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What is Exchange of Goods/meaning/concept

The term Exchange of Goods refers to all tangible goods destined directly or indirectly for commercialization. Thus, it is considered that the exchange of goods are the goods purchased and developed for distribution, they are those who are in the process of production or are consumed to produce the goods to be sold. The key word is “to trade”, both traded and consumed goods are considered Exchange of Goods. This type of good is one of the pillars on which the market economy is based , as well as services.

Given all this, a good is an element that serves to meet needs. However, it is demanded and offered in the market as an exchange good and its price is determined according to these two variables. Its main characteristic is precisely to be incorporated into the marketing process. The final sales price will be decisive in evaluating the costs for its production or acquisition in the case of resale; the other aspect to consider will be the replacement cost .

These goods are registered in inventories that estimate their price and there are several methodologies to achieve this objective. Thus, one can use one that considers the sale and purchase prices according to the criterion of “first entry, first exit” (FIFO); in this case, the cost of the goods is recorded as it was actually purchased and the outputs follow a chronological order. In other cases, a “last entry, first exit” system is used , where costs are also similar to those distributed in the market, with the exception of exits that follow an inverse chronological order and record the last costs of the goods as first outputs. Finally, there is a system used to record an average of the cost of all purchased products, which is recorded for the different outputs.

Exchange of Goods is different from use goods that are not directly involved in trading. They may be important in the development of the activity, but they are not incorporated into the final good or even consumed for its production. In contrast, trade-in goods are often the core of the business and commercial activity of the company in question.

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