Almost all community activities cannot be separated from trading companies and have transacted at these companies.
This is because the activity of trading or commerce is ingrained and has become a culture of society.
If you have ever met a stall or small shop around your neighborhood, that also includes a trading company, you know.
Then what exactly is meant by a trading company or trading company? What are the definitions and characteristics? And what are the types?
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Let’s see the full review in the following article!
What Is a Trading Company?
Trading company is a company that requires various types of products that are sold for consumer needs without changing the shape or form of the goods. There are many examples of trading companies, one of which is supermarkets and grocery stores that we often encounter everyday.
Initially, the company first purchases certain products, maintains inventories, and distributes these products to customers through transactions.
Its main activity is to resell goods that have been purchased without changing, modifying, or processing them so that the value and form of the goods change.
The company just needs to resell it by setting a higher price than the purchase price.
That’s where the trading company gets its profit, namely from the difference between the selling price and the buying price of the products that have been sold to customers.
Various Kinds of Trading Company
Basically, trading companies are classified into 2 types, including:
1. Trading Companies Based on Types of Products that are Traded
This type of company is divided into two categories, namely production or raw goods and finished goods. Here’s an explanation:
a. Production or Raw Goods Companies
As the name implies, this type of trading company is a company that trades products in the form of raw materials or raw materials. These materials are usually used as basic materials to make a product or production equipment.
From raw materials that are processed using special techniques and tools will later produce other products.
The company’s target is not ordinary people, but business or industrial sectors that require raw materials.
People rarely transact in this type of company because the goods that are traded cannot be consumed immediately, but must first go through a production process.
For example, companies for logs, glass powder, cotton fiber, lathes, chopping machines, and many more.
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b. Finished Goods Company
In contrast to raw goods companies, the products utilized in this type of company are finished goods which are the final product so they are ready for consumption. The target market can be from the business sector, government, community, and other companies that need finished goods. Such as textile, electronics, instant food and drink, and so on.
2. Trading Companies Based on Types of Consumers
Based on the type of consumers involved, trading companies are divided into several types. Including the following:
a. Wholesaler Company (Wholesale)
The first type of company based on the type of consumer is the wholesaler.
A wholesaler company is a type of trading company that buys products directly from factories on a relatively large scale.
These products are then resold in large volumes or quantities where they have a warehouse to store their product inventory which is usually managed with a warehouse application .
An example of this type of company is a wholesaler.
You can transact with wholesalers and buy certain types of products in large quantities to get cheaper prices than buying retail.
You can then resell these products to intermediaries who also need large amounts of stock for them to resell. All related matters that are taken care of for the distribution of goods are called Supply Chain Management .
Thus, the profit you get from selling these products is also greater.
b. Middleman Company (Trade Brokerage)
As the name implies, this type of company is in the middle position between wholesale companies and retail companies. Middleman companies are trading companies that buy products in wholesales and then resell them in moderate quantities to retail sellers, not directly to consumers.
An example of a middleman company is a sub-grocery trader.
c. Retailer Company (Retailer)
The last type of trading company based on the type of consumer is a retailer or retailer company. This type of company is a company that sells their products directly to consumers in retail or in units. These companies are most often found in the community around their environment and most frequently transact with level consumers end.
For example supermarkets or supermarkets, kiosks, stalls, minimarkets, grocery stores, and so on.
Characteristics or Characteristics of a Trading Company
There are several characteristics or characteristics of trading companies that differentiate them from non-trading companies.
This feature is the core process of this company, namely trading or commerce.
What are the characteristics?
- Its main activities are buying, selling, operating expenses, storage and stock maintenance.
- Do not carry out production processes that change the value or form of goods.
- Calculation of total profit, the benchmark of which is the difference between the total sales proceeds and the total purchase price and operational costs.
- Accounting activity, which means the company uses its merchandise inventory account, which includes HPP calculations, balance sheets and profit and loss statements.
Trading Company Main Activities
Apart from having special characteristics that are not owned by other types of companies, this company also has different and unique main activities or core processes.
The following is an explanation of what are the main activities carried out by a trading company:
1. Purchase
In this activity, the trading company buys various types of needs needed by the company. Such as assets or assets, and goods for sale.
2. Expenses
This core process is a company activity that includes various expenses related to the purchase of goods and services. For example, expenses for taxes, debt, experts, and other needs related to business activities.
3. Sales
This activity is the most core process of the trading company. Through sales activities, the company can obtain profits to then be turned back to buy and maintain stock of goods.
4. Receipt of Money
The last core process of this company is the activity of receiving money, in which the company receives a certain amount of money from various payments and settlements.
Trading Company Accounts in Accounting Reports
To be able to run the company well, of course, the trading company also carries out various accounting activities that are recorded in the financial statements.
In the report, there are several accounts to determine the progress of its business activities. The following accounts are owned by the trading company:
1. Purchase
Purchases account is used to record every transaction made by the company.
Purchase transactions that occur can be credit or cash (cash).
You can study the purchasing and debt SOP information system course to better understand the implementation of SI and SOP related to purchasing and debt management in companies.
2. Sales
This account serves to record various sales activities, both by debit and credit.
3. Returns
The function of this account is to record returns (returns) of some items that have been bought or sold due to defects, damage, or not according to the order. Return accounts consist of two types, namely purchase returns and sales returns.
4. Accounts Payable
The function of this account is to record returns (returns) of some items that have been bought or sold due to defects, damage, or not according to the order. Return accounts consist of two types, namely purchase returns and sales returns.
5. Cuts
Discount accounts are divided into two, including purchase discounts and sales discounts. As the name implies, the purchase discount account is used by the company to record deductions received by the company for paying off debts. Meanwhile, the sales discount account functions to record deductions from the settlement of company receivables.
6. Transport Load
The freight load account serves to record the freight load when shipping goods.
If you want to set up a trading company, then you will rely heavily on efficient inventory management due to the large sales volume and number of items.
The use of an inventory application that has complete features such as an inventory application and a warehouse application will greatly assist in managing your products, so you can save on operational costs.