Sale Definition

What Is a Sale?

A sale is a transaction between two or more parties in which the buyer receives tangible or intangible goods, services, or assets in exchange for money. In some cases, other assets are 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 the seller of the particular good or service in question.

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 between a buyer and seller regarding the price of a security, and delivery of the security to the buyer in exchange for the agreed-upon compensation.
  • 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 a donation.

How a Sale Works

A sale determines that the seller provides the buyer with a good or service in exchange for a specific amount of money or specified assets. To complete a sale, both the buyer and the seller must agree to the specific terms of the transaction, such as the price, quantity of the good sold, and delivery logistics.

In addition, 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 receiving anything in return, the transaction is more likely to be treated as a gift or a donation, particularly from an income tax perspective.

To complete a sale, both the buyer and seller must be deemed competent, and they have to agree on the terms of the sale, that the good or service in question is available to buy, and that the seller has the authority to transfer the item to the buyer.

Every day, millions of people take part in countless sales transactions across the globe. This creates a constant flow of assets and forms the backbone of the associated economies. The sales of goods and services within a retail market are a more common form of sales transaction; the sales of investment vehicles in the financial markets are considered highly refined value exchanges.

A sale can be completed as part of the operation of a business—within a grocery store or a clothing retailer—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 an individual 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, including the process of 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, called mortgage-backed securities, and other kinds of debt financing.