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Venture Trading

The next stop on our journey is the trading centers of medieval Italy, which developed partly as a result of the Crusades from the 11th to the 13th centuries. Literacy is more widespread, arabic numerals are beginning to be used, an international banking system exists, and the use of credit is prevalent. Banks are also business enterprises operating as service firms, which exist to provide services such as loaning money and performing other services for their customers.

At this time, it is commonplace for a partnership to be formed for a single venture. A partnership is a business owned by two or more individuals who agree to share both the risks and rewards of the business. How would you conduct business in such an environment? First you must find a partner. Then, each of you would contribute goods to be traded with others in foreign countries. Note that your personal belongings are still at risk if the business fails, but now you share this risk with one or more additional individuals.

Next, you hire an agent to ship the goods to the foreign land. When the ship returns from trading, it is loaded with goods of the foreign land, which you and your partner divide between yourselves. How do you determine the proper allocation of the goods acquired? You need a partnership agreement, which stipulates the rights and obligations of each partner and describes how to divide the goods (partnership profits).

Then, your accounting system provides the information to help you determine your individual share of the goods received by the partnership. The accounting system also reflects the information to hold the trading agent accountable for making a profitable trade. However, your accounting records do not distinguish between business and personal affairs, so at the end of each individual trading venture, it is necessary to terminate the business and divide the goods between the partners.

Date: 2015-01-02; view: 1094

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