Stock In Trade Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Stock In Trade, written in plain English, along with examples of how it is used.
What is Stock In Trade?
(n) Stock in trade is the collection of goods, inventories and merchandise, maintained by a business entity for the purpose of using them for processing, making salable goods or for selling to the customers with an intention to make profit from such deals.
History and Meaning of Stock In Trade
Stock in trade is a term that refers to the merchandise or goods that a company has in its possession for the purpose of selling to customers or using them for processing or manufacturing new products. This term has been in use for many decades and is an essential element of accounting and business management.
For retailers, stock in trade can be anything from raw materials or components used to make finished products, to the finished products themselves. In general, the stock in trade varies based on the industry type and the type of business.
In accounting terms, stock in trade is a current asset and appears in the balance sheet. The value of any given stock in trade is essential for companies to know and monitor for effective management of their assets.
Examples of Stock In Trade
A car dealership has many vehicles that it relies on as its stock in trade. Whenever a customer buys a car, the dealership replaces the sold vehicle with new stock to maintain its inventory.
A grocery store stocks its shelves with items that are its stock in trade, like milk, bread, and eggs, in order to meet the daily needs of local shoppers and generate profits from sales.
A dressmaking company maintains fabric and other materials as its stock in trade, to support the production of finished dresses for sale.
Legal Terms Similar to Stock In Trade
Inventory: This term means the same as stock in trade and is also used to refer to goods held by a company.
Asset: The stock in trade is a type of asset, just like any other property owned by the company.
Balance Sheet: This is a company's financial statement that lists all its assets, including stock in trade, and its liabilities and shareholder equity.