Purchase and Sale of Goods | Jamb Commerce

Procedure and Documentation

1. Procedure in Trade Transactions: The series of steps followed in trade, from initial inquiry to final delivery and payment.
2. Documentation in Trade: A set of documents that ensures smooth and legal transactions between businesses in international trade.
3. Import and Export Documentation: The paperwork required for the import or export of goods, including invoices, certificates, and permits.
4. Role of Documentation: Ensures transparency, legal compliance, and smooth customs processing in international trade.
5. Legal Requirement: Certain documents are legally required to complete a trade transaction, such as a bill of lading or a certificate of origin.
6. Electronic Documentation: The growing use of electronic documents to streamline trade processes.
7. Standardization of Documents: International organizations like the International Chamber of Commerce (ICC) help standardize trade documents.
8. Customs Documentation: Documents needed for clearing goods through customs, including customs declarations and invoices.
9. Shipping Documents: Documents like a bill of lading that confirm goods have been shipped and are in transit.
10. Bill of Exchange: A financial document that demands the payment of a specific amount of money at a set date.
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Enquiry and Quotation

11. Enquiry: A request from a buyer to a seller for information regarding goods, services, prices, and terms of trade.
12. Quotation: A formal statement issued by a seller to a buyer specifying the prices, terms, and conditions of goods or services.
13. Written Quotation: A formal document that binds the seller to offer the quoted prices for a specified period.
14. Verbal Quotation: An informal offer made over the phone or in person, which may or may not be binding.
15. Validity of Quotation: The period during which a quotation remains valid, typically mentioned in the quotation itself.
16. Discounts in Quotations: Sellers may offer discounts in their quotations based on bulk purchases or promotional periods.
17. Request for Quotation (RFQ): A formal request sent by a potential buyer to obtain a price quotation from a seller.
18. Negotiation of Quotation: The process of negotiating the price, terms, and conditions after receiving a quotation.
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Order, Invoice, Proforma Invoice

19. Order: A formal request by a buyer for goods or services from a seller.
20. Purchase Order: A document sent by the buyer to the seller detailing the goods or services ordered, their quantity, price, and delivery date.
21. Invoice: A bill issued by the seller to the buyer, specifying the amount due for goods or services provided.
22. Proforma Invoice: A preliminary invoice sent by the seller to the buyer before the actual sale, detailing the expected cost and terms.
23. Differences Between Invoice and Proforma Invoice: An invoice is a final demand for payment, while a proforma invoice is a pre-sale estimate.
24. Invoice Number: A unique number assigned to each invoice for tracking and record-keeping.
25. Description of Goods on an Invoice: Detailed information about the goods being sold, including quantities, unit price, and total cost.
26. Payment Terms on Invoice: Terms specifying how and when the payment for goods should be made, including payment methods and deadlines.
27. Tax Information on an Invoice: Information about applicable taxes (e.g., VAT, sales tax) included in the invoice.
28. Currency on Invoice: The currency used for payment, especially in international trade, often specified on the invoice.
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Statement of Accounts, Indent, and Consular Invoice

29. Statement of Accounts: A document that summarizes all transactions between a buyer and seller over a specific period, showing outstanding balances.
30. Indent: A written order from an importer to an exporter to supply goods, commonly used in international trade.
31. Consular Invoice: A document required by some countries, issued by a consulate, verifying the goods’ origin, description, and value.
32. Purpose of Consular Invoice: It helps customs authorities verify that the goods comply with local laws and trade agreements.
33. Verification of Goods: Consular invoices ensure the authenticity of goods and may be used for price verification by the authorities.
34. Invoice Fraud Prevention: The consular invoice helps prevent fraudulent practices by ensuring documentation authenticity.
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Bill of Lading, Certificate of Origin, and Consignment Note

35. Bill of Lading (B/L): A legal document that serves as a receipt for goods shipped, evidence of the contract of carriage, and a title of ownership.
36. Functions of Bill of Lading: Receipt of goods, contract of carriage, and title of ownership, which allows goods to be transferred.
37. Types of Bills of Lading: Includes straight bill of lading, order bill of lading, and sea waybill, depending on the terms of delivery.
38. Certificate of Origin: A document certifying the country of origin of the goods, often required for customs clearance and compliance with trade agreements.
39. Purpose of Certificate of Origin: Used to determine tariff rates and comply with trade agreements like Free Trade Agreements (FTAs).
40. Consignment Note: A document detailing the contents and handling instructions of goods being transported, serving as proof of shipment.
41. Importance of Consignment Note: Provides evidence of delivery and is used to settle disputes regarding the shipment.
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Terms of Trade and Discounts

42. Terms of Trade: The conditions under which goods are bought and sold, including price, payment terms, and delivery conditions.
43. Common Terms of Trade: Includes Incoterms such as C.O.D, F.O.B, C.I.F, and E.O.E.
44. Trade Discount: A reduction in price offered to buyers for bulk purchases or as part of a special promotion.
45. Quantity Discount: A discount given based on the volume of goods purchased, often applied in bulk purchasing.
46. Cash Discount: A discount offered to buyers for early payment of invoices, often used to encourage quicker payments.
47. Seasonal Discount: A price reduction given for purchasing goods at off-peak times or seasons.
48. Trade Discount vs. Cash Discount: A trade discount is based on purchase volume, while a cash discount is based on timely payment.
49. Freight Discount: A reduction in the cost of transportation offered by the seller or shipper.
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C.O.D, C.I.F, F.O.B, E.O.E

50. C.O.D (Cash on Delivery): A payment term where the buyer must pay for goods at the time of delivery.
51. C.I.F (Cost, Insurance, and Freight): An Incoterm indicating that the seller is responsible for the cost, insurance, and freight to deliver goods to a specified destination.
52. F.O.B (Free on Board): A term of trade indicating that the seller delivers goods to a port, and the buyer takes responsibility for transport costs and risks thereafter.
53. E.O.E (Ex-Works): An Incoterm where the seller makes goods available for collection at their premises, and the buyer bears all costs and risks from there.
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Terms of Payments, Legal Tender, and Credit

54. Terms of Payment: Specifies when and how payment will be made, including payment schedules, methods (e.g., cash, bank transfer), and any discounts.
55. Cash – Legal Tender: Currency that is legally recognized by the government as a valid method of payment for goods and services.
56. Credit: The ability of a buyer to receive goods or services before paying, based on an agreement to pay later.
57. Types of Legal Tender: Includes coins, paper currency, and electronic money that can be used to settle debts.
58. Credit Transactions: When goods are provided to a buyer on the promise of future payment, often with interest charges.
59. Interest on Credit: The cost of borrowing money for trade transactions, usually calculated as a percentage of the amount owed.
60. Credit Limit: The maximum amount of credit extended by a seller or lender to a buyer or borrower.
61. Credit Rating: An assessment of the buyer's ability to repay credit based on past financial behavior.
62. Credit Terms: The conditions under which credit is extended, including repayment period, interest rates, and penalties for late payments.
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Types and Functions of Legal Tender

63. Paper Money: Banknotes issued by governments as a form of legal tender for transactions.
64. Coins: Physical currency minted by the government and used as legal tender.
65. Electronic Money (E-Money): Digital money used in electronic transactions, including online payments and transfers.
66. Role of Central Bank: Central banks issue legal tender and regulate monetary policies in most economies.
67. Monetary Policy: Government policies regulating the supply of money to control inflation and economic growth.
68. Legal Tender in International Trade: Legal tender in one country may not be accepted in another, which is why currency exchange is often needed.
69. Digital Payments: The growing use of credit and debit cards, mobile wallets, and online bank transfers as legal tender in modern trade.
70. Convertible Currency: Currency that can be easily exchanged for another currency in the foreign exchange market.
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Merits and Demerits of Credit Transactions

71. Merit – Flexibility for Buyers: Credit transactions allow buyers to purchase goods without immediate cash outlay.
72. Merit – Increased Sales: Sellers can increase their sales by offering credit terms to buyers who may not have immediate cash.
73. Merit – Building Buyer-Seller Relationships: Credit transactions help establish long-term relationships between buyers and sellers.
74. Merit – Capital Management: Credit allows businesses to manage their working capital more efficiently, freeing up cash for other investments.
75. Demerit – Risk of Non-payment: Credit transactions involve the risk that the buyer may not be able to pay, leading to financial loss.
76. Demerit – Administrative Costs: Managing credit transactions requires additional administrative work, such as credit checks and debt collection.
77. Demerit – Interest Charges: Buyers may incur additional costs in the form of interest on unpaid credit balances.
78. Demerit – Credit Limits: Buyers may face limitations on the amount of credit available, restricting their purchasing ability.
79. Demerit – Increased Financial Strain: Prolonged credit terms can lead to financial strain on both buyers and sellers.
80. Demerit – Potential Bad Debts: Sellers risk non-payment from customers who default on credit agreements.
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Additional Key Points

81. Trade Credit Insurance: Protection against non-payment for credit transactions, often provided by third-party insurers.
82. Letter of Credit (L/C): A document from a bank that guarantees payment to a seller when certain conditions are met.
83. Cash Flow Management: The ability to manage inflows and outflows of cash, which is essential when offering credit.
84. Debt Collection: The process of pursuing payment from buyers who have not paid their credit bills within the agreed terms.
85. Overdue Payments: Payments that are past the due date, often subject to penalties or interest.
86. Credit Terms Negotiation: The process by which buyers and sellers agree on the terms of a credit transaction.
87. Collateral in Credit Transactions: Assets pledged by a borrower as security for a loan or credit transaction.
88. Credit Risk Assessment: The process of evaluating the financial stability of a buyer before extending credit.
89. Cash-on-Delivery (C.O.D.) as a Risk Management Tool: Used by sellers to mitigate the risk of non-payment for goods delivered.
90. Default on Credit: The failure of a buyer to repay credit within the stipulated terms, leading to possible legal action.
91. Personal Guarantees: When an individual agrees to be personally responsible for repaying a business’s credit debt.
92. Secure Credit: Credit that is backed by collateral to reduce the risk of loss for the lender.
93. Unsecured Credit: Credit extended without any collateral, carrying a higher risk for the lender.
94. Revolving Credit: Credit that can be used, repaid, and reused up to a specified limit, commonly used in credit cards.
95. Credit Agreement: A formal contract between the buyer and seller detailing the terms of credit extended.
96. Credit Monitoring: The process of regularly checking the buyer’s ability to meet credit obligations.
97. Open Account Credit: A form of credit where goods are shipped without requiring immediate payment, with terms for future payment.
98. Invoice Financing: A type of short-term borrowing used by businesses to raise funds based on the value of their unpaid invoices.
99. Trade Credit: A form of credit offered by suppliers to buyers, allowing payment at a later date.
100. Consumer Credit: Credit extended to individuals for personal consumption, including loans and credit cards.

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