COMMISSION, BROKERAGE, DISCOUNT
Money plays an important role in any transaction. We are going to
study some Technical terms... [Show More] involved in business transactions.
A producer or manufacturer of goods generally does not sell his
goods directly to the ultimate consumer. There are agents who purchase
the goods from the manufacturer and sell them to the consumer. In a
sense, such agents bring the manufacturers and the consumers together for
transaction. The remuneration which an agent gets for his services in the
transaction is called commission. Most of the business transactions are
made through intermediate persons.
1.2 RATE OF COMMISSION
The amount of commission that an agent gets in the transaction
depends on the volume of work done or the services rendered by him. His
commission is based on the value of the goods bought or sold and is
generally fixed on a percentage basis. In some cases, he is paid a
commission on the total sales brought by the agent or on different slabs.
For example, it may be 5% on the first Rs. 10,000/-, 6% on the next Rs.
5,000/- and so on.
1.3 TYPES OF COMMISSION AGENTS
On account of the different fields of specialization in business
activities agents can be differentiated as such as commission agents,
brokers, del credere agents, factors, insurance agents, export agents,
auctioneers, etc. Agents particularly salesmen are also paid regular salary
in addition to commission they earn.
Commission Agent: A commission agent is that middle-man who buys or
sells goods on behalf of some other person called as principal. He is
usually employed by his principal and gets commission as some
percentage of the sale value.
Broker : A broker is that middle-man who brings together a prospective
seller and a prospective buyer and negotiates the sale between them. The
commission that he gets is called brokerage, which may be charged from
both the parties. Accordingly, there are stock-brokers, producer, brokers,
bullion-brokers, bill-brokers, insurance-brokers depending upon the field
of business in which they work.
Factor: A factor is an agent who takes possession of the goods and then
sells them in his own name. A factor does the transaction without
disclosing the name or identity of his principal. He receives payment in his
own name and passes receipt for the same.
Del Credere Agent: A del credere agent sells goods and at the same time
gives a guarantee of the collection of dues from the consumers. In return
for this guarantee, he gets an additional commission known as del creders.
This commission may be at a flat rate on all the sales or at a higher rate on
credit sales only.
Auctioneer: A person who wants to sell his goods or property or
machinery approaches such an agent. The agent then gives an
advertisement in which he gives some description of the goods and the
date of sale. The agent sells goods to the highest bidder, i.e. the person
who offers to pay the highest amount in the auction. Such an agent is
called an auctioneer. Generally, the auctioneer does not disclose the name
of the principal. [Show Less]