Financial Accounting Co Operative Societies – tryspring

By | September 30, 2019

Financial Accounting – Co-Operative Societies

Any ten persons who are competent to contract may file an
application to the Registrar of Co-operative Societies as per
Section 6 of the Co-operative Societies Act, 1912. By law, may be
framed by each society and should be registered with the
Co-operative Societies.

Effectiveness of change by the law of societies is applicable
only when changes are approved by the Registrar of Society.

Types of Society

There are two types of society −

  • Limited liabilities society
  • Unlimited liabilities society

Any member is not liable to pay more than the nominal value of
the share held by him and no member can own more than 20% of the
shares of society.

Today, government is encouraging co-operative societies to help
society at large. Cooperative societies are operative in various
sectors like consumer, industrial, services, marketing, etc.

Under accounting system of Co-operative societies, the term
Receipt and Payment is used for two fold aspects of double entry


Following accounts usually maintained by the Co-operative
societies −

  • Day Book (Journal)
  • Day Book (Cash Account)
  • Day Book (Cash Book with Adjustment Column)

Day Book (Journal)

Day book is a book of original entries. In a day book, all types
of cash or non-cash transactions are recorded, according to the
principle of double entry system.

As per the practice followed in the co-operative societies, a
separate journal book is not prepared rather all transactions are
directly recorded in the day book. Day book has two sides Receipt
(debit) and payment (credit) and there are two columns in each
side of a day book, one for the cash transactions and second for
the adjustment.

Transaction for the cash receipt and cash payment are recorded in
cash column and payment side respectively. Similarly, entries are
done in debit and credit side of a day book in the adjustment

Day Book (Ledger for Cash Account)

Since, all the cash transactions are recorded directly in a day
book, it might be called as ledger account of cash book.

Day Book with Cash and Adjustment Columns


Day Book with Cash and Adjustment Columns
Date Particular R.No. Cash Adjustment Date Particular R.No. L.F Cash Adjustment


In the co-operative societies, posting of ledger is not done on
the double entry system. Receipt side of the day book on debit
side of the ledger account and payment side of the day book
posted on the credit side of the ledger account.

Closing of Ledgers

In the co-operative societies, balancing of a personal account is
done at the time when any member clear his account or a new
account is opened. Totals of all other accounts (receipt and
payments) are kept as it is. Balancing of receipt and payment
accounts are not required.

Receipt and Payment Account

A receipt and payment account is the summary of a day book and
prepared for a specified period. Receipt and payment account is
prepared from the totals of receipts and payment sides of the
ledger accounts.

Final Accounts

Trading & Profit and Loss account and Balance sheet are
prepared from the receipt and payment accounting after
consideration of the adjustment entries. Items appear under the
receipt side are treated as income, and items of the
payment side are as expenditure.

Rules Appropriated as

  • First 25% of the net profit should be transferred to the
    reserve fund account.

  • As per section 35 of Co-operative Societies Act, 1912,
    distribution of the profit should not be more than 6.25%.

  • Contribution to charitable funds as defined in section 2 of
    Charitable Endowment Act, 1890, which says that contribution
    may be done with the prior permission of the Registrar.
    Maximum contribution is restricted to 10% of the available
    profit, after transferring profit to reserve account.

  • Unlimited liabilities, co-operative society may distribute
    profit only after general or special order of the State

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