INTRODUCTION TO COMMERCE

Concept definitions

1. Goods: - this refers to raw materials as well as tangible, manufactured products such as toys, shirts,
cement, cars, television sets, books, etc.;

2. Service: - this refers to work that people do for others to earn their living e.g. hairdressing, tailoring,
banking work, civil service work, etc.;

3. Trade: - this refers to the activity of buying and selling and exchanging of goods and services;

4. Trade by barter: - it is an ancient system of buying and selling when money was not in use. It means
the exchange of goods for goods and services for services.

Meaning of Commerce Commerce can be defined as the process of buying, selling and distribution of
goods and services through the assistance of various activities such as communication, warehousing,
insurance, advertising and banking. Commerce can also be defined as the study of how man buys, sells
and distribute goods and services. It is trade and aids to trade.

Scope of Commerce The scope of commerce covers the entire area of commercial activities which
ensure the distribution and exchange of goods and services for the satisfaction of people e.g.
warehousing, banking, communication, advertising, transport, tourism and insurance. Commerce is
therefore divided into trade and aids to trade.

Branches of Commerce Commerce Aids to trade Retail Trade Home trade and Foreign trade Wholesale
Export and Import Trade Warehousing Tourism Communication Banking Insurance Adversity transport

1. Trade: - It is the process which involves buying and selling of goods and services by wholesalers,
retailers, importers and exporters. It is divided into two (2) i.e. home trade and foreign trade;

2. Aids to trade: - These are activities which assist or facilitate trade. They are referred to as ancillaries
to trade. They are as follows:

- a. Advertising: it is the process of creating awareness about the existence of a product in order to
stimulate demand;

b. Communication: effective trading cannot take place without communication particularly between the
seller and the buyer. It is the means by which people are linked together to transact business;

c. Warehousing: it is concerned with all the activities that help in storing goods until they are demanded
for in order to ensure uninterrupted and regular supply;

d. Transportation: this helps in carrying goods and people from one place to another. It also facilitates
the movement of raw materials and finished goods to where they are wanted.;
e. Insurance: it is needed to manage various risk associated with business including trade;

f. Banking: it ensures the acceptance of deposits from customers and making funds available to business
men for business transactions.;

g. Tourism: it is one of the aids to trade which affords touriststhe opportunity of getting involved in
business activities when they are visiting another country.

Functions of Commerce

Commerce serves the following functions:

- 1. Provision of employment;

2. Warehousing of goods;

3. Exchange of goods and services;

4. Improvement in standard of living;

5. Provision of assistance to trade;

6. Leads to interdependence;

7. Aids rapid transfer of information;

8. Mass production of goods;

9. Economic growth and development;

10. Risk bearing.

Characteristics of Commerce

The following are some characteristics or features of commerce: -

1. Linkage between primary and secondary producers with the users or consumers;

2. Indispensability to other forms of production;

3. Relatively high requirements of short – term facilities and capital;

4. Great diversity and broad based;

5. Great interaction with the business environment;

6. Great contractual and legal relationship;

7. Productive activities consisting of rendering of (in direct) services as opposed to extraction or

conversion of goods.
Importance of Commerce

1. Enabling a country to have economic transaction with the rest of the word;

2. Enabling specialisation and division of labour to take place within the economy;

3. Generating employment and income for people.

TOPIC ONE: INTRODUCTION TO COMMERCE

Definition of Commerce
Commerce can be defined as any of the following:
1.
According to S. A Butt
-
Commerce is the sum total of all the activities beginning from the
place of production and ending at the retailer’s shop’
A study of commerce would therefore involve:

A study of trade, the principal activity in distribution of goods,

A study of auxiliary services that make trade possible

A study of how best the above two could be organized so as to satisfy the needs of
a consumer in the most efficient manner.
2.
Commerce is the system by which raw materials are distributed to industry and the
finished products to consumers.
3.
Commerce is the sum total of those processes which are engaged in the removal of
hindrances of persons, place and time in the exchange of commodities (Saleemi)
4.
Commerce is the sum total of all the activities beginning from the place of
production and ending at the retailers shop.
5.
Commerce is a social science which is associated with trade and aids to trade.
6.
Commerce includes all those branches that deal with the removal of
obstacles / barriers to satisfaction of human wants.
7.
It is a study of the distribution of goods and services and the prices at which they are
exchanged with the aim of achieving the most efficient distribution to maximize the
satisfaction of human needs and wants.
8.
According to N. A. Saleemi, commerce is a social science, which is associated with
trade and aids to trade.
9.
According to G.R. Rwabutoga ( a Textbook of commerce), Commerce is concer
ned with trade and other human activities embracing transport, finance,
insurance, banking, advertising, communications, market research and any other
activity that helps people to exchange goods and services.
2
|
Importance/significance of Commerce
Commerce
serves as the basic function of ensuring satisfaction of human wants/needs.
Different people produce different goods, some are not available in the same
geographical location hence peoplein different parts of a country for instance to
meet their needs, they have to enter into a form of exchange. This allows them to
trade what they have in exchange with what they need but do not have or produce.
Commerce ensures that this is achieved.
Commerce is part of a wider subject called Economics, which is concerned
with studying how mankind tries to satisfy unlimited wants using scarce resources.
Man tries to satisfy his wants as efficiently as possible. As the resources are limited
and the wants are unlimited, man has to choose which of his wants to satisfy first.
Scarcity and choice are, therefore, key words in the study of economics.
Commerce is concerned with trade and other human activities (called trade
facilitators) embracing transport, finance, insurance, banking, advertising,
communications, marketing research and any other human activity which helps
people to exchange goods and services. Commerce also involves the study of the
distribution of goods and services and the prices at which goods and services are
exchanged. Its aim is to achieve the most efficientdistribution of goods and
services so as to maximize the satisfaction of human needs and wants.
Human wants
Human wants cover any human desire. Any human desire is known as wants,
needs. These include food, better quality food more clothes, large houses,
new model cars, TV sets and other things that make life better.
All wants of human beings cannot be satisfied because resources are limited or
scarce.
Economic activities are aimed at the satisfaction of human wants as human effects
are converted into rewards such as salaries and wages which help to meet the
wants.
Characteristics of human wants:

a)Habitual:
They are habitual meaning that they can be habit forming.
A person who smokes or drinks may wish to give it up, but find himself unable to do
so. Such wants include desire for cigarettes or beer. A person may find himself
unable to function normally without them.
b)Insatiable
They are insatiable meaning they are so numerous they cannot be satisfi
ed, such things as land where we can’t have all the land for ourselves since our
resources are scarce.

Competitive
They are competitive meaning that most wants can be satisfied by a number of
sources e.g. thirst can be satisfied by water, tea etc. This means you have to make
a choice.

Growth of Commerce
Commerce plays a fundamental role in satisfaction of human wants. Before
commerce, the producer used to consume all his products. This meant we had to
produce a little of everything in order to meet our own needs. With the introduction of
commerce came the exchange of goods and services known as the barter trade.
This was before money was introduced.The growth of commerce introduced
specialization which includes geographical and occupational specialization
. In geographical specialization, different regions of the world or a country produce
the types of goods they are best suited for.

factors that have contributed to growth of commerce:

1.Development of money and banking system led to greater pro
duction and exchange activities
as there was security of money for businessmen.
2.Improvement in the transport sector in terms of infrastructure and communication
system.
3.Specialization or division of labour as people deal with what they could do best,
effectively and efficiently in terms of knowledge, climate and resources.
4.The diverse needs of human wants coupled with inability to produce everything for
personal needs.
5.The diversification of natural resources in different parts of the world in terms of
availability encouraged foreign trade.

Structure and Scope of Commerce

The structure of commerce means those limits under which different problems can
be discussed.
The structure/scope of commerce comprises all commercial occupations. The
main purpose of commercial activity is to facilitate the trading or exchange of
goods.

Divisions of Commerce
Commerce is divided into:
1. Trade
Trade is the buying and selling of goods and service with an aim of making a profit.
Trade takes place within or between countries; trade can be home trade, Trade: This
covers the exchange i.e. the buying and selling of goods and services either within a
country home trade or between different countries foreign or international trade.
They may be further divided into:
(i)Retail trade
This refers to the selling of goods and services direct to the final
consumers or users by traders
(ii)Whole sale trade:
Selling of goods to middlemen or manufacturers, agents in large
quantities.
(iii)Export trade
Selling of goods and services by one country to another or several
other countries.
(iv)Import trade
Purchase of goods and services by one country from another or from
others.E.g Retail and wholesale trade or international/foreign trade e.g. import
and export trade.

2.Aids to trade
which include banks, insurance, warehousing, transport and advertising.
Retail and wholesale trade make up home trade; export and import make up
foreign or international trade.
Aids to trade or auxiliary services: Trade is the main branch of commerce. The aids
are helpers which facilitate trade and include:
i)Transport:
Refers to the movement of goods and people from one place to another.
The chief forms of transport are land (road and railway) water and air. Transport
assists trade by distributing raw materials to manufacturers, semi-finished goods to
finishing firms and the finished goods to the consumers and users.
ii)Communication
This is the act, or any natural or artificial means of conveying
information. This consists of those people engaged in spreading commercial
information between producers and consumers by means of the press, wireless,
radio, television etc.
iii)Banking:
Banks are institutions which receive and safeguard public funds. Banking
assists trade by safeguarding the trader’s money. They too provide efficient, safe
and convenient method of payment by use of cheques as well as lending them in
form of loans or over drafts.
iv)Warehousing
This stores the goods so that they are available when and where they
are required. It also protects goods from being stolen, going bad due to
extreme weather conditions and from other hazards.
v)Insurance
All business activities are exposed to a number of risks. Goods may be
stolen, catch fire, be damaged in an accident, and sink
in sea etc. insurance firms helps traders by minimizing such risks.

Significance of Commerce to an individual and the community.

1.Boosts development through capital goods e.g. machinery from other
communities/societies.
2.Creates employment for large numberof people.
3.Enables an individual to dispose off surplus goods for money
4.Enables civil societies to collect revenue in form of tax
5.Enables one to get goods that cannot be produced by an individual.
6.Enables people to get variety of need satisfying goods.
7.Encourages the movement of labour, technology and capital from one community
to another.
8.Facilitates high standard of living
9.Helps some individuals to specialize in areas where they can do best.
10.Helps to promote good relations amongst people in the society
11.In caseof emergency in one community, supplies may be obtained from another
community.

|
TOPIC TWO:
PRODUCTION
Meaning of Production
It can be defined as the creation of goods and services or increasing their
usefulness to become more satisfying. Production activities include transforming raw
materials into finished products, transportation and storage. Goods and services
produced must have utility.There are several types of utility:

Types/ Classification of Production

1.Direct Production
This is where goods and services are produced for own consumption rather
than for commercial purposes. It is commonly referred to as subsistence and is
much more common in rural areas. However, nowadays it is difficult to find
someone living purely on this form of production.

Characteristics of Direct Production

Goods and qualities are mainly of low quality and quantity;

Encourages individualism

Leads to low standards of living;

Does not encourage consumption;

Can be very tiring;

Does not encourage invention and innovation;

A lot of time is wasted as one moves from one job to another;

No one has the ability to provide all that he/she requires.

2. Indirect Production
It is the production of goods and services for selling the excess to the
market in order to purchase what one needs but doesn’t produce. It thus
leads to specialization.

Characteristics of Indirect Production

-Production with a view for exchange;

-The producer specializes in one or a few areas of production

-It results in surplus of goods and services.

Levels of Production

1. Primary Level
This involves extracting the goods from their natural setting. The goods are either
used as is or they are processed further to make them more useful. Primary level of
production mainly involves mere ‘looking after’ e.g. growing crops where the farmer
looks at the crops and nature grows them, or extracting the materials from nature.
Examples of primary production include: farming, mining, fishing and lumbering.

2. Secondary level
It involves processing raw materials into much more useful products like processing
clothes, processing and food canning, manufacturing like furniture making
and welding, and construction roads, houses and railways
3. Tertiary level
This level deals with production of services. It may be divided into two categories:
-Communal services
it involves trade or aids to trade activities like banking, retailing,
banking and insurance.
-Direct personal services
Include services rendered by individuals directly to the consumers. E.g. teaching,
nursing, pastoral work, legal practice, etc.

Factors of Production and their Rewards

They are resources necessary for the production process such that without
them, production would not be possible. They include:
1.Land
It refers to all natural e.g. soil, rivers, lakes and climate. Since it is natural,
it cannot be increased in quantity, it can only be improved in quality. Land earns
rewards to the owners or users in terms of royalty, rent and rates.

Characteristics of Land as a Factor of Production

It is a basic factor of production since production cannot take place without it;
It is fixed in quantity of supply;

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1
CONTENTS
INTRODUCTION
TO COMMERCE
 ..................................
....................................
....................................
8
The importance of
commercial services
in trade
 ..................................
....................................
.................... 9
PRODUCTION
..................................
....................................
....................................
.................................
10
THE METHODS
OF PRODUCTION
..................................
....................................
..................................
10
THE FACTORS OF
PRODUCTION
..................................
....................................
...................................
10
THE BRANCHES
OF PRODUCTION
 ..................................
....................................
................................
11
The inter-
dependence of
commerce and
industry
 ..................................
....................................
................ 12
EXAMINATION
QUESTION
..................................
....................................
....................................
......... 13
HOME TRADE
..................................
....................................
....................................
................................
14
PRE- SALES
SERVICE
..................................
....................................
....................................
................... 15
FUNCTIONS OF A
WHOLESALER
 ..................................
....................................
..................................
17
CHARACTERISTI
CS OF CASH AND
CARRY
WHOLESALERS
 ..................................
...................... 18
MAIN
CHARACTERISTI
CS OF A HIRE
PURCHASE
AGREEMENT
..................................
............... 18
ADVANTAGES OF
HIRE PURCHASE
AGREEMENT
..................................
....................................
... 18
DISADVANTAGE
S OF HIRE
PURCHASE
AGREEMENT
..................................
.................................
18
SAMPLE
EXAMINATION
QUESTIONS
 ..................................
....................................
.......................... 19
FOREIGN TRADE
..................................
....................................
....................................
...........................
20ADVANTAGES
OF
INTERNATIONA
L
TRADE ....................
....................................
....................................
.....
20Disadvantages
of international
trade ........................
....................................
....................................
......... 20
Documents as used
in international trade
 ..................................
....................................
.........................
20Bill of
lading .......................
....................................
....................................
....................................
..........
20Indent ................
....................................
....................................
....................................
..........................
21Charter
party ........................
....................................
....................................
....................................
.......
21Manifest .............
....................................
....................................
....................................
.........................
21Customs
specification ..........
....................................
....................................
....................................
.......
21Functions of th
e customs and Ex
cise Authorities ..
..................................
..................................
............. 21Reasons
why customs
authorities requir
ed to undertake
the following ........
..................................
..... 22Enforcemen
t of
quotas ......................
....................................
....................................
.............................
22Controlling
bonded ware
houses .....................
....................................
....................................
...............
22Collection of
customs
duty ..........................
....................................
....................................
...................
22Types of
custom
duty ..........................
....................................
....................................
............................ 22
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2Ad valorem duty

....................................
....................................
....................................
..........................
22Specific
duty ..........................
....................................
....................................
....................................
...... 22Excise
duty ..........................
....................................
....................................
....................................
........ 22Terms as
used in
international
trade ........................
....................................
....................................
...... 23Customs
draw
back .........................
....................................
....................................
................................
23Entre pot trade
....................................
....................................
....................................
............................
23EXAMINATIO
N
QUESTIONS ........
....................................
....................................
....................................
. 23BUSINESS
UNITS ....................
....................................
....................................
....................................
...... 25Explain
what is
meant by the ter
m private enterpr
ise ...........................
..................................
.............. 25Featur
es /
characteristics of
sole trading ..........
..................................
..................................
..................
25Advantages of
sole
trading ....................
....................................
....................................
.........................
25Disadvantages
of sole
trading ....................
....................................
....................................
.....................
25PARTNERSHIP
....................................
....................................
....................................
..............................
26Formation of
partnership ............
....................................
....................................
....................................
26FEATURES /C
HARACTERISTIC
S OF PARTNERS
HIP .........................
..................................
........................
26ADVANTAGES
OF
PARTNERSHIP .....
....................................
....................................
................................
27DISADVANTA
GES OF
PARTNERSHIP .....
....................................
....................................
...........................
27SIMILARITIE
S BETWEEN THE
SOLE TRADE AN
D PARTNERSHIP
..................................
.............................
27COMPANIES.....
....................................
....................................
....................................
............................
28ARTICLE OF
ASSOCIATION ...
....................................
....................................
....................................
........
28CERTIFICATE
OF
INCORPORATIO
N ...............................
....................................
....................................
...
28PROSPECTUS ..
....................................
....................................
....................................
.............................
28BOARD OF
DIRECTORS ..........
....................................
....................................
....................................
...... 29ANNUAL
GENERAL
MEETING ..............
....................................
....................................
............................
29PRIVATE
LIMITED
COMPANY ..............
....................................
....................................
............................ 29
FEATURES
/CHARACTERIS
TICS
..................................
....................................
....................................
.....
29ADVANTAGES
OF PRIVATE
LIMITED
COMPANY ..............
....................................
....................................
29DISADVANTA
GES OF PRIVATE
LIMITED COMPA
NIES ......................
..................................
......................
30PUBLIC
LIMITED
COMPANY ..............
....................................
....................................
...............................
30FEATURES/CH
ARACTERISTICS
....................................
....................................
....................................
.....
30ADVANTAGES
OF PUBLIC LIMI
TED COMPANY ...
..................................
..................................
.................
31DISADVANTA
GES OF PUBLIC L
IMITED LIABILI
TY ...........................
..................................
........................ 31
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3Similarities of p
ublic and private l
imited companies .
..................................
..................................
.........
31MULTINATIO
NAL COMPANIES
....................................
....................................
....................................
.... 32PUBLIC
ENTERPRISES......
....................................
....................................
....................................
.............
33CAPITAL OF
THE COMPANIES
....................................
....................................
....................................
...... 34
TYPES OF
CAPITALS
 ..................................
....................................
....................................
......................
34CLASSES OF
SHARES .................
....................................
....................................
....................................
... 34Ordinary
Shares......................
....................................
....................................
....................................
..... 35Deferred
Shares .....................
....................................
....................................
....................................
.....
35Characteristics
of
debentures ............
....................................
....................................
.............................
35Differences be
tween Shares and
Debentures ...........
..................................
..................................
.........
36EXAMINATIO
N
QUESTIONS ........
....................................
....................................
....................................
. 37LUSAKA
STOCK
EXCHANGE ...........
....................................
....................................
..................................
38Functions of
the stock
exchange..................
....................................
....................................
...................
38REASONS/PU
RPOSE FOR
THE ESTABLISH
ING OF LUSAKA
STOCK EXCHAN
GE. ..........................
.............
38FUNCTIONS
OF THE LUSAKA
STOCK
EXCHANGE ...........
....................................
....................................
..
38HOW LUSE FA
CILITATE SECO
NDARY TRADIN
G ..............................
..................................
.......................
38LISTED
COMPANIES ON
LUSE ........................
....................................
....................................
..................
39ADVANTAGES
OF SHARE HOLD
ERS IN LISTED
COMPANIES ........
..................................
.......................... 39
Many prayers of
the Lusaka Stock
Exchange ................
....................................
....................................
.. 39Stock
Brokers ...................
....................................
....................................
....................................
...........
39Dealers ...............
....................................
....................................
....................................
.........................
39BUYING AND
SELLING OF SH
ARES AT THE LU
SE ...........................
..................................
........................ 40E
XAMINATION
QUESTIONS ........
....................................
....................................
....................................
.
40BANKING .........
....................................
....................................
....................................
............................
41SERVICES /FU
NCTIONS OFFER
ED BY COMMERC
IAL BANKS...........
..................................
.......................
41HOW COMMER
CIAL
BANKS FINANCE
BOTH HOME
AND FOREIGN T
RADE ......................
...................... 41Loa
ns ..............................
....................................
....................................
....................................
.............
41Overdraft ..........
....................................
....................................
....................................
...........................
42Bank Facilities
and how they
operate ...................
....................................
....................................
.......... 42Standing
Orders ....................
....................................
....................................
....................................
...... 43Direct
Debit ........................
....................................
....................................
....................................
......... 43TYPES OF
ACCOUNTS ...........
....................................
....................................
....................................
....... 43
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 4DEPOSIT
ACCOUNT ..............
....................................
....................................
....................................
....... 43SAVINGS
ACCOUNT ..............
....................................
....................................
....................................
....... 44CURRENT
ACCOUNT ..............
....................................
....................................
....................................
......
44BUILDING SO
CIETIES (MAIN
SERVICES) ...........
..................................
..................................
.................... 44NA
TIONAL SAVING
AND CREDIT BA
NK (SERVICES/
FUNCTIONS) ......
..................................
....................
44THE CHEQUE
SYSTEM .................
....................................
....................................
....................................
. 45TYPES OF
CHEQUE
CROSSINGS .........
....................................
....................................
..............................
46DISHONOURE
D
CHEQUE .................
....................................
....................................
................................
46THE BANK
–
 CHEQUE
CLEARING
SYSTEM..................
....................................
....................................
...... 47The main
purposes of the
bank clearing
house. ......................
....................................
...........................
47Credit
Cards .......................
....................................
....................................
....................................
.......... 48Automati
c Teller Machine
–
Cash Dispenser
(ATM) ......................
....................................
..................... 48THE
CENTRAL
BANK .......................
....................................
....................................
.................................
49Describe
the main
functions/ service
s offered by the
central bank .........
..................................
........... 49Explain
the rights of a
customer in
banking ....................
....................................
....................................
50EXAMINATIO
N
QUESTIONS ........
....................................
....................................
....................................
. 50FINANCING
OF BUSINESS
UNIT .......................
....................................
....................................
................
52Methods of
financing
businesses ..............
....................................
....................................
......................
52Trade
credit ......................
....................................
....................................
....................................
........... 52Hire
purchase .................
....................................
....................................
....................................
............. 52Bank
over
draft ........................
....................................
....................................
....................................
... 52Reasons
for choice of a
bank overdraft as
means
of payment ............
..................................
................. 52Bank
loan............................
....................................
....................................
....................................
......... 53Reasons
for choice of a
bank
overdraft ...............
....................................
....................................
...........
53Debentures .......
....................................
....................................
....................................
..........................
53Reasons for
choice of a
debenture ..............
....................................
....................................
...................
53EXAMINATIO
N
QUESTIONS ........
....................................
....................................
....................................
.
55INSURANCE ....
....................................
....................................
....................................
.............................
57State/list risks
that
a trader firms, co
mpany may insure
against ...................
..................................
...... 57Importance
of taking out an
insurance cover b
y
traders/business
people .....................
....................... 57
Explain the term
“pooling of risks”
..................................
....................................
...................................
57BUSINESS
RISKS .....................
....................................
....................................
....................................
...... 58
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5INSURABLE
RISKS .....................
....................................
....................................
....................................
... 58NON-
INSURABLE
RISKS .....................
....................................
....................................
.............................
58PRINCIPLES
OF
INSURANCE .........
....................................
....................................
....................................
58INSURABLE
INTEREST ............
....................................
....................................
....................................
...... 58UTMOST
GOOD FAITH
(UBERRIMA
FIDES) ....................
....................................
....................................
.
58INDEMNITY ...
....................................
....................................
....................................
...............................
58CONTRIBUTIO
N ...............................
....................................
....................................
................................
59SUBROGATIO
N ...............................
....................................
....................................
.................................
59PROXIMATE
CAUSE ....................
....................................
....................................
....................................
.
60STEPS TO BE
TAKEN WHEN EF
FECTING AN IN
SURANCE COVER
..................................
........................... 60
PROPOSAL FORM
....................................
....................................
....................................
........................
60PROCEDURE
IN MAKING A
CLAIM .....................
....................................
....................................
.............
60INSURANCE
BROKER ..................
....................................
....................................
....................................
. 61LIFE
ASSURANCE ........
....................................
....................................
....................................
.................
61WHOLE LIFE
POLICY ...................
....................................
....................................
....................................
. 61ENDOWMENT
POLICY ...................
....................................
....................................
..................................
61FIRE
INSURANCE..........
....................................
....................................
....................................
................
61FACTORS CON
SIDERED
WHEN FIXING P
REMIUM
FOR FIRE INSUR
ANCE .....................
.......................... 62
MARINE
INSURANCE .........
....................................
....................................
....................................
.......... 62MOTOR
INSURANCE .........
....................................
....................................
....................................
...........
63EXAMINATIO
NS
QUESTION ..........
....................................
....................................
...................................
64
COMMUNICATIO
N
..................................
....................................
....................................
........................ 65
TYPES OF
COMMUNICATIO
N
..................................
....................................
....................................
.... 65
TELECOMMUNIC
ATION
..................................
....................................
....................................
.............. 69
EXAMINATION
QUESTIONS
..................................
....................................
....................................
....... 72
TRANSPORT
 ..................................
....................................
....................................
............................. 73
Define
Transportation
..................................
....................................
....................................
....................
73Discuss the
Modes of
Transportation .....
....................................
....................................
........................
73Road Transport
....................................
....................................
....................................
...........................
73Advantages of
road
transport ................
....................................
....................................
.........................
73Disadvantages
of road
transport ................
....................................
....................................
.................... 73
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6Rail
Transport ...............
....................................
....................................
....................................
...............
73Advantages of
rail
transport ................
....................................
....................................
...........................
73Disadvantages
of rail
transport ................
....................................
....................................
....................... 74Air
Transportation .....
....................................
....................................
....................................
..................
74Advantages of
air
transport ................
....................................
....................................
............................
74Disadvantages
of air
transport ................
....................................
....................................
........................
74Sea Transporta
tion ...........................
....................................
....................................
............................... 7
4Main Types of
Sea
Transport ...............
....................................
....................................
...........................
74Main Types of
Ships ........................
....................................
....................................
................................
75Advantages of
sea
transport ................
....................................
....................................
...........................
75Disadvantages
of sea
transport ................
....................................
....................................
......................
75Containerizatio
n ................................
....................................
....................................
..............................
75Advantages of
containerization ...
....................................
....................................
...................................
76Disadvantages
of
containerization ...
....................................
....................................
...............................
76Chartering .........
....................................
....................................
....................................
..........................
76Shipping
Conference ............
....................................
....................................
....................................
....... 76Advantages
of shipping
conferences ...........
....................................
....................................
...................
76Disadvantages
of shipping
conferences ...........
....................................
....................................
............... 76Pipe
Line ...........................
....................................
....................................
....................................
........... 76Hiring
and Owning
transportation ......
....................................
....................................
............................
77What are
some of the
advantages of ow
ning your own
fleet? .....................
..................................
....... 77Hiring
Transportation .....
....................................
....................................
....................................
............. 77
Advantages of
hiring transport
 ..................................
....................................
....................................
.... 77Owning
Transportation .....
....................................
....................................
....................................
.......... 77
Outline some of the
factors to be
considered before
deciding for Hiring
or Owning
transport
 77List factors af
fecting choice of
mode of Transpor
tation .....................
..................................
.................. 78Rece
nt Trends in
Transportation .....
....................................
....................................
...............................
78
These are some of
the changes or
development taking
place in
transportation
..................................
.... 78Port
Authority ...............
....................................
....................................
....................................
.............. 78Outline
the
Responsibilities
of port
authorities..............
....................................
....................................
78Facilities at Po
rts for Passenger
s and Traders ......
..................................
..................................
..............
79WAREHOUSIN
G ................................
....................................
....................................
...............................
80
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7Importance of
Warehouses ...........
....................................
....................................
.................................
80Types of
Warehouses ...........
....................................
....................................
....................................
....... 80
Retailers Wareh
ouse/Depots
 ..................................
....................................
....................................
...... 80Wholesalers
Warehouse .............
....................................
....................................
....................................
80Cash and Cary
Warehouses ...........
....................................
....................................
.................................
80Cold
Storages .................
....................................
....................................
....................................
............. 80Regional
Distribution
Centers ...................
....................................
....................................
......................
80Manufacturers
Warehouse .............
....................................
....................................
................................
81Public
Warehouses ...........
....................................
....................................
....................................
........... 81Bonded
Warehouses ...........
....................................
....................................
....................................
........
81EXAMINATIO
N
QUESTIONS ........
....................................
....................................
....................................
.
82ADVERTISING
....................................
....................................
....................................
..............................
83Purpose of
Advertising ............
....................................
....................................
....................................
.... 83TYPES OF
ADVERTISING ....
....................................
....................................
....................................
..........
83Benefit of adve
rtising to the man
ufacturers ............
..................................
..................................
..........
84Advantages of
Advertising: ...........
....................................
....................................
..................................
84Disadvantages
of
advertising: ............
....................................
....................................
.............................
84Function/roles
of an advertising
agency/Why
companies may
need the services
of advertisingage
ncies? .......................
....................................
....................................
....................................
.............. 85State
the methods of
appeal you
know .........................
....................................
....................................
.
85Protecting the
Consumer (Code o
f Advertising Pra
ctice) ......................
..................................
...............
85ADVERTISING
MEDIA ....................
....................................
....................................
..................................
86EXAMINATIO
N QUESTION ......
....................................
....................................
....................................
..... 89
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8
INTRODUCT
ION TO
COMMERCE
COMMERCE
-

Commerce is
trade
and
aids to trade.
-

It aims at the
distribution of
goods and services
in order to satisfy
human wants
andneeds.
-

Trade
is the buying and
selling of goods
and services with a
view of trying
profit.
-

There are two

types of trade
namely; home
(local) trade and
International or
foreigntrade.
-

Aids to trade
are commercial
activities or
services that assist
trade to take place.
COMMERCE
Trade Aids to trade-
Warehousing-
AdvertisingHome Foreign -
Banking-Transport-
InsuranceRetail Wholesale I
mport Export -
Communication
Commercial
activities
-
Commercial
activities are all
activities
concerned with the
distribution of
goods andservices.
-
They include
Trade which is
necessary for the
purchase and sell
of goods and
serviceswhich
include raw
materials such as
timber, cotton, and
finished goods
such asequipment,
books, clothes,
services such as
entertainment,
tourism.
-
And Trade which
is done for a profit
-

Also they include

Aids to trade
which makes trade
to be possible or
smoothens or
helpsin the
distribution of
goods and
services.
WABTIC
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The
importance of
commercial
services in
trade
Commercial
services are aids to
trade (WABTIC)
that help to make
trade possible
in the
followingways:-
Warehousing
-
Storing raw
materials
awaiting processin
g
-
By storing finished
goods awaiting
sale
-

Protecting goods
against bad
elements such
as unfavorable
weather, fire, theft,
etc.
-

By storing goods,
warehousing
prevents shortages
-

helps in stabilizing
prices.
-

Stores dutiable
goods in
bonded warehouse
s until after duty is
paid.
Transport
-

Delivering
equipment and raw
materials to
industries.
-

Delivering
finished goods to
local and
international
markets.
-

Moving workers to
and from their
work places to
enhance
production
-

Carrying company
executives and
agents to far
places in order to
meet their clients.
Advertising
-

By informing the
members of public
on the availability
of goods and
services on
themarket.
-

Persuading
potential
customers to buy
the goods and
services available.
-

By informing the
public on
job vacancies with
a view of
recruiting
new staff
-

By
Informing/spreadi
ng awareness on
matters of public
interest.
Banking
-

Finances the
traders by means
of loans and
overdrafts
-

Safe-
guards the trader’s
money and other
valuables.
-

Facilitates the
payment of huge
sums through
cheques
-
Offers special
facilities to traders
such as
standing orders,
direct debits,
credit
transfers,discounti
ng bills of
exchange, etc.
Insurance
-

Compensates/
restores/indemnifi
es traders in case
of a risk occurring.
-

Protects traders
against financial
losses resulting
from either fire,
theft, etc
-

And against claims

from third parties.
-
In terms of life
assurance, it
provides a saving
plan to surviving
dependents.
-
Provides
confidence or
encouragement to
traders to go into
huge businesses
withoutfear of
making a loss.
Communication
-
Informs the public
on the availability
of goods and
services on the
market
-
Allows customers
and suppliers to
contact each other
speedily
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-
By means of
telephone,
facsimile (fax),
letters, electronic
mail (e-mail), etc.
PRODUCTIO
N
-
Production is the
provision of goods
and services in
order to satisfy
human needs
andwants.
-
There are three
branches of
production namely
industry,
commerce, and
directservices.
-
Industry it deals
with extraction of
natural resources
(raw materials)
and transformingth
em into semi-
finished or
finished goods.
-

Commerce it deals
with the
distribution of
both raw materials
and finished
goodsfrom the
source /place of
extraction or
manufacturing to
the place of
demand/scarcity.
-
Direct service
plays an indirect
role in production
whose services are
essential in
enhancing
production. This
includes teachers’
doctors’ architects,
the police, the
lawyers or any
service rendered
by any service
worker and three.
THE
METHODS
OF
PRODUCTIO
N
The satisfaction of
human needs and
wants are achieved
either by direct
and indirect
production.There
are two main types
of method of
production
namely:-
Direct Production
-
It is the production
of goods for
own use
-

that is done on
subsistence level
-
there is no need
for exchange with
others
-
Only satisfies
one’s own needs
and wants.

Indirect
Production
-
it is the production
for the benefit of
others
-

which involves
trading what has
been produced
-

and helps one

obtain what he /
she can’t produce

-
it depends upon
trade
-

makes people to
specialize one
field
-
so as to sell their
value
THE
FACTORS
OF
PRODUCTIO
N
Factors of
production are
essential resources
or inputs that must
be in place before
any production of
goods or services
can take place.
There are four
factors of
production
namely:-
Land

-
Land implies the
place or venue where
production is done.
-

It includes all kinds

of natural resources
found on earth and
underground

Examples of l
and are copper, coal,
fish, water, animals’
trees.
-

The providers of
land are called
landlords
-
The benefit or
reward to land is
Rent or Rates
.

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Labour
-

This is the human

effort that is
applied
in production,
-
It may be divided
into
Manual/physical
(unskilled) or
professional/menta
l (Skilled)labour.
-
Providers of
labour are called
workers
-

The reward for

labour is a
 salary or
a wage

Capital

-
These are
resources that man
uses to
produce goods and
services.
-
Examples are
money buildings,
machinery, raw
materials etc.

-
Providers of
capital are called
capitalists

The reward for

capital is
interest.
Enterprise/
Entrepreneurship

It is the ability to
organize other
factors of
production.

It involves making
decisions
-

Examples of
decision are
expansion
of businesses,
investing, buying a
new
vehicle, ploughing
back.

Providers are
called
Entrepreneurs,
organizers or
enterprise
-

Entrepreneurs
receive a reward
called
profit or loss.
THE
BRANCHES
OF
PRODUCTION
Production is
classified into
three main
branches namely
industry,
commerce and
direct services
Industry
:Industry
concerned with
-
The obtaining of
raw materials
-

Processing it into
finished goods
-
And it is divided
into extractive
(primary)
-
Manufacturing and
(secondary
industry)
-

Construction
(secondary
industry)
Commerce:

Trade and aids to

trade
-
It contributes to
the satisfaction of
human wants by
distributing goods
and services
toconsumers
through
warehousing,
communication,
transport,
insurance, banking
andadvertising.
Direct services
:
-
These are non-
material goods.
-

They contribute to
the satisfaction of
human wants by
providing a variety
of publicand
personal services.
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12
BRANCHES OF
PRODUCTION
PRODUCTIONIndustry D
irect Services
-
EducationPrimary Secondar
y - Health care(Or Extractiv
e industry) (Or Manufacturi
ng industry) - Music-
Security
COMMERCE
Trade Aids to trade-
housing-AdvertisingHome F
oreign -Banking-Transport-
InsuranceRetail Wholesale I
mport Export -
Communication
The inter-
dependence
of commerce
and industry
-
Industries is
concerned with
-

Obtain raw
materials and
process them into
finished goods.
-

They are divided

into extraction,
manufacturing and
construction while
-
Commerce will
concern all
activities which
aid extractive
industry to final
consumer
-
It will be
impossible for
industries to
operate without
activities of
commerce.
-
These are trade
and aids to trade
i.e. transport,
communication,
advertising,
insurance, banking
, warehousing.
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13
EXAMINATIO
N QUESTION
1.

Explain the
meaning of
commerce?2.

What do you
understand by
commercial
activities?3.

Explain how
commercial
activities assists
trade?4.
Explain the
meaning of the
term production5.

Describe the
following method
of production:-6.
state and explain
the factors of
production7.

state and explain

the factors of
production8.
Describe the three
branches of
production9.

Explain the inter-

dependence of
commerce and
industry
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14
HOME
TRADE
-

It is trade that is
conducted within
the country-
it is divided into
retail and
wholesale trade-

Retail is the
buying in bulk
and breaking the
bulk into smaller
quantities-

wholesale trade is
the buying of
goods in bulk and
selling them in
large quantities-
RETAIL TRADE
Retail is a word
which means to
cut again

retail trade is the

buying of goods in
bulk and breaking
the bulk to suit the
needs ofconsumers
The Functions of a
Retailer are to
-

break bulk
-

provide a variety
of goods
-

credit to trusted
customers
-

offer delivery on
some goods
-

pass information
to wholesalers
-

give advice to
consumers
-

package goods
before sale
-

provide a local
supply of goods
-

display goods in
retail shops
-

provide presales
and after sales
service
Factors to
consider when
establishing a
retail shop
-

Capital
-

Location of the
retail shop
-
Business
experience of the
owner
-

Goods for sale

-
Method of selling
-

Name of the shop

-
Right quantities of
goods should be
stocked
-

How to inform the

customers about
the shop
Factors to consider
when choosing the
location of retail
shop
-

Cost of site
-
How much
competition is
there
-

Sufficient
customers
-
Trade growth
-

Security of the sho

p
-
The transport and
communication
facilities
-

Sources of supply
-
Capital
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15
-

Price of goods
-
Accessibility to th
e shop
-

Parking space
PRE- SALES
SERVICE
Features of a Self
Service store?
-

Provide trolleys to
customers
-
sell packaged
branded and price
goods
-

have large trading

space
-
Offer additional
customer facilities
such as car park
-

have two or more

check out points
where cashiers
collect payment
from customers.
-

Sell goods a t
cheaper prices
-
may belong to large
retail chain
-

buy direct from

producers at factory
prices
Main
Characteristics of
E- commerce
-

It is selling of
goods and services
on internet-
It is also called
online shopping-

customers can buy

goods from the
comfort of their
homes-
customers do not
need to travel to
buy goods-

sellers have a
world wide
market-
 buyers are able to
look for the goods
24hours daily and
7days a week-

Online customers
are able to access a
variety of goods
and services
Main
Characteristics of
Small Scale
Retailers
-

One person owns a

small retail
business
-

have limited
capital
-

cannot advertise
on a national scale
-

do not employ
skillful workers to
run the business
-
do not have large
capital to expand
their business
-

open businesses
for long hours
( open early and
close late)
-

offer personal
service to
customers
-
are located in
townships
-

unlimited liability
since most small
retail businesses
are owned by sole
traders
Main
Characteristics of
large Scale
Retailers
-
Goods are bought
in bulk direct from
manufacturers at
factory prices
-

have their own

transport and
warehousing
facilities
-

can afford to
employ experts to
run businesses
-
are able to
advertise on
national scale
-

offer self service

-
Provide
customer facilities
such
as restaurants,
car parks, filling
stations, hair
saloons
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16
-

located in town
centres and
different parts of
large cities
-
Offer a variety of
goods
-

Most large retail

shops belong a
chain f stores
-

offer after sales

services to the
customers
-
have large
amounts of capital
-

sell their goods at

competitive prices
-
have an attractive
display of goods in
appropriate section
s to
encourage impulse
buying
-
use loss leaders to
attract customers
into shop
Invoice
-

a bill for goods or

services supplied
by the seller to
the buyer.
-

Prepared by the
seller and sent
to the buyer.
-
Sent when goods
are sold on credit.
-

Quantity and
description of
goods
-

Contains details su
ch as:
-
Quantity and
description of
goods
-

Units and total

prices of goods
-
Indicates the
discounts offered
if any.
-

Indicates the terms

of payment
-

Value Added Tax

(VAT)
-
It starts the
Accounting
Process
-

For: purchases day

book & Sales Day
Book
-

it forms a basis of
a contract of purch
ase or sale of good
s,
INVOICE
Seller’s Address
…………………
…………

…………………
…………

Date……………
…………..
Buyer’s
Address
…………………
………….

…………………
………….
 Quantity Descripti
on Unit Price Tota
l Price
E.O&E
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17
Monthly
Statement of
Account

Contains a
Summary of
transactions as
invoices, debit notes,
credit notes,
payment in
given period.
-

Sent by the seller to

the buyer.
-

Sent at the end of the

month
-

Shows amount
owing to the seller.
-
Helps the buyer to
compare entries in
his books
-

It is a polite
reminder for
payment
MONTHLY
STATEMENT OF
ACCOUNT
Seller’s Address

……………………
……………………
………..
……………………
……………………
……….

Date………………
…………….

Buyer’s Address
……………………
…………

……………………
………..

……………………
………..
 Date Details folio D
ebit Credit Balance
FUNCTIONS
OF A
WHOLESALE
R
-
One who buys
goods in bulk and
sells them in bulk.-

Warehousing
goods-

Risk bearing-
Keeping prices
stable
-

Breaking the Bulk

-
 providing a
variety
-

Information
-

The Financier
-

Transport
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18
-
Preparing goods
for sale
-

MarketingCHARA
CTERISTICS OF
CASH AND
CARRY
WHOLESALERS
-

It is wholesale that
sells goods strictly
on cash basis
-
deal mainly in
groceries
-

Goods sold do not

require self service
-
Stocks a variety of
goods
-

Goods sold are

displayed on
shelves
-

Operates from
large buildings
-

Sells goods by use

of self service
-

may sell goods to

both retailers and
consumersMAIN
CHARACTERIST
ICS OF A HIRE
PURCHASE
AGREEMENT
-

A down payment
called deposit is
made first
-
followed by the
fixed instalments
at regular intervals
-

payments are
made in in
specified period of
time
-

buyer then takes

possession of the
goods
-
 buyer does not
become the owner
of the goods
-

buyer becomes
the owner after
paying the last
instalment
-

item bought may

not be sold until
the payment is
completed
-

Legally the item

bought remains the
property of the
seller until last
payment
(instalment).
-

seller can
repossess the item
if the buyer
defaults(fails to
pay)
-
it is suitable for
selling durable
goods such as
furniture, stoves,
refrigerators
ADVANTAGE
S OF HIRE
PURCHASE
AGREEMENT
-

Buyers can
manage to buy
expensive goods
-
Buyers have a
possibility of
obtaining special
reduction (price
cuts)
-
Buyers benefit if
the rate of
inflation is greater
than the cost of
credit
-
Payments are
spread over a
period of time he
can save money
for other
-
Items bought are
used while paying
for them
DISADVANTA
GES OF HIRE
PURCHASE
AGREEMENT
-
cost of buying
goods on credit is
more expensive
because of interest
-
Buyers are made
to buy what they
cannot afford
-

buyer suffers with

instalments for a
long time
-

Items bought can

be repossessed if
the buyer fails to
pay the full
instalments
-
 buyer cannot sell
the item until he
has finished
paying for it
-
 buyer will not be
the owner until the
final instalment
has been paid
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19
SAMPLE
EXAMINATIO
N QUESTIONS
1.

List the Functions

of a Retailer
2.
Outline the Factors
to consider when
establishing
a retail shop
3.

Explain the Factors

to consider when
choosing the
location of retail
shop
4.

Explain the
meaning of Pre-
Sales Service
5.
Explain the Features
of a Self Service
Store?
6.

Describe the
Main
Characteristics of
E- commerce7.

Explain the Main

Characteristics of
Small Scale
Retailers
8.
List and explain
the Main
Characteristics of
large Scale
Retailers9.
Distinguish between
small scale and large
scale retailers
10.

Describe an
invoice and
a Monthly
Statement
of Account

11.

Explain the
Functions of a
Wholesaler12.
Explain the main
characteristics of a
cash and carry
wholesaler13.

Outline the main

characteristics of a
hire purchase
agreement14.
Explain the
advantages and
disadvantages of a
hire purchase
agreement
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20
FOREIGN
TRADE
Foreign trade is
the buying
and selling of
goods and services
between two or
more
countries.This can
take place between
individuals,
companies from
different countries
Reasons why
countries trade
with one another
.
-

Due to
unfavorable
climatic conditions
that exist in
different countries.
-
In order to obtain
supplement good
from
other countries.
-
In order to foster
political
friendship.
-

To widen
countries market
for goods
and services.
-

To sell the surplus

goods and services
to other countries.
-
To import raw
material for local
industries that
does not exist in
the origincountry.
-
To improve the
standard of living
in the country.
Advantages and
disadvantages that
traders face in
foreign trade
.
ADVANTAGES
OF
INTERNATIONA
L TRADE
-

A country can
obtain goods
it can’t produce
from other
countries it cannot
produce.
-

Enable surplus
goods to be
exported to other
countries.
-

It may be cheaper
to buy certain
goods from
abroad.
-

To bring foreign
currency to the
country.
-
To allow exchange
of technology
between countries.
Disadvanta
ges of
internation
al trade
-

Causes of natural
resources to be
exhausted.
-
Even undesirable
and harmful goods
may be imported
e.g fire arms and
cocaine.
-
Exposure of the
county to
dumping.
-

It cause over
dependence
between countries.
Documents as
used in
international
trade
-

Bill of lading
-
Indent
-

Charter party
-

Manifest
-

Customs
specification
Bill of lading
-
It a document
when goods are
sent by sea
transport.
-
It is a document of
title and its quas
negotiable.
-

It acts as a receipt
when good are
sent by sea on
board.
-

Its evidence of
contract of
carriage of goods.
-
It gives details of
goods carried by
the ship.
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21
-
It state the
condition of goods
received on the
ship i.e the
captain can sign
theclean and dirty
bill of lading.
Indent
-

It’s a document us
ed in foreign trade.
-

It is an order from
abroad containing
description of
goods e.g price
and quantity.
-

It may be sent
through a buying
agent.
-

A close indent
gives the specific
good to be
ordered.
-
An open indent
gives freedom of
choose of goods to
be sent to the
importer.
Charter party
-
It’s a document
used in foreign
trade.

It is used when
hiring a ship for
transportation of
cargo.
-

It’s a contract for

hire of ship
between the
transporter and
the business
person for
the ship.
-

There is a voyage
charter and a time
charter.
-

Voyage cheater is
the hire of the ship
for the single
journey.
-
A time charter is
the hire of ship for
a certain period of
time.
Manifest
-
It’s the document
used in foreign
trade.

It’s prepared by
the shipping
company when
goods are
received.

-
It is used when
checking goods
exported.
-

Its checked against

the details of
specification.
-

When details are

different the
custom official
check goods
physically.
Customs
specification
-

A customs
specification is a
shipping note
prepared by the
exporter of
goodsgoing by sea
transport.
-

Information on it
is used for
compilation of
statistics on
imports and
exports.
-

It provides details
of goods being
exported.
-

It can be used to
check on goods on
export.
Functions of
the customs
and Excise
Authorities
-

Customs authority
can be the
government
authority
or government
agent
thatsupervises the
movement of
goods and services
in and out of the
country.
-
Supervises the
movement of
ships, vehicles,
aircraft, etc.
-
Correct statistics
on imports and
exports.
-

Prevent smuggling
of goods.
-
Control bonded
warehouses.
-

To inspect
documents used in
foreign trade.
-

Control public
health.
Reasons why the
customs
and Excise
Authority
collect
statistics on
imports and
exports.
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22
-
To give details of i
mported and goods
such as value, volu
me, etc.
-

Enable calculation
of the balance of
trade and balance
of payment.
-

To enable the
government to
know the state of
foreign trade and
take
remedialactions as
required.
-

To give details of
exported goods.
Reasons why
customs
authorities
required to
undertake the
following
-
Enforcement of
quotas.
-

Controlling of
bonded
warehouses.
-
Collecting of
customs duties.
Enforcement
of quotas
-
A quota is a
restriction on the
number of goods
that must be
imported
in thecountry.
-
To prevent
dumping of cheap
and poor quality
goods into the
country.
-
To protect local
industries against
unfair competition
in foreign goods.

-
To allow home
industries to
become more
competitive.
-

To help collect
unfavorable
balance of trade
position.
Controlling
bonded ware
houses
-
To enforce of
payment of custom
duties on datable
goods in bonded
warehouses.
-
To store dutiable
goods on which
customs duties are
not being paid.
Collection of
customs duty
-
To raise the
revenue for the
government.
-

To protect home
industries against
unfair competition.
-

To save foreign
currency by
reducing imports.
-
To correct the
unfavorable
balance of
payment.
-

To discourage the
importation of
harmful or
undesirable goods
such tobacco
andspirits.
Types of
custom duty
-
Customs duty is
the charge or levy
imposed on
imported dutiable
goods from
adifference
customs area.
-
There

are two types of

customs duty i.e
ad valorem duty
and specific duty.
Ad valorem
duty
-

This is a duty
charged as a
percentage of the
value of imported
goods.
Specific duty
-

Specific duty is
customs duty
charge according
to the quantity of
imported goods.
-

The quantity may

be in terms of
value, weight or
number of goods.
Excise duty
-

This is a charge
levied on certain
locally produced
goods such
as cigarettes,
spiritsetc.
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23
Terms as
used in
international
trade
i.

Customs draw
backii.

Entre pot trade

Customs
draw back
-

It’s the refunding

of custom duty
paid on goods that
are re
-exported
Entre pot
trade
-

It’s a form of
international trade
were goods are
temporally
imported into a
country, processed
and then re-export
to other countries
such as spirits,
diamond,tea, etc.
EXAMINATIO
N
QUESTIONS
Q1. (a)Give two
differences
between home
trade and foreign
trade(b)What is
dirty bill of
lading?(c) What is
dumping in
foreign trade?(d)
State two reasons
why countries
trade with
one anotherQ2. (a)
International trade
provided a number
of benefits to
many countries.(i)

Why, despite such

benefits, do
countries impose
tariffs and trade
restrictions?(ii)
Explain briefly the
functions of the
customs and
excise authority.
(iii)

Describe briefly
the importance of
bill of lading
in foreign trade(iv)

Explain the
reasons the
Customs and
Excise duty
Authorities collect
statistics
onimports and
exports(b) Explain
the importance of
the following
documents in
relation to
international trade:
(i) Customs
specification (or
shipping note)(ii)
Manifest(iii)
customs draw
back(v)

indent(vi)

airway bill(c)
Show what
remedial measures
government can
put in place to
improve the
unfavorable balanc
e of payment
prevailing in a
countryQ3. (a)
Explain the means
of payment in
foreign trade:(i)

Bills of
exchange(ii)

Cable transfer(iii)
Bankers draft(iv)

Documenter
credit(v)

Bill of
exchangeQ4. For
what reasons are
customs
authorities
required
to undertake the
following:(i)

Collections of
statistics on
imports and
exports
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24
(ii)

Enforcement of
quotas(iii)
Controlling of
bonded
warehouses(iv)

Collection of
customs
dutiesQ5.explain
the following
terms as used in
foreign trade:(i)

Balance of
trade(ii)

Balance of
payment(iii)
Favorable balance
of payment(iv)

Unfavorable
balance of
paymentWhat
measures can the
country put in
place to control
unfavorable
balance of trade?
Q6. (a) State four
differences
between home
trade and
international
trade(b) Why are
the following
necessary in
international
trade?(i) Collectio
n of statistics
by customs
officials(ii)
Enforcement of
quotas(iii)
Completion of
document such as
the charter party
and the airway
bill(iv)Provision
of warehousing at
ports and airports.
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