Purchase and Sale, Concept of Purchasing and Selling, Step Consider Before Production Purchase and Sale on Cash and Credit Basis (For CBSE, ICSE, IAS, NET, NRA 2022)

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Purchase and Sale

In our routine life we require several things to satisfy our needs and wants. These are all available in the market for sale and can purchase them as and when we need them. Similarly, in business, all business enterprises are engaged in purchasing things like raw materials, machinery, etc. for production; land, building, furniture, stationery, computer etc. for office premises; and so on. Business enterprises are also engaged in selling the goods and services they produce. purchase and sale are two essential activities that take place around us.

Meaning of Purchase and Sale

  • Purchase is a process through which a person gets the ownership of some goods or properties transferred in his name from another, on payment of money.
  • Sale is a process through which the ownership of some goods or properties is transferred from one person (seller) to another person (buyer) , for a price.
  • Sale and purchase always go together. Whenever there is a sale, there is also a purchase and vice versa. So, basically in every sale and purchase there exist two parties. The first party who sells is known as the ‘seller’ , and the other party who buys is known as the ‘buyer’ .
  • We find that in every sale and purchase the buyer pays money to the seller for buying goods or services for his use or consumption and the seller accepts money and thereby gives up his right over those goods and services. In this process the buyer either pays money immediately or at a later date.


Objectives of purchase and sales are as given below,

Objectives of Purchase and Sale

Concept of Purchasing and Selling

Businessmen produce goods or services for others՚ use. People buy those goods and services for a price and thus, the businessmen earn money from them. This money needs to be more than the amount spent in producing the goods and services. That is how a business can earn profit. Profit is the reward for risk-taking by businessmen and it is also the return on capital invested by them. So, it is required that the goods and services produced by business enterprises must be sold. Sale of goods is thus necessary for the very existence of business and its growth over time. Buyer needs to consider following before purchase.

Step Consider by Buyers Before Purchase

Step Consider Before Production

In order to sell goods and services something more needs to be done before production is undertaken.

Step Consider Before Production

Purchase and Sale on Cash and Credit Basis

Purchase and sale can be on cash or credit basis. If the buyer pays the price immediately while taking delivery of goods it is known as cash purchase. If the buyer is unable to make payment while taking delivery of goods and requests the seller to give him some time for payment say 15 days or 30 days and seller accepts the same this is known as credit purchase.

In today՚s competitive environment seller cannot afford to stick to cash sales only. While selling goods on credit the seller should ensure the creditability and the paying capacity of the buyer.