What Is a Sale?

A sale is a transaction between two or more parties in which the buyer receives goods—either tangible or intangible—services, and/or assets in exchange for money or in some cases, other assets paid to a seller. In the financial markets, a sale can also refer to an agreement that a buyer and seller make regarding the price of a security.

Regardless of the context, a sale is essentially a contract between the buyer and seller of the particular good or service in question.


What Is a Sale?

Understanding a Sale

A sale determines that the seller provides the buyer with a good or service, in exchange for a specific amount of money or particular assets. To complete a sale, both the buyer and the seller have to be considered to be competent to make the transaction. They also both have to be in agreement regarding the specific terms of the sale. Also, the good or service that is being offered has to actually be available to purchase and the seller has to have the authority to transfer the item or service to the buyer.

To be formally considered a sale, a transaction must involve the exchanging of goods, services, or payments between a buyer and a seller. If one party transfers a good or service to another without any receiving anything in return, the transaction is more likely qualified as a gift or donation, particularly from an income tax perspective.

[Important: To complete a sale, both the buyer and seller must be deemed competent; they also have to agree on the terms of the sale, if the good or service in question is available to buy, and whether the seller has the authority to transfer the item to the buyer.]

How Sales Work

Every day, millions of people take part in countless sales transactions across the globe, creating a constant flow of assets which forms the backbone of the associated economies. Sales of goods and services within a retail market represent a more common form of sales transaction while the sale of investment vehicles in the financial markets represent highly refined value exchanges.

A sale can be completed as part of the operation of a business, such as grocery stores and clothing retailers, as well as between individuals. Items purchased through a yard sale would be considered a sale between individuals while purchasing a personal vehicle from a car dealership would represent a sale between an individual and a business. Sales can also be completed between businesses, such as when one raw materials provider sells available materials to a business that uses the materials to produce consumer goods.

Example of a Sale

When a typical middle-class person is purchasing their first home a sale occurs when the home is sold to the buyer. However, there are many layers of sales surrounding the deal such as a lending institution providing financing in the form of a mortgage to the homebuyer. The lending institution can then sell that mortgage to another individual as an investment. An investment manager could earn his living trading bundles of mortgages and other kinds of debt financing.

Key Takeaways

  • A sale is a transaction between two or more parties, typically a buyer and a seller, in which goods or services are exchanged for money or other assets.
  • In the financial markets, a sale is an agreement a buyer and seller make regarding the price of a security.
  • If the item or service in question is transferred by one party to the other party with no compensation, the transaction is not considered to be a sale, but rather a gift or donation.