Trading Company: Definition, Characteristics, Types, and Examples of Trading Companies

In general, the meaning of a trading company is a form of company engaged in the trading of goods, where the main activity is buying, storing and reselling merchandise for profit without adding value to these goods.

In other words, a trading company (trading company) buys an item with the aim to resell it at a higher price without adding value to the item. In this case what is meant by providing added value is processing, changing the shape / nature of the goods so that the selling value is higher.

The profit obtained by the company is from the difference in the price of buying and selling goods. There are several types of goods that are traded including;

• Raw material
• Semi-finished goods
• Finished goods
• Commodity goods
• Industrial goods

Also read: Understanding Company

Characteristics and Characteristics of a Trading Company

A form of company can be recognized by its characteristics and characteristics. The characteristics and characteristics of companies engaged in trading are as follows:

1. Its main activities are buying, storing and reselling merchandise.
2. The company does not carry out the production process for the goods sold.
3. The profit earned comes from sales less purchasing costs and operating costs.
4. The form of business undertaken is to buy and resell merchandise without any processing.
5. Accounting activities at this company use the inventory account, where the calculation of the cost of goods sold and the income statement uses single step and multiple step forms.

Also read: Manufacturing Companies

Types of Trading Companies

In general, there are two types of companies engaged in trading, namely:

1. Based on the Empowered Products

• Production Goods, namely companies that trade products in the form of raw materials as basic materials for making products or production equipment to produce new products. For example; lathes, threads, logs, and others.
• Finished Goods, namely companies that trade finished products or products that are ready for use by consumers. For example; clothes, television, tables and more.

2. Based on the type of consumer

• Large Companies (Wholesaler), namely companies that buy products directly from factories in large quantities, and how to sell them in large quantities as well. For example; wholesaler.
• Intermediary Companies (Middleman), namely intermediary companies that buy merchandise in large quantities and resell them to retail companies in moderation. Example; wholesaler sub traders.
• Retail company / retailer (Retailer), which is a company that deals directly with the end consumer where consumers can buy goods at retail. For example; supermarkets, kiosks, stalls.

Also read: Service Companies

Main Activities of Trading Companies

This form of company has several main activities that are interrelated with one another. Referring to the definition described above, the main trading business activities are as follows:

1. Purchasing, which is a company activity that includes purchasing company assets, purchasing merchandise, and purchasing other goods for business activities.
2. Spending money, namely the activities of companies that spend money to buy goods / services, pay taxes, pay debts, and other purposes related to business activities.
3. Sales, namely the activity of a company selling trade goods to obtain income or profit.
4. Money acceptance, namely company activities related to the sale of goods. The sale of goods will be accompanied by the receipt of money obtained from payments, repayments, receivables, sales of goods, and others.

Example of a Trading Company

There are many examples of trading companies around us, including the following:

Also read: Definition of Stakeholders

This is a brief explanation of the definition of a trading company, its characteristics, types, and examples. Hopefully this article is useful and adds to your insight.