Financial accounts notes

*B.Com. First Year*

*Financial Accounting*

*Sunil Kumar Gupta*

*Non-Trading Organizations and Professionals*

Organizations are of two types:

Trading organizations

and Non-trading organizations

Trading organizations refer to those organizations whose main objective is to earn profit.

Whereas non-trading organizations refer to those organizations whose main objective is not to earn profit but to serve society.

Similarly, professionals refer to individuals who earn money through mental activities based on their specialized knowledge, training, qualifications, and experience.

*Why do non-trading organizations need to maintain accounts?*

It is true that the main objective of non-trading organizations is not to earn profit.

They do not engage in any kind of buying or selling.

Instead, they perform social service.

Their transactions are usually in cash.

However, they need to maintain accounts for the following reasons:

*For information on membership fees received*

The main source of income for non-trading organizations is the membership fees received from their members, and every member wants to know how much total membership fees the organization has received.

*For information on donations*

Another important source of income for non-trading organizations is the donations received, and the donor wants to know how much total donation the organization has received and how the donation given by them has been utilized.

*For information on receipts and payments*

Non-trading organizations need to know how much they have received from various sources and how much they have paid to various sources.

*For information on income and expenditure*

Non-trading organizations have members who want to know how much income and expenditure the organization has incurred during a specific period.

*For information on assets and liabilities*

Non-trading organizations need to know how many assets and liabilities they have.