Trade: Meaning, Types of trade, Importance of trade, Method of trade, Documents used in trade, World Trade Organization, South Asian Free Trade Area, Invoice, Means of payment in trade

1. TRADE
Office Practice & Accountancy
Grade 10

2. Meaning
Buying and selling of goods or services is trade.
Goods or services are exchanged with money.
Main motive of trade is to earn profit.
People or companies that are involved in the
process of trade are traders.
The process of buying and selling goods or
services in terms of money with the motive of
earning profit is called trade.

3. Types of Trade
Domestic Trade and Foreign Trade
When goods or services are bought and sold between the traders of the same
country, it is called domestic trade.
Example: Ram from Bhairahawa buys goods from Shyam of Birtamode.
When goods or services are bought or sold between the traders of different
countries, it is called foreign trade.
Example: Ram from Kathmandu sells carpets to a trader of USA.

4. Domestic Trade
Why is domestic trade important?
For fulfilling demand of the people,
For supplying goods or services,
To maintain the balance of payment,
To promote economic development of the country
*
Demand: Willingness to buy goods or services.
Supply: Willingness to sell goods or services.
Balance of payment: Difference between a country’s earning and spendings from foreign trade.
Economic development: Improvement in country’s infrastructure, increase in income, improvement in
quality of life, the overall growth and progress of the country.

5. Types of Domestic Trade
Wholesale trade and Retail Trade
Buying and selling of goods or services in large quantities with the objective
of reselling for profit is called wholesale trade.
Company Wholesalers  Retailers
Buying and selling of goods or services in small quantities with the objective
of consumption is called retail trade.
Retailers  Final customers

6. Method of Domestic Trade
1. Enquiry Could you tell me more about the goods you sell?
2. Quotation letter Sure, here is all the info about what/how we sell.
3. Purchase order Alright! I like your terms. I will make a purchase.
4. Letter of acknowledgement We will send the goods ASAP.
5. Collection of goods [Seller collecting goods for delivery]
6. Packing of goods [Seller packing goods for delivery]
7. Preparation of invoice [Seller preparing bills about the goods sold]
8. Delivery of goods [Seller delivers goods to the transport company]
9. Receipt of Goods [Transport company receives goods from seller]
10. Carriage of goods [Transport company transport the goods to buyer]

7. Documents used in Domestic Trade
• Letter of inquiry Hi! I need to buy something. What kind of goods do
you sell? What is the price? Will there be discounts?
• Quotation letter Sure, here is all the information about what we sell,
how we sell, our terms and conditions and so on..
• Purchase order Okay then, I would like to purchase some goods from
you. I will buy [this], [this], and [that].
• Letter of acknowledgement We just received your order. We will send the goods.
Pleasure to do business with you.
• Invoice Seller: [Lists out all the goods that are sold, their
price, discounts, net amount payable etc.]
• Receipt of goods [A document that says that seller has handed over
goods to the transport company for delivery]

8. International Trade
Why is international trade important?
For fulfilling demand of the people,
For exporting surplus goods,
To earn foreign currency,
To promote national products,
To develop foreign relations

9. Types of International Trade
Import, Export and Entrepot
Purchasing goods and services from other countries is Import trade.
Purchased phones from India and sold in Nepal.
Selling goods and services to other countries is Export trade.
Sold Nepali carpets to a company in USA.
Purchasing goods and services from other countries for selling those goods
and services to other countries is Entrepot trade.
Purchased paper from China and sold to India.

10. Method of International Trade
• Enquiry
• Quotation letter
• Purchase order
• Letter of acknowledgement
• Letter of credit
• Preparation of invoice
• Delivery of goods and bill of lading
*
Letter of credit: Bank guarantee on the behalf of importer.
Bill of lading: Document provided by transport company to exporter after verifying the goods.

11. Documents used in International Trade
• Letter of inquiry Hi! I need to buy something. What kind of goods do
you sell? What is the price? Will there be discounts?
• Quotation letter Sure, here is all the information about what we sell,
how we sell, our terms and conditions and so on..
• Purchase order Okay then, I would like to purchase some goods from
you. I will buy [this], [this], and [that].
• Letter of acknowledgement We just received your order. We will send the goods.
Pleasure to do business with you.
• Letter of credit Bank: [We promise that the importer can pay for the
goods he/she just bought from you]
• Invoice/ Bill Exporter: [Lists out all the goods that are sold, their
price, discounts, net amount payable etc.]
• Bill of lading [A document that says that exporter has handed over
goods to the transport company for delivery]

12. World Trade Organization (WTO)
• An international organization dealing with the global rules of trade
between nations.
• Formally established in 1st Jan 1995.
• WTO is the successor to GATT. [General Agreement on Tariffs]
• 164 members
• Headquarter in Geneva, Switzerland.
• Nepal became member in 23rd Apr 2004. (147th member)

13. World Trade Organization
Functions:
• Oversee the execution and management of international trade deals among
member countries.
• Serve as a platform where nations engage in negotiations to enhance their
trade relations.
• Act as a mediator, resolving conflicts when countries disagree on trade
matters.
• Conduct assessments of each country’s trade policies to ensure transparency
and adherence to rules.
• Collaborate with entities like the IMF and World Bank to promote global
economic stability.
• Provide guidance and capacity-building support to developing nations,
enabling them to participate effectively in global trade.

14. South Asian Free Trade Area (SAFTA)
• SAFTA was established in 2004 with the vision of increasing economic
cooperation and integration among the South Asian nations.
• The Agreement on the South Asian Free Trade Area (SAFTA) is an
agreement reached at the 12th SAARC summit at Islamabad, capital of
Pakistan on January 6, 2004.
• Member countries include Afghanistan, Bangladesh, Bhutan, India,
the Maldives, Nepal, Pakistan, and Sri Lanka.
• The goal was to create a free-trade area encompassing a population of
approximately 1.6 billion people.

15. South Asian Free Trade Area (SAFTA)
Functions:
• To eliminate trade barriers and facilitate cross boarder
movement of goods to the member states.
• To promote free competition in the trade area.
• To create an effective mechanism for the implementation of the
agreement.
• To establish a framework for future regional cooperation and
enhance mutual benefits.

16. Bilateral Investment Promotion and Protection Agreement (BIPPA)
• Bilateral agreement between Nepal and other countries.
• Main objective is to promote and protect bilateral investments and
attract FDI.
• Nepal has signed BIPPA with India, France, Germany, Britain,
Mauritius and Qatar.
• BIPPA was signed between India and Nepal in October 22, 2011.
द्विपक्षीय सम्झौता

17. Invoice
• Document issued by seller to buyer indicating different information about
the goods like type of goods, quantity, price, discount, mode of payment,
mode of delivery etc.
• From the seller's perspective it is Sales invoice and from the buyer’s
perspective it is Purchase Invoice.
• An invoice can contain the following details:
Name and contact details of the seller with reference number.
Date of the invoice.
Invoice or bill number.
Tax payments if relevant.
Tax or company registration details of seller if relevant.
Name and contact details of the buyer.
Date that the product was sent or delivered.

18. perspective it is Purchase Invoice.
• An invoice can contain the following details:
Name and contact details of the seller with reference number.
Date of the invoice.
Invoice or bill number.
Tax payments if relevant.
Tax or company registration details of seller if relevant.
Name and contact details of the buyer.
Date that the product was sent or delivered.
Purchase order number.
Description of the product quality, and quantity.
Unit price of the product, if relevant.
Discount allowed to the buyer/importer.
Total amount charged.
Payment terms including method of payment, date of payment, and
details about charges late payment.

19. Invoice
sample

20. Invoice
sample

21. Invoice
sample

22. Invoice
sample

23. Types of invoice
• Loco Invoice
Includes local price of the exporter without other charges of trade.
• Free On-Board Invoice
Excludes charges from warehouse of exporter to board.
• Cost and Freight Invoice
Includes all expenses like cost and freight of goods except insurance.
• Cost, Insurance and Freight Invoice
Includes all expenses like cost, freight, insurance and other charges.
• Franco Invoice
Includes the price of goods only and excludes all expenses incurred while
carrying goods to buyer.

24. Means of payment
• Traditional means
• Money order
• Telegraphic transfer
• Modern means
• Bank draft
• Cheque
• SWIFT
• Letter of Credit (LC)
• Debit / Credit card, ATM
• Electronic Payment