be deposited and
withdrawn at any time without giving any notice to the
bank.
The main features of current account are as follows;
- The current account is operated to run a business.
- It is a non-interest bearing bank account.
- It needs higher minimum balance other than the saving
account.
- The penalty is charged if minimum balance is not
maintained in the current account.
- It charges interest on the short-term funds borrowed by
the bank.
- It does not promote the habit of saving to its account
holders.
- The main objective of the current account is to provide
smooth working to businessmen.
- There is no restriction on a number of deposits and
withdrawal.
- The bank does not pay interest on current account.
No profit and no loss is the characteristic of the current
account.

INTRODUCTION16
PROFIT & LOSS SHARING ACCOUNT
Profit and loss account is opened for all individuals
and businessman with any amount and there is no
minimum balance requirement.
The main features of profit and loss account are as
below;
- it is interest-bearing bank account and according to
it if the bank goes in profit it will give interest to his
account holders and in case of loss, the loss will be
shared.
- It needs no higher minimum balance as compared
with the current account.
- It promotes habits of saving to its account holders.
- The bank restricted to its account holders in case of
withdrawals over the limit.
The current account and profit and loss sharing
account are the examples of the accounts dealing
with currencies in businesses. Besides these
accounts may other accounts and financial products
are selling by banks and financial institution.
The current and PLs accounts support businesses and individuals.

INTRODUCTION17
FOREIGN EXCHANGE
Foreign exchange is the conversion of the currency of
a country into another country. The value of any
particular currency is determined by market forces
based on trade, investment, tourism, and geopolitical
risk.
Foreign exchange plays an important role in buying
and selling from outside countries and a medium of
payment and receipt.
Above all, the purpose of explaining the above is that
the money or goods of any kind involve in buying and
selling and everyone concerns about the currency
and goods. One who will sell gets money in return
and will have to keep money with him or in banks. If
he involves in daily in and out business he can keep
money with him but one has a large business, he will
have to keep his money in banks.
Foreign Exchange just like works bank but outsource currency.

INTRODUCTION18
KIND OF BUSINESSES
There are three types of businesses in physical
wherein manufacturing, trading and services are in
practice but the purpose of each business is to make
a profit on its investment and efforts. Trading and
manufacturing business requires capital to start a
business but services business does not require
capital but requires efforts.
Manufacturing, trading, and services businesses are
attached to each other.

INTRODUCTION19
MANUFACTURING
Manufacturing is the month of traders and service providers.

INTRODUCTION20
MANUFACTURING
The term of business “manufacturing” describes the
business engaged in producing merchandise most
commonly applied to industrial production in which raw
materials are transformed into finished goods on a large
scale. Such finished goods may be used for other
manufacturing concern or sold to wholesalers,
wholesalers, in turn, sell them to retailers and retailers
sell to end users.
The manufacturing is the only profession which involves
another kind of business; trading and services. If a
manufacturing concern makes something that has to
require manpower and manpower concerns with services
business and besides manpower it engages in different
types of services during the process of manufacturing
like the manufacturing concern has land, building, and
machinery and to maintain them it has to take advice and
services with concerned departments and persons who
charge professional fee and professional fee comes to
services business and like this after making products, the
step of selling them out, it has to contact customers who
sell the products of manufacturers in local and foreign
market.
The life has made easy by manufacturing.

INTRODUCTION21
REQUIREMENTS OF MANUFACTURING BUSINESS
LAND:
The land is required mostly in manufacturing
concerns producing the raw material or convert raw
material into finished goods for the home country and
out countries and having huge production, labor,
materials, and process.
Banks offer loan mark up or on demand finance
against mortgage of land to assess the market value
of the land.
The land for manufacturing has no value with basic facilities.
BUILDING:
After purchasing of land, the building is needed to be
constructed and designed according to the nature and
work of business keeping in view all the aspects of
health and safety of workmen.
The expenses on the construction of a building are
capital expenditure, and capital expenditure is
converted into an asset as Building Account. Money
spending any kind of all repairs and maintenance on
the building is charged as expenses.
The building plays the main role in manufacturing.

INTRODUCTION22
PLANT AND MACHINERY
There will be needed to have plant and machinery to
run any manufacturing concern according to the
nature and work of business after acquiring land and
building.
Money spending any kind of all repairs and
maintenance on plant and machinery is recorded as
expenses.
No manufacturing is considered with machinery.
FURNITURE AND FIXTURES
Furniture and fixtures according to the nature and
work of business are also required in any concern
after acquiring land, building and plant and
machinery.
The furniture is the jewelry of building.

INTRODUCTION23
OFFICE EQUIPEMENT
Office Equipment like typewriters, computers, printers,
fax machines, etc. are also required to control and run
any concern according to the nature and work of the
business.
Office equipment supports communications.
OTHER ASSETS:
Other assets are a group of accounts of minor value
adding during business operation to avoid lengthiness
in the system of accounting. Like land, building, plant
& machinery, Furniture and fixtures and office
equipment there may be other assets like Air
Conditioning unit, generator, power factor, tools,
vehicles etc.
The name of a group of assets is other assets.

INTRODUCTION24
ATMOSPHERE
The atmosphere of the region where the
manufacturing industry is setting up must be
according to the product.
MANPOWER
The manpower plays an important role in
manufacturing, if the labor will be easily available from
nearby areas, the cost on them will come low and
because of which the cost of the product may be able
to fight the market.
BASIC FACILITIES
The basic facilities like electricity, water, gas,
communication etc. in manufacturing business are
required which affect the cost of the product.
Atmosphere, manpower and basic facilities are the main
requirements for manufacturing.

INTRODUCTION25
TRADING
Buying and selling is the name of trading.

INTRODUCTION26
TRADING
The term of business “trading” describes the business
engaged in purchasing and selling of commodities usually
defined two kinds of business wholesale or import & export
who maintain a stock and deliver their products to shops or
large end customers.
This type of business relates to commodities and in trading
business, traders purchase commodities from manufacturer
or importer and sale to wholesaler or retailer in profit.
In trading business many aspects of trading may be therein;
- The trader has to invest his capital and from this capital, he
purchases goods and sale to others for profit.
- The trader sells commodities on the commission to link
business parties. This business is called Commission
trading.
- The trader gets commodities on credit and pays the amount
after the sale it is called credit trading.
- A trading in which trader holds commodities and searches
parties, on getting parties he picks up the commodities on
credit and/or on cash and sale it out at his own price.
Nowadays, trading on the internet is flourishing. Any trader
can find out parties to trade his products.
The trading relates to commodities.

INTRODUCTION27
SERVICES BUSINESS
No business is possible with services business.

INTRODUCTION28
SERVICES BUSINESS
The term of business “service” describes work that
supports a business but does not produce a tangible
commodity. In economics, a service is an intangible
commodity. The business engaged rendering their
skills or mechanical/technical services to his
customers such as dry cleaner, Machinery repairers,
accountants, advocates, auditors, doctors etc.
Everyone is doing service.

INTRODUCTION29
Manufacturing is the process of making goods or
products from raw materials acquired locally or from
abroad. This process involves land, building, plant
and machinery, laborers and complete system of
administration and sells to traders on cash or credit.
This type of business belongs to the trading business.
In trading business, traders acquire goods or
commodities on cash or on credit from the
manufacturers and sell to a wholesaler, retailer or end
user. The trading business concerns with a
manufacturing business.
No capital involves in services business but efforts or
skill works to earn. Service business involves in
manufacturing and trading. A man employed to work,
technician repairs machinery, and a worker involves
in manufacturing, a man to sell products, a consultant
or legal advisor gives advice are providing services.
The manufacturer makes products, service provider
involves in it and trader does trade with it.

INTRODUCTION30
If to see then manufacturing, trading and services
business involves each other in the whole system as;
Manufacturing business produces products, sells
goods to traders and acquires manpower from
services business for doing manufacturing process.
The trading business sells goods to the customer,
goods come from manufacturing and selling requires
manpower by services business.
Service business provides technical support or
manpower to manufacturing and trading business to
work.
Therefore, it may be said that manufacturing, trading,
and services are connected with each other in every
respect.
A product which we purchase is because of the
manufacturer, service provider and traders.

INTRODUCTION31
TYPES OF BUSINESS ORGANIZATION
There is need of an organization for operating of
different nature of business and job. A business
organization may be defined as single individual or
group of persons having the talent of different natures
in order to provide goods and services to make a
profit.
BUSINESS ENTITY
Business entity means a business, division, unit or
another aspect of an organization. For example, a
company with different divisions of the business might
define each division as an entity. Also, each
department or team within an organization might be
its own entity. A product can be an entity, as well as a
company's investments or assets.
The owner and the business are two separate entities
such as owner as capital and the accounts,
maintained by an accountant is related to him and
business is other.
Everyone and everything on its own is the entity.

INTRODUCTION32
Actually, in business, the sense of organization is a
business unit operated by one person, two or more
persons making firm, concern, enterprise, company.
The main types of business organization are;
a) Sole Ownership
b) Partnership
c) Companies/Corporations
d) Franchises
e) Non-profitable organizations
SOLE OWNERSHIP
This is a business owned by one person who provides
capital for the business and usually directs and
supervises its activities. The owner of the
firm/organization is known as “sole trader” who is
responsible for all losses and profits of the business.
The business is owned by one person is sole ownership.

INTRODUCTION33
PARTNERSHIP
A partnership in business occurs when two or more
persons carry on business in common with a view to
making a profit and every investor is called “partner.”
The firm itself is called “partnership. The partners
usually provide the capital and direct and supervise
the activities of the business or by anyone who will act
for all or by an employee. The investment or working
of each partner may be equal or not equal on the
basis of profit and loss sharing ratio.
Two person affiliations in business make the partnership.
JOINT STOCK COMPANIES
The joint stock company is an organization, whose
capital is contributed by several persons who owned
under Companies Act 1984. The investors are called
“Shareholders/Stockholders.”
Joint stock companies deal with capital.

INTRODUCTION34
PRIVATE LIMITED
The Private Limited Company consists of not less
than two persons and more than fifty persons. A
private company must have the word limited (Ltd.)
included in its name. The shares in this type of
company cannot be offered to the public for sale.
The company is usually owned and operated by
family members.
The private limited company is a family company.
PUBLIC LIMITED
The Public Limited Company consist a minimum
number of persons is two. However, there is no limit
as to the number of persons that can be in a public
company. It must have the word Public Limited
Company (PLC) at the end of its name. The company
can offer shares and debentures for sale to the
general public.
The public limited company shares to the public.

INTRODUCTION35
MULTINATIONAL CORPORATION
A multinational firm is one who owns controls and
operates enterprises in several countries in order to
increase market share and improve overall profits.
The parent company makes all the decisions which
are carried out by the management of the subsidiary
companies.
A multinational firm involves outsource countries.
STATE CORPORATION/NATIONALISED INDUSTRIES
The State Corporation or nationalized industries are
owned, controlled and managed by the government or
state. The main of the public corporation is to provide
specific goods and/or services that meet the need of
the country, at a reasonable price.
The State-owned industries are called State Corporation.

INTRODUCTION36
FRANCHISES
A franchise is a right sold by one person or firm called
a franchisor. It is another form of cooperation between
a big firm and a sole trader. In franchising, a well-
known company allows someone to buy the right to
use their trade names.
The potential franchisee pays to use the name,
products or services of the major company which
receives a lump sum and a share of the profits of the
business sometimes called royalties.
The franchisee receives the majority of profits, but
must also meet most of any losses. In addition to
allowing the use of their name, products, techniques
or services, franchisors usually provide an extensive
marketing back-up in return for the money they
receive.
Franchiser is authorized to use the right of other.

INTRODUCTION37
NON-PROFITABLE ORGANIZATION
The non-profitable organizations give services to poor
people on charity basis for which they are donated the
amount to operate their project by persons including
all classes.
A non-profitable organization is a business comes
under services. The board of directors is of it are
volunteers who are none paid and staff can be paid.
The source of their income is from donations and
grants.
Donations and grants are the sources of funds the in
non-profitable organization.

INTRODUCTION38
NATURE OF BUSINESS TRANSACTIONS
Any exchange of values is called “transaction “or the
process of doing business with another person,
company, etc. subdivided into cash transaction and
credit transaction.
Cash Transactions:
The transaction involves exchange of cash on the
spot on receipt or payment is called cash transaction
as;
- Purchase of Merchandise, Land, Building, Furniture
etc. on cash.
- Sold Merchandise, Furniture, Building, Equipment etc.
on cash.
- Services rendered on cash.
- Received cash.
The cash transaction is the immediate solution for sale.

INTRODUCTION39
Credit Transactions:
The transaction in which exchange valves involve but
cash payment of receipt is not made immediately and
to be made later is called Credit Transactions as;
- Purchase of Merchandise, Land, Building, Furniture
etc. on credit.
- Sold Merchandise, Furniture, Building, Equipment etc.
on credit.
- Services rendered on credit.
A credit transaction is made by the mutual
understanding between two persons.

INTRODUCTION40
INVOLVEMENT OF TRANSACTION
SALE TRANSACTIONS
A sale is the exchange of a commodity for money or service
in return for money or the action of selling something. If the
sale is made on cash basis known as “cash sales” and sales
under a certain understanding, on credit, known “credit
sales.”
Sales Return & Allowance
When a consumer is not satisfied with a product and expects
to receive the full amount paid for the product known as
Sales return or if the seller gets the claim from the consumer
about the defect, damage etc., and the seller allows some
rebate in the price of such goods it is known as Sales
Allowance.
Sales Discount:
Sales discount is a reduction in the price of a product or
service that is offered by the seller, in exchange for early
payment by the buyer or to increase sales.
Sales transaction may have return and discount.

INTRODUCTION41
PURCHASES TRANSACTIONS
The activity of acquiring goods or services for
business purchases. The purchases may be made on
a cash basis, if payment made immediately, “called
cash” purchases and later on called “credit
purchases.”
If any item of purchased returns due to certain
reasons are known as Purchase Return. If the item is
not according to sample or other reasons, the supplier
or seller cut short the price of such item known as
Purchase Allowance.
Purchase Discount:
Purchase Discount is the rebate amount allowed on
the purchase by the seller.
Purchase transaction may also have return and discount.

INTRODUCTION42
THE TYPES OF SALE:
All sales transactions require exchanging value in
shape of cash or equaling to it. The sale is the subject
that is changeable of its kind. It may be in cash,
credit, exchanging value of commodity equal to cash,
transferring stock for sale etc. but the aim of all is
same as to get cash.
Everyone invest money in business in anticipation of
getting profit from one’s investment and there is no
business without profit leaving the non-profitable
organizations that perform services and operate them
from donations and grants.
Cash sale and credit sale are the types of sale but
consignment sale is the technique of sale.

INTRODUCTION43
CASH SALE
Cash means present currency in shape of paper and
coins guaranteed by the State uses in any kind of
business and the cash which receives on the spot on
account of selling goods and services comes under
cash transaction and that cash which was not
received in the time of handing over the goods comes
under credit sale.
A cash sale is not the complete solution for business.
THE ADVANTAGES OF CASH SALE
- Cash received on the spot.
- Profit is sure.
- The goods once sold cannot be returned.
- The period of return has very short duration.
- It supports buying and selling.
- It is very suitable for small investors.
- The commodity is just like cash in hand.
The solution for business is to increase the volume of sale.

INTRODUCTION44
THE DISADVANTAGES OF CASH SALE:
- The price fluctuates.
- The cash discount has to allow.
- The sale is limited.
- Who purchases that has money.
- The stock is limited.
- The seller has to work according to his customers.
- The seller has to use different ways of selling his
product in cash.
Everything has well and bad why not a cash sale.
CREDIT SALE
Credit sales mean the commodity is delivered but not
cash is received. The party who purchased the goods
pays later under an agreement. The seller sells the
commodity at another price which is increased and by
which he covers risks of his receivables from the
parties because his money can also be drowned
because of some reasons.
Credit sale is made under an agreement.

INTRODUCTION45
THE ADVANTAGES OF CREDIT SALE:
- The price does not fluctuate.
- The cash discount has not to allow.
- The sale is unlimited.
- Who can purchase that has no full money.
- The seller does according to him.
- It has not discount.
Credit sales may increase the volume of sale.
THE DISADVANTAGES OF CREDIT SALE
- Cash is received later.
- Profit is not sure.
- The goods sold can be returned.
- The period of return can go up to the receivable.
- It does not buy and sell.
- It is not suitable for small investors.
- The commodity changes its place.
- It has a discount on early settlement.
- The receivable might be written off.
Credit sale is not suitable for small investors.

INTRODUCTION46
Cash sale and credit sales are both the part and
techniques of sales and the purpose of them is to sell
the product or services.
The sale has two different prices for the goods or
services as to cash price and credit price.
The seller has to use the different ways and style of
selling his products or services.
Cash sale and credit sales are the part of sales.

INTRODUCTION47
KIND OF SALES
CONSIGNMENT SALE
The consignment means the sending or shipping of goods to
an agent or reseller named consignee under an agreement
to pay the amount of the goods to the consignor or seller of
goods after the goods or products are sold. In consignment,
a consignor sends goods to the consignee who pays the
consignor only as and when the goods are sold. The
consignor remains the owner or title holder of the goods. The
consignor continues to own the goods until they are sold
because of the reason the goods appears as an inventory in
the accounting records of the consignor, not the consignee.
The consignment is made under stock transfer system
involving supply chain management and the supply chain is
a technique of selling commodities of chain supply
management involving distribution system of the
organization.
Then we can say that the consignment is an agreement
between the owner and agent wherein the goods or
materials are given over to another person’s charge, custody
or care on the risk of the sender but the owner retains the
legal ownership or title until the goods or materials are sold.

INTRODUCTION48
The agent sells the goods on behalf of the sender according
to his instructions. The agent is authorized to incur all
expenses to receipts, storage, and sale of goods or
materials.
The following terminologies are used in consignment
accounting;
CONSIGNMENT:
The consignment is an agreement of sending goods on
commission basis under sender’s risk and expenses. The
sender is the owner of goods and retains the legal ownership
of the materials which he sends to commission agent.
In consignment, the consign searches a suitable party in
another city or country and settles the terms and conditions
of sale. Suppose that Mr. A is the manufacturer of watches
and making them in Karachi if wants to increase his sale or
popularity of his product, he will go another city suppose that
Lahore and where he will find the dealer or shops they are
involved in selling watches. Mr. ‘A’ found Mr. D who are
doing this business and will say him that he is making
watches in his city and wants to keep them in his shop under
his risk and expenses and will pay commission over the sale.
The mutual agreement with A and D will make the
agreement which will be called consignment.

INTRODUCTION49
CONSIGNING:
The act of sending goods by the owner of the goods
to his agent in another city or place for the purpose of
increasing sale under commission is consigning. The
owner bears all expenses and losses of the goods.
CONSIGNOR:
The word consigner is used in place of the seller in
consignment agreement. The consigner is the
principal party who sends the goods on consignment.
CONSIGNEE: The consignee is another name of the
buyer or the party to whom the goods are sent for
sale on commission by the consignor.
COMMISSION:
The agreement of consignment refers to the
commission to the consignee on which he was agreed
to keep the goods of consignor on his shop and
generally it is worked out on the agreed percentage of
the gross proceed of sales.
Consignment is the technique of sales.
INTRODUCTION50

THE PROCEDURE OF CONSIGNMENT
The procedure of consignment discusses on;
DISPATCHES
The consignor dispatches or ships the agreed
quantity of goods or materials at his own risk and
expenses his agent called consignee under invoice
which is called pro-forma invoice.
The shipment is the other name of dispatch.
PRO-FORMA INVOICE:
The pro-forma invoice is an estimated invoice which is
sent by the consignor in advance of a shipment or
delivery of goods. It describes the kind and quantity of
goods, their value, and other important information
like weight and transportation charges. The pro-forma
invoice differs from a normal invoice and which does
not demand or request for payment.
The pro-forma invoice does not demand payment.

INTRODUCTION51
DEL CREDERE COMMISSION
The consignor expects the sale of goods from consignee at
as high a price as he can procure and for this service he
pays to consignee the commission at an agreed percentage
of the gross sale. If the consignee undertakes to bear losses
and bad debts in connection with credit sales, the consignee
is paid an extra remuneration known as DEL CREDERE
commission.
Del Credere commission is an extra remuneration.
DEL CREDERE AGENT
The DEL CREDERE Agent is a sale agent to whom the
goods are given under the agreement of consignment and
who undertakes the guarantee of his customers and gives
them the consigned goods on credit and in case of any loss
or bad debt, he compensates to the consignor and for this
work he charges extra remuneration or commission higher
than normal rates.
Sale Agent is called Del Credere agent.

INTRODUCTION52
AUTHORIZATION;
The consignee is authorized to do all necessary
expenses against receipts, storage, and sale of the
consigned goods which are usually met out of sale
proceeds.
In consignment, the consignee is authorized for all
necessary expenses.
ACCOUNT SALES
It is a statement which is prepared and sent by the
consignee to the consignor periodically showing him
to the goods sold, sale proceeds, the expense
incurred, commission payable and the net amount
due to the consignor.
Account sale is a statement sent by the consignee.

INTRODUCTION53
EXPORT SALES:
The international trade wherein goods make in one
country and ships to another country is called export
sale or trade.
The export of finished goods increases the
profitability of any country by means of applying raw
material and labors of its own and the return of
money in foreign currency grows country’s future.
In order to promote exports, the government allows
various incentives to the exporters as to duty drawback
account, the premium on Import/Export License account
which is recovered only when the claim is received or the
premium on the license is realized.
In export, goods or materials are sold via seaport or dry
port to a foreign country and who exports, is called
exporter. An exporter has to face freight charges, loading
unloading charges and agent service charges as well sales
tax and income tax therein.
The export of raw material is the sale of blood.
INTRODUCTION54

SALES ESSENTIALS
It is necessary to have the knowledge of sales essentials
that are what is to sell, where is to sell and who is to sell?
We know that there are three types of businesses and every
type of business has separate essentials but giving
something for something to someone is common in them.
What is to sell? Where is to sell? Who is to sell are sale essentials.
What is to sell?
The question “what is to sell?” describing us that we have to
something to sell to someone because there is no business
without anything either visible or non-visible. If a person
manufactures a product, he will have to acquire raw
materials, packing materials, and many more for giving his
product in finished form, a trader trades thing for thing and
provides service who have no materials but works on
materials using his techniques then he has thing means his
techniques and like this a doctor, engineer, pleader, etc.
provide their techniques on other materials and works. A
man who has an idea that he can make a thing new in the
market, his idea is sold and the buyer of it makes the idea
possible, then we can say that the idea and efforts are
saleable and they come in the services business.
Goods, ideas, efforts, goodwill, etc are to sell in sales.

INTRODUCTION55
Where is to sell?
The stock of sale needs the sale and sale questions that
where the stock is to be sold?
We know that the manufacturers or importers are the
sources of providing stock which they sell their stock to an
agent or sell directly through their set up.
The market is the main place of selling any product.
The materials and products are in different kinds of food,
chemicals, grocery, machinery, medicines and many other
things needs for living and like this the places of selling them
are in different kinds called markets which may be physical
market, non-physical, auction market, foreign market, black
market, knowledge market, financial market and many more.
The question remains that where is the market for a service
business?
Services are the business that has no particular market
because the market requires goods and for goods the place
of keeping it is necessary but the services business involves
in every type of market of any business and we can say that
there is no business without services business.
The sale has a place and has no place.
INTRODUCTION56

Who is to sell?
The business has goods and market but both
business and market question that who is to sell?
The products and services are of different kinds and
the markets for them are different from machinery
market, food market, medicine market, share market,
etcetera. The person who is making products or
having product is the person who is the first person
sells to the second person may be an agent, traders,
wholesaler, retailer or end user who keeps the
products in the market for selling may be called.
Like this, the service provider is who that become the
cause of performing sale of any kind.
Everyone involves in the sale.

INTRODUCTION57
The product or commodityof every type of business defers from each
other as in;
MANUFACTURING
The manufacturing is the business which involves in making
products from raw materials to finished products and the
process of manufacturing needs services and trading on its
own. This is the basic of sale which we have that will sell.
The manufacturing concerns play an important role in the
sale because the traders and service providers are
dependent on them.
The manufacturing requires raw material, packing material,
manpower and all other suitable facilities which can provide
the atmosphere for making the particular product. The land,
building, machinery, furniture etc. are the basic requirement
for manufacturing. The land must be at the place where the
manpower may be available or may come easily and utilities
like electricity, water, gas, and communication are in reach
because of which the cost of the product can fight the
market.
The manufacturer makes products in stock according to the
demand of the market and sends his stock to traders,
wholesaler, and the retailer or to end user.
The manufacturing is the source of what is for sale?
INTRODUCTION58

TRADING:
In trading, a trader invests money in stock and sells the
stock at his own price or on the price printed on products
given him by at discounted price from which he covers
his profit and expenses. The trader gets the product from
the manufacturer, importer, and distributor and sells it to
customer from his sale point or supply to shop or to end
users.
The essential for traders may be;
- Place for selling
- Merchandise
- Transport
- Sales-persons
PLACE FOR SELLING
The trader must have at first the place for selling where
he can store goods and show them to his customer. The
place for selling must be in the market for the product
which he is trading. The place for selling plays the main
roll in trading because a trader must have to see the
place where customers come, where his product is
required, where the market of its kind exist.

INTRODUCTION59
MERCHANDISE
The trading is not possible without having commodities or
merchandise because a person has something will sell
something. The merchandise is the value from which a
trader gets profit and operates trading cycle means
buying and purchasing.
TRANSPORT
The transport plays an important role in trading because
the trading concerns with goods and goods have weight
and space and to carry the goods a thing which can bear
the weight and space is required and for which the
transport is the best way of it. The trader can deliver the
product to others and can buy goods for next trading.
SALESPERSONS
The proverb “one and one is eleven” is proven in
business rightly because a man can do nothing as
nothing is made alone by one person.
The person who helps traders is called sales person and
by him, the traders sell and send products to shops or
customers.
The trading is not possible without commodity.

INTRODUCTION60
SERVICES:
Services is also an industry which provides skill and non-
skill powers to the business of manufacturing, trading
and on its own. This business has the special
characteristic that it has no concern with making product
and commodities but can work on products of other
giving its services. The services business has
techniques, skill, efforts and mental approach to
performing its guideline for any problem for anyone
against professional charges like consultants, advocates,
chartered accountant, commission agent etc.
Business is very difficult without services.
The services business requires that;
ASSESSMENT OF VALUE:
Services business is the business which has no
commodity and works on valuation that like an employee
is paid against the minimum wages assessed overall
expenses of the month for living which is fixed by the
State then the measure of assessing the value of an
employee is the standard of living. If a person who
performs work, he takes fee or charges against his
standard of living.
Value is measured by the standard of living in services.
INTRODUCTION61

.
What are receivable and payable?
The money recoverable from a customer whom goods
or services sold on credit is called account receivable.
The money payable to parties whom goods or
services purchased on credit is called account
payable.
Account receivable is the form of cash or liquid asset
which is recoverable from time to time for the party
and the amount which has been received in cash and
the balance which is in party’s account is still
receivable but expected to come also is cash.
Like account receivable, the account payable is also
the form of cash or liquid liability which is payable in
shape of cash to the parties from whom the goods
purchased.
Account receivable relates to current asset and
account payable to current liabilities and both have
some risks in receiving or paying.
INTRODUCTION62

The sale means the commodities or services of
economic value which are purchased by someone
and someone must receive the commodities or
services in good condition under-payment in cash or
in credit.
Although the sale is confirmed after receiving the
cash when in business some parties pay cash against
goods and some parties take goods and pay later but
in accounting the profit is confirmed when a sale
occurs and the goods delivered and the matter of
payment is between the seller and the purchaser. If
the purchaser does not pay the debt, the seller will do
credit party’s payable account and considers it
expense under debiting bad debt expense account.
The commodities which were sold may be returned in
case of any defect under mutual understanding. The
return of goods does contra effect on sale.
WRITER

THE SYSTEM OF SALES(CHAPTER I)

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