The institutions or individuals which are engaged in activities other than Trade are called Non-Trading Concerns. Such institutions are formed not for carrying on a business and making profits but they work for some Charitable, religions, social and similar other purposes of public betterment. Examples of such institutions are clubs, hospitals, schools, colleges’ libraries, debating societies, orphanages etc.

These non-profit making institutions, usually do not maintain a full set of Accounting books. Generally they keep only cash book in which cash receipts and cash payments are recorded. Their receipts are mainly from donations subscriptions; entrance fee etc. is spending in achieving the object for which they are formed. At the end of the year they prepare an Income and Expenditure Account. The Income and Expenditure Account serve the same purpose as the Trading and profit and loss Account in case of Trading concerns.


The main characteristics of Non-Trading Concerns are as follow:

  1. 1.    Non-Profit Making

The main purpose of the formation of these institutions is not to make profits rather they work for the benefit of the community.

  1. 2.    Objective:

The main purpose of non-trading concerns is to provide services to fulfill the social needs of the community.

  1. 3.    Source of Income:

As these institutions are not engaged in any particular trade or business so the. main source of income of the non-trading concerns are usually from subscriptions. Donations, fee from members, government grants and similar sources.

  1. 4.    Organization form:

Non-Trading Concerns may be in the form of clubs, society, social welfare association and trust, etc.

  1. 5.    Maintenance of Accounts:

The Accounts of 4he non-trading concerns are usually maintained like Trading Concern according to the double entry system of book-keeping. But as these institutions

usually do not maintain full set of books but a cash book. From this summary of cash book, they prepare the Income and Expenditure Account in order to ascertain whether the incomes are excess that expenditures or the expenditures are excess than incomes.

6. Utilization of Income:

The excess income remaining after meeting the expenditures of any particular

•     year is not distributed among the members but that is retained to provide the better
services to its members and to fulfill the needs of that particular institution.

The following are the main points of difference between Accounts of the

Trading concerns and Non-Trading Concerns.



Points of differenceAccounts of Trading ConcernsAccounts of Non-Trading Concerns
I. Purpose of formation

2. Source of

3. Management

4. Ownership

5. Distribution
of excess
As these institutions are formed for earning profits so their Accounts are kept under Double Entry System of Boo-Keeping. The complete system of Book-Keeping i.e. Journal ledger and Final Accounts (Profit & Loss Account and Balance Sheet) are prepared.

The source of the income of these institutions is from the sale of goods and services.

The business is managed usually by the proprietor or the partners with the help of the employees.

The persons who have invested capital in the business may be called as owners, partners or stock holder

The net profit earned during a particular period is distributed among the owners, partners, or shareholders.
The purpose for the formation of these institutions is not to make profit so their Accounts are not prepared like trading concerns etc. The Accounts of such institutions are not kept under double entry system of Book-Keeping but only the following Accounts books are used:
(a) Cash Book (b) Stock Register
(c) Register for Salaries and Wages
(d) Personal Accounts.

The main source of such institution's income is from Donations, subscriptions fees, etc.

The affairs of the non-trading concerns are run by Management Committee. In order to run the manage-met affairs. Manager or the Secretary is appointed by the Management Committee.

But the persons who run such institutions like club, society or association are called as its members and not the owners.

The excess income remaining after meeting the expenditure of any particular year is not distributed among the members of that institution but that is retained to provide the better services to its members and to fulfill the needs of that institution.

6. Form of organizationThese trading concerns are usually in the form of sole-proprietorship, partnership or joint stock company. These non-trading concerns may be in the form of society, association, clubs, etc.



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