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

Objectives

Trading Concerns: The main objective is to earn profit.
Non-trading Concerns: The main objective is to provide goods and services that fulfill a social need.

Source of Income

Trading Concerns: The primary sources of income are merchandise sales and services rendered to others.
Non-trading Concerns: The primary sources of income are entrance fees, subscriptions, donations, the government, municipal grants, and so on.

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 requirements of the concerns.

Organization Form

Trading Concerns: These may take the form of a sole proprietorship, partnership, joint-stock company, or public enterprise.
Non-trading Concerns: These may take the form of a club, society, association, or trust.

Ownership

Trading Concerns: Ownership lies in the hands of the persons who contributed capital. In a sole proprietorship, the proprietor is the owner, whereas in partnerships and joint-stock companies, the partners and shareholders are the owners of the business.
Non-trading Concerns: Ownership does not lie in the hands of anyone. All the persons carrying on the society, club, or trust are its members.

Management

Trading Concerns: The proprietor manages the sole proprietorship, the partners or their representatives manage the partnership, and the board of directors controls the joint-stock company.
Non-trading Concerns: The control and management of non-trading concerns rest in the hands of trustees, the governing body, and the management committee.

Accounts

Trading Concerns: Accounts are maintained using the double-entry system. Trial balance is drafted to improve the arithmetic accuracy of the accounts books, and the income and expense summary is prepared to ascertain the net income or loss of the business.
Non-trading Concerns: The double-entry system is used, but only a cash book is maintained. The receipts and payments account is prepared instead of the trial balance, and the income and expenditure account is prepared to show how much income has exceeded expenditure, or vice versa.

Exercise

Other articles on non-trading concerns are also available to read:

What are non-trading concerns?
Multiple choice questions
Fill in the blanks
Short questions

Get help from our Partners

Finance Strategists collaborates with top financial firms in the country to provide you only with trustworthy financial advisors. Speak to a financial advisor in Birmingham, AL today or visit our financial advisor page if you don’t live locally.

Frequently Asked Questions

What are the benefits of trading vs. non-trading businesses?

The benefits of trading businesses are that they can generate revenue and profits, and they can provide employment opportunities. The benefits of non-trading businesses are that they can reduce costs, and they can avoid the risk of loss associated with trading businesses.

How do I know if my business should be a trading or non-trading concern?

You should consider the following factors when deciding whether to trade or not: - the nature of your business: if your business manufactures products or provides services that are sold to customers, then it is likely a trading concern. On the other hand, if your business provides services that are not sold to customers, then it is likely a non-trading concern. - Your company's structure: if your business is structured as a sole proprietorship, partnership, or limited liability company, then it is likely a trading concern. On the other hand, if your business is structured as a corporation, then it is likely a non-trading concern. - Your business location: if your business is located in a country that has high taxes on trading businesses, then it is likely a non-trading concern.

What is the main objective of a trading concern?

The main objective of a trading concern is profit-making.

What are the key considerations when deciding to trade or not to trade?

The key considerations when deciding to trade or not to trade are the nature of your business, your company's structure, and your business location. You should also consider the benefits of trading businesses and the risks associated with trading businesses.

What are the key differences between trading and non-trading concerns?

The key differences between trading and non-trading concerns are that trading businesses are involved in the buying and selling of goods and services, while non-trading businesses are not.

True is a Certified Educator in Personal Finance (CEPF®), a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.