POA SECTION 9

PART 2 Accounting for Co-operatives

What is a Co-operative?
A Cooperative is a group of people who get together to meet their economic, social, and cultural
needs. They may be incorporated to provide a service or sell merchandise. They can be
established as either a business co-operative or not-for-profit co-operative.

Principles of Co-operatives
1. Open Membership
2. Control by members
3. Fair Economic Participation
4. Self-rule
5. Continuing Education and Information
6. Alliance with other Co-operatives
7. Community Building

Scan the following QR codes and make your notes on the Principles of Cooperatives.

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Types of Cooperatives
• Producer / Marketing Cooperatives.
• Consumer Cooperatives.
• Worker Cooperatives.
• Housing Cooperatives.
• Financial Cooperatives.
• New Generation Cooperatives.
• Multi-stakeholder cooperatives.
• Non-profit Community Service Cooperatives.

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Capital Raising for Co-operatives (needed for the Balance Sheet)
➢ Equity financing from members in the form of Share capital deposits, contributions,
membership fees, membership loans and deposits
➢ Loan Capital (External loans)
➢ Reinvested Surplus (Undistributed surplus earnings and Reserves (Same as
Profits/retained earnings of a company)

Accounts prepared by Co-operatives.

1. Journal entries to record Share Deposits and Loans

Example: On 1st January 2019, Hulk purchased shares in Avengers Co-operative at $8000,
while Black Panther deposited $30,000 for two years as savings. On this day, the Avengers
also borrowed $22,500 from Captain America.

Avengers Co-operative
The General Journal
Date Details Debit $ Credit $
2019
January 1 Cask/Bank 60,500
Share Capital (Hulk) 8,000
Deposit (Black Panther) 30,000
Loan (Captain America) 22,500
To record the issuance of shares, deposits and a loan

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2. Journal entries to record payment of interest and repayment of loans to members.

On 31st December 2019, Black Panther was paid his interest of 10% per annum on his principal
amount. Captain America received the interest on his loan, which was 10%, and his first
instalment of $8,500.

Avengers Co-operative
The General Journal
Date Details Debit $ Credit $
2019
December 31 Interest Expense (10% x $30,000) + (10% x $22,500) 5250
Bank 5250
To record the payment of interest expense for
deposits and loans

December 31 Loan (Captain America) 8500

Bank 8500
To record the first instalment for the year

3. Income and Expenditure Account

➢ Same as an Income Statement for a Profit-Making Organisation
➢ Same as Non-Profit Organisations
➢ Interest incurred on deposits and loans will be included under the Expenditure
Section

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4. Appropriation Account
After the Surplus/deficit is calculated (using the Income and Expenditure Account), this
account is prepared to show how this Surplus/Deficit is distributed (shared). It can be
prepared as an extension of the Income and Expenditure Account or on its own. It
documents the items that represent Income earned by the Cooperative and Items that
represent Expenses incurred by the Cooperative that are appropriated from the
Surplus/Deficit. Income earned will be credited (added) to Surplus/Deficit, and Expenses
incurred will be debited (subtracted) from Surplus/Deficit as Appropriations. The residual
income (Undistributed Surplus) will be transferred to the Balance Sheet (Reserves
Section).

Income added to Expenses (Appropriations) subtracted from Surplus/Deficit.

Surplus/Deficit.
Undistributed Surplus b/d – the
remainder of surplus from the
previous financial year that was
not distributed.
• Reserves – portions of Surplus set aside for general or specific
reasons. In addition, some reserves are mandatory by law
(statutory reserve).
• Honorarium payable –an allowance or stipend paid to
professionals for services rendered outside their regular duties
and responsibilities.

• Preliminary expenses – these are expenses incurred before

(before) the cooperative begins its operations and will not be
incurred at any time during its operations. (legal fees, company
incorporation fees, expenses for raising initial capital, stamp
duties, and name approval fees.

• Dividends – These are the returns the shareholders/members

receive on the money they invested.

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 POA SECTION 9

Name of the Business

Appropriation Account for the year ended (Day Month Year)
$ $ $
Surplus/deficit xxx
ADD Undistributed Surplus b/d xxx
xxx
LESS APPROPRIATIONS
Transfer to Reserves:
Statutory Reserves xxx
Investment Reserves xxx
Building Reserves xxx
xxx
Honorarium Payable xxx
Preliminary expenses xxx
Proposed Dividends xxx
Total Appropriations (xxx)
Undistributed Surplus c/d XXX

5. Balance Sheet
This Balance Sheet of a Cooperative has the same format as Corporation (Company).
However, there are a few additions.

➢ Proposed dividends are included in the Current Liabilities Section because they are
owing at the period's end. Accrued expenses.
➢ A proposed honorarium is also included in the Current Liabilities Section because it is
still owing at the end of the period.
➢ If the Loan interest is accrued, it will also be included in the Current Liabilities Section
➢ Undistributed Surplus c/d is included in the Reserves Section
➢ The Financed by Section has some variation.

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$ $ $
Financed by:
CAPITAL
Share Capital xxx

Loan xxx

RESERVES
Statutory Reserves xxx
Education Fund xxx
Investment Reserves xxx
Building Reserves xxx
Undistributed Surplus b/d xxx
xxx
XXX

Past Papers
Jan 2010 #6
June 2011 #6
Jan 2012 #4
June 2012 #7
June 2013 #6
June 2015 #7
June 2016 #6

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