Features of Non-trading Concerns

Non-trading concerns, also known as non-profit organizations, are characterized by the following features.

1. Non-Profit Motivation

Non-trading concerns do not seek to earn profit. Instead, their main objectives are to serve their members or society as a whole.

2. Entity

The entity concept is also applied to non-trading concerns because these organizations do not have owners.

3. Forms of Organizations

Common organizational forms for non-trading concerns include clubs, societies, charitable bodies, and public institutions (e.g., schools, colleges, hospitals, dispensaries, and libraries).

4. Sources of Income

Non-trading concerns have limited sources of income. In many cases, these organizations are dependent on the donations given by the members and outsiders. This is because subscriptions received from members may not cover all operating expenses.

5. Budgeting

Large-scale organizations, even if they are non-trading concerns, prepare an annual budget.

6. Use of Funds

Non-trading concerns spend their funds so as to maximize the benefit to the members.

Frequently Asked Questions

Is a non-trading concern required to maintain separate accounting records?

Yes, as per section 147(7) of the companies act 2013. It requires every non-profit organization or association or body of individuals to keep and maintain such books of account as will enable true and fair view of its financial position.

What are the main features of non-trading concern?

Non trading concerns are organizations that are formed to promote certain common interests rather than making profits for its members. These organizations do not have owners and do not distribute any income to them. They maintain separate accounting records.

What is an association or body of individuals?

This is referred to as non trading concern.

What is the source of income of non-trading concern?

Non trading concerns have limited sources of income. These can be through membership fees, donations etc. They are often dependent on the funds received from members and outsiders for covering their day-to-day expenses. Only wealthy institutions may have sufficient resources to maintain a certain level of activity.

What is the use of funds in non-trading concerns?

Non trading concerns spend their funds in such a way that it benefits the members by maximizing their benefits. Here, they do not make any profit for its members and owners. If the organization has surplus fund after meeting all of its expenses, it can distribute the extra money to its members or invest it for charity purpose.

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

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.