Explanation Of Distribution

Definition of Distribution

Distribution in general means dividing something among a number of recipient (not necessarily equal) or movement of services or goods from one source to another.

Brief Explanation Of Distribution

Distribution in Finance means payment of stocks, cash or profit earned from disposal of assets (securities or capital gains) to is shareholders.

It is normally investment company paying profit from its securities disposals to its shareholders.

For example, if a stock is bought for $ 100 and then later on sold for $ 150 then the capital gain is

Purchase price   $ 100

Sale price          $ (150)

Gain                  $   50

The profit earned through this profit is taxable income for the shareholders.

Word “Distribution” in corporate world refers to many things for example if a company creates its independent subsidy i.e. if a company spins off then shares from existing company or parent company are distributed through this new entity.

They are also referred to as dividends and does not always have to be in cash form.

Shareholder’s wealth or share decreases with the receiving of any such capital gain.

Distribution cost in accounting means any expense directly incurred in delivering a product to its retailer or end consumer. It includes costs like storing in warehouse, advertisement cost, shipping, transportation and delivery charges etc. It is also referred as selling cost.

All these items can be accumulated and can be called items of distribution channel.

  • Distribution channel can be direct i.e. from manufacturer to consumer directly i.e. customized products. This is the shortest channel.
  • The second one involves other intermediaries to make a product reach from a manufacturer to its end consumer i.e. whole sellers and retailers involved. This distribution channel can be a bit longer.

Distribution cost is a part of Profit and loss statement and is subtracted from sales and included in the cost of goods sold.




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