Customers and suppliers - the entities that transactions are between - fall into four main categories:

Sole trader	Partnerships	Companies (Limited liability companies)	Unincorporated not-for-profit organisations
Individuals There is no legal separation between the personal assets and liabilities of the individual and their business activities.	Groups of individuals who formally share costs and profits. Examples are groups of professionals such as accountants, lawyers, architects or doctors. As with sole traders, there is no separation between the assets of the individuals and the business they run.	An 'incorporated' entity registered at Companies House and regulated by the Companies Act. Liabilities are limited to the assets of the business and separated from the assets of the individuals associated with the business.  Includes public limited companies (plc), limited liability partnerships (llp), and not-for-profit companies which are limited 'by guarantee".	Associations, clubs, societies, unincorporated charities and other 'not-for-profit' groups. Examples are local tennis clubs, arts and historical societies, and small charities.

Most transactions between entities are a form of trading; with one entity being a customer and the other a supplier.

In the examples below the entities are shown in bold: An individual pays £10 to another individual to clean the windows. A individual pays £10 to a company to clean the windows. A company pays £10 to a window cleaning company to clean their windows. A window cleaning company pays a donation of £10 to a charity for retired window cleaners. The first three examples are trading - the supplier is in business to provide a service in return for payment. In the last example, no trade takes place, because the payment is a donation and nothing tangible is expected in return.

For not-for-profits, the language of accounts is slightly different. For example instead of talking about 'Profits' and 'Losses', which are trading terms, the language becomes 'Income' and 'Expenditure' which is more neutral. Although the language is different, the mechanics of the accounts and double-entry are exactly the same.

Next steps: Transactions