What are non-trading concerns

Concerns or organization may be classified as:

Profit making organizations:

Profit making organizations deal in buying and selling merchandise with the expectation of earning profit. Examples of trading or profit making organizations are commercial banks, insurance companies, textile mills etc.

Non-trading concerns or non-profit makingorganizations

Non-trading concerns or Non-profit making organizations are those which exist for the benefit of the community on to supply a service to their members and not for the purpose of trading with a view to making profit. Such organizations are called Non-Trading Concerns. Some Non-Trading Concerns are civil hospitals, Govt. owned educational institutions, public libraries, orphanages, sporting and athletic clubs and societies of various kinds.

Characteristics of non-trading concerns

The main characteristics of non-trading concerns are as follows:

Objective:

The main objective of non-trading concerns is to provide goods or services that fulfill a social need. There is neither a profit motive nor an expectation of earning net income.

Source of Income:

The main sources of income of non-trading concerns are fees, subscriptions, donations, Govt. and municipals grants and other similar sources.

Also Check:  Receipts and payments account

Distribution of Income:

No part of excess of income over expenditure is distributed to those who contributed support through subscription or donations etc.

Utilization of Income

The excess of income over expenditure is ordinarily utilized in later years to provide better goods and services to the citizens of the area.

Management:

The control and management of Non-tracing concerns rests in the hands of trustees or governing body committee of management.

Maintenance of Accounts

The accounts of these institutions are generally maintained according to the double entry bookkeeping system. At the end of the year, they make out the summary called income and expenditure summary and balance sheet.

These institutions and societies do not maintain a full set of books but only cash book is maintained in which all receipts and payments are entered.

Exercise:

We also have other non-trading concerns topics to read:

Differences between trading and non-trading concerns
Multiple choice questions
Fill in the blanks
Short questions

1 thought on “What are non-trading concerns”

Leave a Comment