Co-operative Societies

A cooperative is an association of persons who have voluntarily joined together to achieve a common
goal through the formation of a democratically controlled organisation. In other words, a cooperative is a
voluntary non-profit organisation, which is owned and run by members or shareholders who are also the
customers.
Members purchase shares which constitutes the co-operative’s capital. The co-operative can also raise
capital through their member’s deposits, sale of goods and services to members and any affiliation or
membership fees collected. They may also raise capital through external loans.
The sole aim of the co-operative is to provide a service for its members and not to make a profit.
Therefore, any profits/surplus made are shared among the members in the form of Divdends.
Co-operatives are registered under the Co-operative Society act and hold annual general meetings where
shareholders elect a Board of Directors who make policies to manage the activities of the co-operative.
Members who belong to committees who work in the co-operative are given a voluntary payment called
Honoraria.
The accounts prepared for co-operative societies are;

 Receipts and Payments Account

 Trading Account (If they sell products)
 Income and Expenditure Account
 Appropriation Account
 Balance Sheet
NB. These statements are prepared in similar manner to those for a Non- Trading Organisation
and Limited Liability Company.

Guiding Principles of Co-operatives

 Voluntary/Open Membership
 Democratic Controls
 Limited Interest on Capital
 Patronage Refund
 Continuous Education
 Cooperation among Co-operatives
NB. Patronage Refund – The returns/ surplus from the operations of a co-operative society belongs
to the members of the co-operative, and therefore should be distributed to them in such a manner
that no member gains at the expense of the other.

The Surplus of a Co-operative is shared between its members in an Appropriation Account.

 Name of Co-operative
Appropriation Account for the year ended…………………………………
Surplus for the year xxxxx
+ Undistributed Surplus b/d (Last Year) xxxxx
xxxxx
-Transfer to Reserve
Statutory Reserve xxxx
Special Reserve xxxx (xxxx)
xxxxx
-Honararia (xxxx)
xxxxx
-Proposed Dividends (xxxx)
Undistributed Surplus c/d (This Year) xxxxx

NB. A Reserve refers to a savings for a particular purpose.

Balance Sheet Extract

Capital and Reserves Section
Capital and Reserves:
Share Capital xxxxx
+ Reserves:
Statutory Reserve xxxx
Special Reserve xxxx xxxx
Xxxxx
+ Undistributed Surplus c/d xxxxx
xxxxx