Differences between trading and non-trading concerns

The main points of difference between trading and non-trading concerns may be summarized as follows:

Objective:

Trading Concerns: The main objective of these concerns is to earn profit.

Non-trading Concerns: The main objective of these concerns is to provide goods and services that fulfill a social need.

Source of Income:

Trading Concerns: The main sources of income are revenue received from the sale of merchandise or from the services rendered to others.

Non-trading Concerns: The main sources of income of these concerns are entrance fees, subscriptions, donations, Govt. and municipals grants etc.

Distribution of net income:

Trading Concerns: The net income or profit earned during a trading period is distributed among the partners or shareholders.

Non-trading Concerns: The excess of income over expenditure is not distributed but is used to fulfill the needs of the concerns.

Organization form:

Trading Concerns: Trading concerns may be in the form of sole proprietorship, partnership, joint stock company or public enterprises.

Non-trading Concerns: Non-Trading concerns may be in the form of club, society, association and trust.

Ownership:

Trading Concerns: The ownership lies in the hands of the persons who contributed capital for trading concerns. In sole proprietorship, proprietor is the owner, in partnership the partners and in Joint-stock company, the shareholders are the owners of the business.

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Non-trading Concerns: In non-trading concerns, the ownership does not lie in the hands of anyone. No one can claim the ownership of these concerns, All the persons carrying on the society or club or trust are its members.

Management:

Trading Concerns: The sole proprietorship is managed by the proprietor, the partnership by the partners or their representatives and joint stock company by the board of directors.

Non-trading Concerns: The control and management of non-trading concerns rest in the hands of trustees, governing body and committee of management.

Accounts:

Trading Concerns: The accounts of these concerns are maintained according to the double entry system. Trial balance is drafted to know the arithmetic accuracy of books of accounts and income and expense summary is prepared to ascertain the net income or loss of the business.

Non-trading Concerns: The accounts of non-trading concerns are also maintained according to the double entry system of accounting. These institutions do not maintain a full set of books but only a cashbook is maintained. Réceipts end payments account is prepared instead of trial balance and Income and expenditure account is prepared to present to the members showing how much income has exceeded expenditure or vice versa.

Exercise:

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