Maharashtra Board Class 12 Cooperation Chapter 5 Accounts and Audit of Co operative Societies PDF Download

5. Accounts and Audit of Co-operative Societies

5.1 Introduction

Every business organization involves an exchange of goods and services. Exchange of goods and services from one business organization to other parties is called a transaction. Business organization having an object to earn Profit maintains the books of accounts to know the profit or loss in the business during the financial year.

Co-operative societies are voluntary organizations formed by the members. Even though the main object of co-operative society is not to earn profit, but to take a review of financial conditions of the society they maintain the books of accounts.

Scientific recording of financial transaction is known as accounts. The scientific record contains the details of the date and amount of the transaction. Every co-operative society must conduct the audit every year. Verification of accounts is known as audit.

According to Maharashtra co-operative societies act 1960, it is mandatory to maintain books of accounts of co-operative society. As cooperative society is an organization of persons and is working on the basis of Democratic principle, there should be transparency and honesty in the financial transactions. Therefore, it should make the arrangement for maintaining and writing the books of accounts.

So, we are going to study the books of accounts and Audit in this topic.

Teacher's Note

Every shop and business keeps a diary of money they receive and spend. This diary is called account books. Just like you write your homework diary, businesses write these books to know if they made money or lost money.

Exam Trick

Remember: Accounts = Diary of business. Just like Aadhaar is your identity, accounts are the identity of a business showing if it is healthy or sick.

Points to Remember

A transaction is exchange of goods and services between two parties.
Accounts are scientific recording of all financial transactions.
Audit means checking and verifying all accounts books.
Co-operative societies must keep accounts according to law.
Accounts help know profit or loss in business.

5.2 Books of Co-operative Society

In the working of co-operative society many financial transactions take place. All these transactions are recorded in different books of account. It is mandatory to maintain the books of accounts and also other books. This book is useful for the smooth functioning of the co-operative society. Following are the different books of accounts.

A. Books of Accounts

Every co-operative society has to maintain books of accounts. This book is the mirror of financial transaction in a co-operative society. This book shows the financial position of the co-operative society.

Following are the different books of accounts and statement of a co-operative society.

1. Journal: The journal is a primary book of original entries. In this book the day to day transactions are recorded in a chronological order, in debit and credit form and in a systematic manner. All cash and credit transactions are recorded in this book. Therefore, this book has a Legal importance. Journal is a base of ledger.

2. Subsidiary book: The co-operative societies which has large number of business transaction maintains subsidiary book. It is secondary book. The journal is divided into several parts to enter the numerous transactions quickly and effectively. In each subsidiary book the specific types of transactions are recorded. Under subdivision of journal all cash transactions are recorded in cash book and credit transactions are recorded in suitable subsidiary book. e.g. Purchase book, Sale book, Purchase return book, Sales return book etc.

3. Ledger: A bundle of accounts is known as ledger. The book in which various accounts are recorded is known as ledger. After recording the transaction in a journal, subsequently it is to posted to a ledger. The process of transferring entries from journal is known as ledger posting. The ledger is a record of final entry at the end of the financial year. All accounts are balanced and trial balance is prepared. Therefore, it is the most important book of accounts. All co-operative societies maintain ledger.

4. Cash book: The cash book is a sub division of the general. In this book all cash transactions are recorded. It records details of cash received by the co-operative society, cash paid by the co-operative society and cash in hand on the particular date.

Teacher's Note

Journal is like the daily diary of a bank. It writes everything that happens each day. Ledger is like the account book of a bank where all customer accounts are kept separately.

Exam Trick

Remember: Journal = Daily diary (chronological order). Ledger = Account wise (by customer or by expense). Cash book = Only money in and money out.

Points to Remember

Journal records transactions in order of date (day by day).
Ledger records transactions organized by account type.
Cash book only records money received and money paid.
Subsidiary book is used when there are many transactions.
Posting means transferring entries from journal to ledger.

B. Statutory Books

According to Maharashtra co-operative societies act 1960. The books and registers which is obligatory to be maintained by the society are called as statutory books. Every co-operative society has to maintain the following statutory books. The cash book, journal ledger are statutory books in addition to these books following statutory books are maintained:

1. Members register: The co-operative society act 1960 provides that, every society has to maintain the register of members. It should be maintained in the form 'I'. The register includes full name of members, address, occupation, date of admission, shares held by them, date of entrance fees paid name of the nominee etc.

2. Active and non-active member's register: After completing the financial year the name of the active and non-active members is written in the register. In this register name, address, email, classification of active member according to the date, classification of non-active members according to the date such information is recorded. The list of active members is recorded in form J1 and list of non-active members is recorded in form J 2 separately.

3. Share register: This register contains the details of shares allotted to the members. The share account is written with the help of share register. The list of shares which are allotted is prepared according to the number of share certificates.

4. Debenture register: This register contains all the details regarding debenture sold by cooperative society, its face value and total amount. The register contains the name and address of the debenture holders.

5. Minute book of members meeting: This book contains the proceedings of General Body Meeting of the society. This book has legal importance. It contains names and signatures of the members, chairman, secretary present for the meeting and the business transacted in the meeting.

6. Minutes book of managing committees meeting: The proceedings of the meeting of the Managing committee are recorded in this book. The business transacted in every meeting is recorded separately. Accordingly, if sub-committee meetings are conducted there minutes are recorded separately.

7. Stock register: All the details of the stocks in the different departments of a co-operative society are recorded in this register. The entries of incoming and outgoing stock are recorded in this register.

8. Asset register: All the types of assets which are owned by the co-operative society are recorded in this register. It contains the title and nature of asset, date of purchase of asset, cost of asset, installation charges and any addition or deduction of the assets.

9. Investment register: The details of the investment made in different forms at different places by the co-operative society are recorded in this register. The particulars regarding the name and nature of investment, date of investment, amount invested, date of maturity, rate of interest or dividend etc. are recorded in this register.

10. Dead stock register: In this register details related to dead stock are entered e.g. outdated stationary, furniture, etc. The date of purchase of asset, cost, quantity etc. is recorded in this register. The assets written off are also recorded in this register.

11. Loan register: The loans provided by the co-operative society to its members are recorded in this register. Register is maintained to record the name of member, the amount of loan given to the member, rate of interest, period, loan recovery and outstanding amount etc.

12. Audit and audit rectification register: Every year auditor is appointed in the Annual General Body Meeting. The auditor audits books of co-operative society. All information relating to audit is recorded in this register. This register is known as auditors remark book. In this book the accounting year, name and address of the auditor, appointment of auditor, auditors remark etc. such information is recorded. If auditor has taken any objection and suggested any rectification then it is also recorded in separate audit rectification register.

Teacher's Note

Statutory books are like the school register that government says you must keep. Members register is like attendance book - it shows who are members and when they joined. Just like school shows records to education officer, co-operative must show these books to auditor.

Exam Trick

Remember: Statutory = By law (compulsory). Non-statutory = Not by law (optional for smooth work). Statutory books are checked by auditor, non-statutory books are not checked by auditor.

Points to Remember

Statutory books are required by law and must be maintained.
Members register keeps list of all members and their details.
Share register shows how many shares each member has.
Minute book records what happens in meetings.
Stock register tracks goods coming in and going out.
Audit register records auditor's findings and comments.

This is a preview of the first 3 pages. To get the complete book, click below.