What Is the Meaning of Stock-in-Trade?

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The phrase "stock-in-trade" is often used informally to refer to a skill or characteristic a person is known for, usually in a professional context. However, stock-in-trade is also a term used in business to describe the ready resources that are essential for carrying out a firm's operations. When stock-in-trade is used in this context, it has a precisely defined meaning that's different than its informal usage. It's important for businesspersons to understand the meaning of stock-in-trade because the term is often used for legal and accounting purposes.

The Meanings of Stock-in-Trade in Common Usage

The phrase "stock-in-trade" has multiple definitions and a business owner or manager needs to know how to sort them out. As used by many people, stock-in-trade refers to an activity or good produced by an individual or organization in order to make a living or earn a profit. For example, the stock-in-trade of author Stephen King is the horror story. Fast food is the stock-in-trade of companies like Wendy's and Burger King.

In business, stock-in-trade means resources or assets used to operate a business. However, stock-in-trade is often used interchangeably with other terms. Thesaurus.com lists several such stock-in-trade synonyms, including cash flow, inventory, supply and stock. Informal usage of stock-in-trade to mean these things should be avoided because they don't accurately reflect the legal or accounting definitions.

The Meaning of Stock-in-Trade in Law

Suppose you operate a restaurant. Your stock-in-trade includes the ingredients needed to prepare menu items as well as other consumable materials, such as napkins and cleaning supplies. Stock-in-trade also includes the equipment and tools needed to prepare and serve the food, such as:

  • pans
  • kitchen utensils
  • ovens
  • plates
  • glasses
  • silverware

For a manufacturing business, stock-in-trade includes tools, supplies and production equipment as well as raw materials, work in progress and finished goods.

Meaning of Stock-in-Trade in Accounting

Stock-in-trade is defined in a slightly different way for accounting purposes than it is in law. Accounting records and financial statements list inventory and stock-in-trade as separate items. In other words, the meaning of stock-in-trade in accounting is the legal meaning except with inventory assets excluded. For instance, a profit and loss statement might have an entry under expenses for "raw materials, work in progress, finished goods and stock-in-trade." An entry for purchases of stock-in-trade wouldn't include the purchase cost of any inventory since that's listed elsewhere on the statement.

References

About the Author

Based in Atlanta, Georgia, William Adkins has been writing professionally since 2008. He writes about small business, finance and economics issues for publishers like Chron Small Business and Bizfluent.com. Adkins holds master's degrees in history of business and labor and in sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.

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