Difference between trading and manufacturing concern

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on June 22, 2021

The difference between Trading and Manufacturing concern can be explained with the help of following points:

Nature of purchase

Trading Concern: These business institutions purchase merchandise in ready shape to sale condition, for example, furniture dealer purchase furniture from the manufacturer and sell it to customers without additional processing.
Manufacturing Concern: Manufacturing institutions employ labour and machinery to convert material into finished goods, for example, furniture manufacturer converts wood and other material into furniture after applying labour.

Nature of inventories

Trading Concern: Opening and closing inventories are of-one type i.e., merchandise in trade.
Manufacturing Concern: Opening and closing inventories are of three types i.e., raw- material, work-in-process and finished goods.

Accounting data

Trading Concern: As there is no production, thus accumulation of accounting data identified with production process is not needed.
Manufacturing Concern: Accounting procedures provide for the accumulation of accounting data, identified with production process.

Determination of sale price

Trading Concern: In trading concern, the sale price is determined by adding profit in purchase price.
Manufacturing Concern: In manufacturing concern, the sale price is determined by adding profit in per unit cost.

Ledgers required

Trading Concern: No extra ledgers like factory ledgers are needed.
Manufacturing Concern: Additional ledger accounts are required.


Trading Concern: Only is roll acquaintance prepared, because problem like that of manufacturing does not arise.

Manufacturing Concern: As wages and salaries are paid to workers employed in production and to those who are working in the office. Separate payrolls are prepared because cost of production department is charged to manufacturing cost and the other to selling and administration cost. Moreover, separate payroll is prepared for direct labour and indirect labour.

Intangible assets

Trading Concern: Intangible assets if not recorded, it does not matter, rather it is preferred not to record intangible assets.
Manufacturing Concern: Intangible assets such as cost incurred on research work,  patents, designs and experimental costs etc. are to be recorded and must be included in computing unit cost.


Trading Concern: The difference of cost and expense is not made in trading concerns.

Manufacturing Concern: In manufacturing concerns proper distinction is made between cost and expense.

Fixed assets

Trading Concern: In trading concerns fixed assets used are smaller in number and usually no separate ledger is maintained for them.
Manufacturing Concern: In manufacturing enterprises fixed assets used are large in number, therefore separate ledger is maintained for them.

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