Difference Between Trading Concern And Non Trading Concern | Trading And Non Trading Organization

What Is A Profit Making Concern / Trading Concern And What Is The Difference Between Trading Concern And Non Trading Concern .

The organisations which are formed with a main purpose of earning a profit are called as “ Profit making concerns “ or “ Trading concerns “. In simple words trading concerns means that the basic objective of such concerns is to earn profits.

 

Profit making concerns / Trading concerns example –

1. Proprietary / Sole Trading concerns involved in purchasing and selling goods.
2. Professional persons providing various services like Doctors, Lawyers, C.A. etc.

 

 

What Is A Non Profit Making Concern / Non Trading Concern ?

The organisations which are formed not for profit making purpose, but with a main purpose of providing various services to the people for development of the society are called “ Not for Profit or Non Trading Concerns “. It means that such associations are works not for profit, but they works for development of society by providing various services.

 

Non profit making concerns / Non Trading concerns example –

1. Sports clubs.
2. Charitable hospitals.
3. Education institutes.

 

Difference Between Trading Concern And Non Trading Concern :

 

• Profit Making Concern / Trading Concern –

1. The main purpose is to earn profit through trading.
2. They purchase and sale goods, they carries on a trade and so they prepare Trading account.
3. They work for profit earning and so they prepare Profit and loss account.
4. The final accounts of such concerns involves Trading account, profit and loss account and balance sheet.
5. Such concerns are basically formed for profit earning and so :

1. Credit balance of profit and loss account is termed as “ Net profit “.
2. Debit balance of profit and loss account is termed as a “ Net loss “.

6. The excess of assets over the liabilities is termed as capital worth / Net worth .
7. Detailed books of accounts required to be maintained such as subsidiary books, ledger, cash book, petty cash book etc.
8. In general, summary of cash book not requires to be published.
9. The owners provides capital from own funds, if required they borrow funds. So the items like donations, grants, entrance fees etc. not appears in the books.

 

• Non profit making concerns / Non Trading concerns –

1. The main purpose is to provide services to society for development.
2. In general they do not purchase or sale Trading goods and so they do not prepare Trading Account.
3. They work for social welfare so they do not prepare profit and loss account, they prepare income and expenditure account.
4. The final accounts of such concerns involves income and expenditure A/c, balance sheet. A summary of cash transactions I.e. Receipts and payments account is also prepared.
5. Such concerns are basically formed for social benefit and not for profit and so :

1. Credit balance of income and expenditure account is termed as Surplus / Excess of income over expenditure .
2. Debit balance of income and expenditure account is termed as Deficit / Excess of expenditure over income .

6. There is no capital account and so the Excess of assets over liabilities is termed as a Capital Fund / General Fund .
7. Such concerns have to maintain limited number of books such as Cash book, members registers, ledger etc.
8. These concerns have to make public the summary of cash transactions so that the people should know how the total cash raised is distributed for various reasons.
9. Such concerns collects the funds from Donations from people, subscription, administration fees, grant etc.

 

Features Of Not For Profit Concerns :

 

1. Such concerns are formed to promote welfare of the people in general.
2. They prohibit the payment of any dividend to their members.
3. They are formed for the purpose of promoting commerce, art, science, charity or any other useful object.
4. They collect the income from source like donations, subscriptions, admission fees, government grant etc.