Meaning Of Buying And Selling: Procedure And Methods Of Buying And Selling

Meaning Of Buying And Selling

Business Studies

Topic: Buying And Selling

Table Of Content

  • Meaning Of Buying And Selling
  • Procedure For Buying And Selling
  • Methods Of Buying And Selling

What Is Buying And Selling?

Buying and selling involves trading of goods. By reading through this article, you will understand every part of buying and selling.

Procedure For Buying And Selling

There is no stated or stereotyped procedure for buying and selling of goods. The procedure adopted by any company depends on the system it operates.

However, procedure for buying and selling is discusses under two headings. Procedure when goods are sold by cash and procedure when goods are sold on credit.


Cash sales takes place when payment for goods is made in full at the time of sale. In cash sales, after negotiating for the goods to be bought, the buyer pays cash and parts with the goods. Small retailers such as sole traders usually sell by cash. The goods normally sold on cash basis are edibles sold by small retailers such as: Vegetables, yam, beans, salt, pepper, etc.

Other commodities such as clothes, shoes, and household goods are also sold by cash.

When payment is made by cash for goods earlier purchases on credit, the seller gives a cash receipt to the buyer.

A receipt is a document issued by the seller who has earlier sold goods on credit to the buyer as evidence that cash has been received from the buyer for the goods bought or services enjoyed.

Cash Register:

When cash sales are made, the seller would record the particulars of the sales in his cash register.

A cash register is therefore a book where the seller records his daily sales by cash. It contains the date of sales, description of goods sold, amount of the goods sold and total sales for the day. It does not contain the name and address of the buyer.


Deferred payment refers to sales other than cash. That is where the buyer is allowed to part with the goods without making payment on the spot. Deferred payment can be divided into three which are:

a. Credit Sales
b. Hire Purchase
c. Lease

a. Credit Sales

In a credit sale transaction the buyer parts with the goods without paying cash on the spot. He may pay part of the invoice price on the spot. The amount of the credit is paid on a later date agreed with the seller at the time of the transaction. The most important feature of credit sale is that once the transaction is completed the goods become the property of the buyer.

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The seller cannot reposses the goods if the buyer fails to pay at the agreed time. He can sue to get his money paid to him but cannot sue to recover the goods this can be contrasted with Hire Purchase.

b. Lease

Under lease arrangement, the goods, usually industrial equipment of high value, is delivered to the user (lessee) for a periodic rental pay monthly. These rents are paid as long as the lessee holds the equipment.

Majority of lease arrangement leaves the lessee with the option of buying thr equipment after some amounts of rents has been paid. If the lessee exercises his option to buy, the equipment becomes his own. If he chooses not to buy, he returns it.

The important thing is that the lessee enjoys the use of the equipment, which he could not have been able to buy.

c. Hire Purchase

Hire purchase is a type of credit sale that enables the hire purchaser to make use of the goods being purchased when he has not fully paid for it.

In a hire purchase transaction the buyer pays on the spot a small part of the hire purchase price or any initial amount agreed. He is allowed to part with the goods and start using it as if it is his own.

Agreed monthly or periodic installments is paid by the buyer until the full hire purchase price is paid.

On the payment of the last installment, a purchase invoice is issued making the goods the property of the buyer.

Until the last instalment is paid the goods is not the property of the buyer. That means that the seller can take back the goods if the buyer defaults in paying any of the installments.

Goods that are usually sold in this way are durable and costly goods like motor vehicles especially transport vehicles industrial plant and machinery. Installments are paid from income derived from the transport business.

Other goods sold in this way include, Television set, Electric Generating sets, Industrial machines etc.


Equity arises if the buyer has paid greater part of the hire purchase price and defaults payment. The goods are recovered or repossessed by the seller.

Under the legal rule of Equity the seller should sell the goods, and take the instalment not yet paid by the buyer. Under this rule he should return to the buyer the amount remaining in the sales proceed after the seller has taken his money.

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Methods Of Buying And Selling

For a transaction to take place, buyer and seller must come together either physically or otherwise to negotiate for the goods to be bought.

There are various methods by which this negotiation can be done irrespective of whether it is a cash or credit transaction. These methods are:

1. Selling by description or grading
2. Selling by sample
3. Selling by auction
4. Selling by inspection.

1. Selling By Description Or Grading:

Many products are sold by description or by grading. The producer or manufacturer usually describes the quality and quantity of such goods. We buy many products after reading their decription. We believe that the description is not misleading and simply make our purchase.

Most drugs are sold by description, The manufacturer describes the type of sickness which the drugs cures and the seller buys the drug based on the manufacturer’s description. Other commodities sold by description are: tinned food such as milk, fish, beverages, tin tomatoes, soap, detergent, etc.

At times, the seller may describe the quality and worth of the product to the buyer orally and based on the confidence the buyer places on the seller, he may buy the products. In order to convince the buyer that what the seller says is the truth he (the seller) gives the seller some days or weeks.

Certain captions placed on certain products explain the above points. “Bournvita, the vitality drink”, “Pen go quickly with pengo”, “Add magic to your cooking with maggi cube”, “Be refreshed with premier soap”.

On the other hand, goods may be sold according to their grades or qualities hence in certain commodities such as palm wine, palm oil, cashew nuts, etc.

They are displayed according to their grades. The best quality of them is descriped as grade A, in descending order the rest are graded B, C, D, etc. The price drops as the grade falls.

Selling by description and by grades are all related because in both cases emphasis is placed on quality of the goods.

2. Selling By Sample:

This is a method of selling whereby a small part of the goods are displayed to show how the rest look like as in the sale of some agricultural products such as rice, beans, cocoa, cashew nuts, etc. Ready-mde dresses such as gowns, jeans, shirts, trousers are also sold by sample.

After examining the samples by the buyer, he may then ask for the type, colour or even the size he wants.

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Sample sales is related to selling by grading for most of the times, commodities sold by grading are displayed first based on qualities and the seller, after examining the displayed goods takes a decision on the quality or grade to buy.

3. Selling By Auction:

Auction is a public sales whereby the goods are displayed for bidding by the public or a group gathered for that purposes. Finally, the goods will be sold to the highest bidder, as in bazaar sales.

The person who conducts auction sales is called the Auctioneer. The Auctioneer is usually Licensed to perform as an Auctioneer.

During the sales, the auctioneer would raise the commodity for sale up or announce the name of the commodity or points at it if is bulky (as in the case of the house, vehicle or machine).

Then, he would ask the public or people who gather for that purpose tobid for the goods. Finally, the goods would be sold to the highest bidder (the person who offers the highest price).

Other goods that may be sold by auction are: second hand clothes, unserviceable vehicles, mortgaged houses, goods produced by a company whose sales does not move and which must be disposed etc.

Auction sales therefore involves goods which by all means must be disposed of no matter the price and not goods which must be sold at a target price.

4. Selling By Inspection:

This is a system or methods of selling whereby the buyer can negotiate and pay for thr goods after careful inspection of the goods to be bought.

In open-air market, virtually all the goods are sold by inspection. Though the inspection done in the open market, most times, is a sort of comparison with similiar products.

Goods are displayed in the market and buyers walk to and fro examing the goods, they look for the quality, type and colour which they want. During the inspection, if they find the one that appeals to them, they would stop to negotiate and consequently make a purchase.

Government and company’s excess assets, buildings owned by individuals, etc., are all sold by inspection.

In most cases, adverts are put in th newspaper or company’s notice board inviting the public to tender and a date is fixed when the assets or property will be inspected, after careful inspection of the products the buyers will decide on the price to offer.

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