1. What is a Cooperative?

A cooperative is an association of persons (organization) that is owned and controlled

by the people to meet their common economic, social, and/or cultural needs and
aspirations through a jointly-owned and democratically controlled business
(enterprise).

2. Explain the types of Cooperative

a) Retail Cooperatives

Retail Cooperatives are a type of "consumer cooperative" which help create retail
stores to benefit the consumers making the retail “our store”. They allow consumers
the opportunity to supply their own needs, gain bargaining power, and share earnings.
They are organized as communities, or other “local groups”, owning their own retail
stores. Retail cooperatives are often found in small communities where local
businesses have shut down. Examples: hardware, food, agriculture products, and even
movie theaters. 

b) Worker Cooperatives

Members of worker cooperatives are both employees of the business as well as

owners of the cooperative. This is one of the fastest growing segments of
cooperatively owned businesses. Possibilities for being organized as a worker
cooperative include: New business start-ups, entrepreneurs sharing highs & lows
of business, or a conversion of existing

businesses. Examples: bakeries, retail stores, software development groups, and

aquaculture.

c) Producer Cooperatives

Producer cooperatives are created by producers and owned & operated by producers.
Producers can decide to work together or as separate entities to help increase
marketing possibilities and production efficiency. They are organized to process,
market, and distribute their own products. This helps lessen costs and strains in each
area with a mutual benefit to each producer. Examples: agricultural products, lumber,
carpentry and crafts.

d) Service Cooperatives

Service cooperatives are a type of "consumer cooperative" which help to fill a need in
the community. They allow consumers the opportunity to supply their own needs,
gain bargaining power, and share earnings. They are organized to give members more
control over the services that are offered. Examples: service co-ops such as child care,
health care clinics, and funeral services.

e) Housing Cooperatives

Housing cooperatives are a type of service cooperative which provide a unique form
of home ownership. They allow homeowners the opportunity to share costs of home
ownership (or building). They are organized as an incorporated business formed by
people who wish to provide and jointly own their housing. The units in a housing co-
op are owned by the cooperatives and cannot be sold for profit. Examples include:
condominiums, rentals, single-family homes, market rate, and limited equity.

3. Explain the process of capital formation in cooperatives.

The process of capital formation occurs in three stages, which we shall discuss in
detail. But one fundamental aspect must be borne in mind that for the accumulation of
capital goods (capital formation), part of current consumption must be sacrificed. By
deferring a part of current consumption, savings are created which are invested for
increasing capital goods. Thus, for capital formation, both savings and investments
are necessary. An example will explain by this point.

Suppose a person earns Rs. 5,000 per month and he spends the entire amount and
saves nothing for future. On the other hand, if he saves Rs. 2,000 per month out of his
earnings of Rs. 5000, he can accumulate a handsome amount for future investments.

This accumulated money can be invested by him either for procuring equipment and
machinery or he may purchase shares and government bonds.

By means of these savings and investments, he provides benefit to the society, as the
society will have a larger volume of stocks of capital and also greater production of
goods and services that simultaneously provides benefit to himself, also as he is able
to earn more income. On the contrary, if he goes on increasing his savings (in the
form of money capital), but does not invest it for purchase of capital goods, his act
will not be covered under capital formation.

4. Explain budget process in Cooperatives.

involves reviewing past budgets, identifying and forecasting

Budget process it
revenue for the coming period, and assigning amounts to spend on a
company’s various costs. The following are the processes of budget in
cooperative;
a) Review the previous period

The starting point should always be to look over the existing information
you have to hand. And in this case, the best evidence for how your new
budget should play out is the previous one.You should do this at a high level
for the entire company, and you should also encourage individual budget
managers (if you have them) to do the same for their own scopes.

Also critical in this step is to consult other team leaders. As we’ll see, the
best budgets are collaborative, and you need to know how well the previous
budget worked for everyone affected.

b) Calculate existing revenue

The most obvious starting point for any budgeting exercise is to figure out
how much you have to spend. This will involve other costs, of course, but
we’ll come to these next.

At the company level, you need to identify income streams. How much
money are you making gross? List your core products, their pricing, and the
expected volumes for each in the coming year. Naturally, this involves some
estimates and won’t be perfect.

c) Set out fixed costs

Fixed costs - often called “overheads” - are those over which you have little
control. Most importantly, they’re not impacted by your sales - whether the
business succeeds or not won’t have any effect on the amount you pay.
Assuming you know your employee headcount for the year, and have your
office space and insurance sorted, you can comfortably plan for these costs.
As part of this process, it’s worth understanding key payroll terminology so
that you don’t let your misconceptions or a lack of experience trip you up,
especially when it comes to assessing staffing costs.

d) Add variable costs

Variable costs are usually thought of as discretionary expenses. As opposed

to fixed costs, these are more fluid and can be tinkered with. “Discretionary”
doesn’t mean that these costs are frivolous or unnecessary. A business won’t
grow without marketing, and team perks can be a key contributor to keeping
employees happy for longer.

But when building a business budget, these costs have to be justified more
critically. And when you’re in danger of going over budget, variable costs
are usually the first to be cut.

e) Forecast additional spending

Are there any one-off expenses on the horizon? These can include a
serious merger or acquisition, consultant help to prepare for audit, or even a
special event or party that doesn’t come around often. If possible, try to set
out these irregular expenses separately in your budget. You certainly need to
account for them in your spending, but they won’t be a core piece for years
to come.

You might also consider a “rainy day fund.” Because the only certainty is
uncertainty, it pays to have some portion of your budget set aside in case
unexpected events occur and you need a safety net.

f) Scrutinize cash flow

This is where the budget analysis starts. You should now have a clear record
of expected revenue and expenses, and hopefully you even have a record of
these for the previous period. Look for clear indicators that certain parts of
your budget might need extra attention. You want to know the particular
aspects of your business that impact the budget most heavily, and be
prepared to adjust accordingly.

g) Make business decisions

Naturally, you now need to use all of the analysis and preparation you’ve
done. And that means forming a clear spending plan for the future. You’ll
almost certainly make updates and changes throughout the year, so it’s
important to rely on the data you have today, and to not get too bogged
down.
h) Communicate it clearly

The final step is to share the budget with your teams and make sure they
know what’s required of them. Chances are you’ll rely on many team leads
to handle their own costs, and they need to have the tools and expectations
to do this well. And then there’s the messaging. For many governments,
“budget day” is the biggest day of the year. There’s a reason why political
leaders take the messaging so seriously. And while you don’t need to go
overboard, it makes sense to get your communication right too.

5. Explain accounting procedures in cooperatives.

Step 1: Identify Transactions 

The first step in the accounting cycle is identifying transactions.

Companies will have many transactions throughout the accounting

cycle. Each one needs to be properly recorded on the company’s books.

Record keeping is essential for recording all types of transactions. Many

companies will use point of sale technology linked with their books to

record sales transactions. Beyond sales, there are also expenses that can

come in many varieties.

Step 2: Record Transactions in a Journal 

The second step in the cycle is the creation of journal entries for each

transaction. Point of sale technology can help to combine steps one and

two, but companies must also track their expenses. The choice between

accrual and cash accounting will dictate when transactions are officially

recorded. Keep in mind that accrual accounting requires the matching of

revenues with expenses so both must be booked at the time of sale. Cash

accounting requires transactions to be recorded when cash is either

received or paid. Double-entry bookkeeping calls for recording two

entries with each transaction in order to manage a thoroughly

developed balance sheet along with an income statement and cash flow

statement.

Step 3: Posting 

Once a transaction is recorded as a journal entry, it should post to an

account in the general ledger. The general ledger provides a breakdown

of all accounting activities by account. This allows a bookkeeper to

monitor financial positions and statuses by account. One of the most

commonly referenced accounts in the general ledger is the cash account

which details how much cash is available. The ledger used to be the gold

standard for recording transactions but now that almost all accounting is

done electronically, the ledger is less of an active concern as all

transactions are automatically logged.

Step 4: Unadjusted Trial Balance 

At the end of the accounting period, a trial balance is calculated as the

fourth step in the accounting cycle. A trial balance tells the company its

unadjusted balances in each account. The unadjusted trial balance is

then carried forward to the fifth step for testing and analysis. This is the
first step that takes place once the accounting period has ended and all

transactions have been identified, recorded, and posted to the ledger

(this is usually done electronically and automatically, but not always).

The purpose of this step is to ensure that the total credit balance and

total debit balance are equal. This stage can catch a lot of mistakes if

those numbers do not match up.

Step 5: Worksheet 

Analyzing a worksheet and identifying adjusting entries make up the fifth

step in the cycle. A worksheet is created and used to ensure that debits

and credits are equal. If there are discrepancies then adjustments will

need to be made. In addition to identifying any errors, adjusting entries

may be needed for revenue and expense matching when using accrual

accounting.

Step 6: Adjusting Journal Entries 

In the sixth step, a bookkeeper makes adjustments. Adjustments are

recorded as journal entries where necessary.

Step 7: Financial Statements 

After the company makes all adjusting entries, it then generates its

financial statements in the seventh step. For most companies, these

statements will include an income statement, balance sheet, and cash

flow statement.

Step 8: Closing the Books 

Finally, a company ends the accounting cycle in the eighth step

by closing its books at the end of the day on the specified closing date.

The closing statements provide a report for analysis of performance over

the period.

Generally ,after closing, the accounting cycle starts over again from the

beginning with a new reporting period. Closing is usually a good time to

file paperwork, plan for the next reporting period, and review a calendar

of future events and tasks.

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