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Meaning of Purchase and Sale

Let’s understand what is meant by purchase and sale, their importance, and how they happen.

1. What is Purchase?

  • Purchase means a person gets the ownership of goods or property by paying money to someone else. The buyer becomes the new owner after paying.

Elaboration and Important Points:

  • When you purchase something, you pay money to someone and get the product or service in return.
  • Ownership means the right to use and decide about the goods or property.
  • Purchase only happens if there is someone who wants to sell.

Examples:

  1. You go to a shop, pay money, and buy a notebook. You are making a purchase.
  2. Your family buys a new house by paying the price. They become the owners.
  3. A company buys raw materials from a supplier to make products.

2. What is Sale?

  • Sale is the process where the owner (seller) transfers goods or property to another person (buyer) for money.

Elaboration and Important Points:

  • Sale happens when a seller is willing to give his goods to the buyer in exchange for money.
  • After the sale, the seller does not own the goods anymore.
  • Sale and purchase always happen together.

Examples:

  1. A shopkeeper sells fruits to customers. He no longer owns them after the sale.
  2. A boy sells his old bicycle to his friend for some money.
  3. A business sells its products to customers in the market.

3. Relationship between Sale and Purchase

  • Sale and purchase always go together. One cannot happen without the other.

Elaboration and Important Points:

  • Each sale requires two parties: a seller and a buyer.
  • For every seller, there is a buyer, and for every buyer, there is a seller.

Examples:

  1. When you buy a book, the bookstore has made a sale to you.
  2. If your mother buys vegetables from the market, the vendor has made a sale, and your mother has made a purchase.
  3. A company purchases computers from a supplier, and the supplier makes a sale.

4. Money and Transfer of Ownership

  • In every sale and purchase, the buyer pays money to the seller and gets the right to use the goods or services.

Elaboration and Important Points:

  • The seller gives up his right to the goods or services after receiving money.
  • The transfer is complete only when ownership and money both are exchanged.

Examples:

  1. You purchase a movie ticket. The theatre sells you the right to watch the movie.
  2. A school purchases lab equipment. The supplier brings the items and receives payment.
  3. You buy a cold drink. After payment, the cold drink is yours to consume.

5. Business, Profit, and Selling

  • Businessmen produce goods or services for others’ use and earn money by selling them.
  • The money earned must be more than what they spend to make profit.
  • Profit is the reward for taking business risks and investing money.
  • Goods and services must be sold for the business to exist and grow.

Elaboration and Important Points:

  • If a business cannot sell products, it cannot earn and will not survive.
  • Profit comes after selling goods or services at a price higher than the cost.
  • Continuous sales are required for business growth and survival.

Examples:

  1. A bakery sells cakes and cookies to customers and earns profit.
  2. A dairy farm sells milk daily; the profit depends on sales.
  3. A clothing company sells its clothes in stores to make profit.

6. Things a Buyer Needs to Consider Before Purchase

  • A buyer should consider (i) their needs, (ii) quality and features of the goods/services, (iii) affordability, and (iv) social and cultural aspects.

Elaboration and Important Points:

  • Identify your need: Buy only what is necessary.
  • Check product features: What is good or bad about it?
  • Can you afford it? Will it fit your budget?
  • Will the purchase fit social and cultural expectations?

Examples:

  1. Before buying a winter jacket, check if it is warm enough and reasonably priced.
  2. Before purchasing a smartphone, look at its features and make sure it fits your budget.
  3. Before buying a food item, ensure it matches your dietary culture or restrictions.

7. Key Points for Sellers Before Production

  • Sellers should identify the needs of people and design products/services to meet those needs.
  • Product/service should be available, affordable, and known to customers.
  • Continuous improvement is important for customer satisfaction.

Elaboration and Important Points:

  • Customer feedback helps in improving products.
  • Awareness about the product should be created before and after sale.

Examples:

  1. A toy company surveys kids to find what new toys they want before making them.
  2. A restaurant updates its menu according to what customers prefer.
  3. A mobile phone company adds new features after getting user feedback.

8. Marketing Functions

  • Activities to make goods/services available, affordable, and known are called marketing functions.
  • Selling is only one part of marketing.

Elaboration and Important Points:

  • Marketing covers everything from finding customer needs to delivering the product and after-sales service.
  • Good marketing increases customer satisfaction and sales.

Examples:

  1. Advertising a new chocolate bar on TV to attract customers.
  2. Offering discounts so that more people buy a product.
  3. Providing after-sales support if customers face problems with a product.

Purchase and Sale on Cash and Credit Basis

9. Cash Purchase/Sale

  • If buyer pays the price immediately and gets the goods, it is called a cash purchase (for buyer) and cash sale (for seller).

Elaboration and Important Points:

  • Cash purchase/sale is simple and immediate.
  • No delay in payment; ownership transfer is instant.

Examples:

  1. Buying snacks from a grocery shop and paying instantly.
  2. Paying cash at a movie theatre counter and getting a ticket.
  3. Purchasing stationery and paying the bill at the shop.

10. Credit Purchase/Sale

  • If buyer pays after some time (like 15 or 30 days), it is called a credit purchase (for buyer) and credit sale (for seller).

Elaboration and Important Points:

  • Buyer gets the goods now but pays later.
  • Credit helps buyers who do not have money immediately.
  • Sellers must check if buyers can pay on time.

Examples:

  1. A shopkeeper takes goods from a wholesaler and promises to pay after a month.
  2. A business buys office chairs on credit to pay next month.
  3. A friend borrows money to buy a book and promises to pay you later.

Step-by-step Activity: Observing Sale and Purchase

Activity: Observe and note down a sale and purchase happening at a local shop.

Steps:

  1. Go to a shop in your area with a notebook.
  2. Observe any two people: one selling and one buying an item.
  3. Note down the following:
    • What is being bought and sold?
    • Who is the buyer and who is the seller?
    • How much money is paid?
    • Was the payment made immediately (cash) or promised later (credit)?
  4. Ask the shopkeeper if possible: Do they sell on credit sometimes?

Observations:

  • You will see that the buyer gives money and the seller gives goods (ownership).
  • If money is paid later, it is a credit sale.
  • The shopkeeper may allow only trusted customers to buy on credit.

Fun Tip: Try to create a role play at home with family or friends acting as buyers and sellers using toys or household items.

Scenario Based Questions

  1. Scenario: You notice your friend is about to buy a mobile phone that is very expensive and beyond his budget.
  • Question: What should your friend consider before making this purchase?
  • Answer: He should check if he really needs the mobile, its features, whether he can afford it and if it fits his needs. He should not buy something just because it's popular.

  1. Scenario: Your school wants to buy new sports equipment but will pay the dealer after a month.

    • Question: What kind of purchase is this, and what must the seller check before agreeing?
    • Answer: This is a credit purchase. The seller should check if the school is trustworthy and able to pay after one month.

  2. Scenario: A business sells air coolers only during summer but finds low sales.

    • Question: Why must the business identify customer needs before producing goods?
    • Answer: If the business understands what customers want and when they want it, they can make and sell the right products at the right time, ensuring higher sales.

  3. Scenario: Your friend’s shop only accepts cash payments and refuses to sell on credit.

    • Question: What problems might the shop face in today’s market?
    • Answer: The shop may lose customers who want to buy now but pay later, especially if other shops allow credit purchases.

  4. Scenario: After buying a soft drink, your friend finds the seal is broken and is unhappy.

    • Question: Why is customer satisfaction important for sellers?
    • Answer: Unhappy customers may not come back. Satisfied customers may buy again and also tell others to buy from the seller.

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