Differences Between Trading and Non-trading Concerns
The primary points of difference between trading and non-trading concerns may be summarized as follows:
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.
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.
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.
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.
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.
Other articles on non-trading concerns are also available to read:
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About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True contributes to his own finance dictionary, 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.