Accounting System Of Cooperative Societies
(Enugu North Local Government Area)
The accounting system of cooperative societies is designed to accurately record and manage the financial transactions of these member-owned organizations. Typically following principles of double-entry accounting, cooperative societies maintain ledgers to track income, expenses, assets, and liabilities. Special attention is given to the equitable distribution of profits among members, reflecting the cooperative’s commitment to collective ownership and benefit-sharing. Financial statements such as income statements and balance sheets provide a comprehensive overview of the cooperative’s financial health. Additionally, cooperative accounting often involves maintaining individual member accounts to track contributions, patronage dividends, and other relevant financial activities, fostering transparency and accountability within the cooperative structure. This specialized accounting system enables cooperative societies to effectively manage their resources, promote member participation, and ensure the sustainability of their economic endeavors.
The growing complexities and challenges of the global co-operative societies has in recent times increased like wilel fire. The queve which is almost a culture in the country, fraudulent activities etc there, the need now arises on how these problems can be solved.
The research work is designed to analyse the role of co-operative societies and operational performance in local government areas reference to Enugu North.
It also helps other people to know the full meaning of co-operative societies in Nigeria and what they should achieved on it. Before forming co-operative society they will make sure that they investigate the level of adequacy of accounting records of co-operative societies.
It will heep them to know that they should tried to keep adequate accounting records of books and also to determine the impact of the present level of accounting records on profitability and viability of co-operative societies.
An oral interview is used to collect useful data and information which could not have been portrayed by the questionnaire. Form the analysis of data my major finding is that co-operative societies do not really maintain adequate accounting system; also that co-operative societies make use of their members as their accounting staff usually the secretary finally that most co-operative societies do not comply with the established accounting standards.
Most critics hold that there are paucity of accounting records maintained by co-operative societies.
This study therefore investigate the level and the adequacy of accounting records of co-operative societies. To determine this, the fundamental objective of the study among others are.
1. To identify and disclose whether adequate accounting records are kept by co-operative societies.
2. To determine the impact of the present level of accounting record’s on profitability and viability of co-operative societies.
The entire cooperative societies in Enugu North local government area (registered) was the study population from which 98 was selected. A set of structured questionnaire was administered to the sample out of which 72 responded. Oral interview were also used to collect useful data and information which could not have been portrayed by the questionnaire.
The collected data were classified, analysed and interpreted by the use of tables, percentage, product moment of correlation and chi-square (test of goodness of fit) was used in testing the hypothesis.
From the analysis of data the major findings are that.
a. co-operative societies do not really maintain adequate accounting system.
b. There is weakness in the internal control system of co-operative societies.
c. Co-operative societies make use of their members as their accounting staff usually the secretary.
d. Most co-operative societies do not company with the established accounting standards.
e. The present level of accounting records in co-operative societies affect the profitability and viability of co-operative societies.
Based on the findings some of these recommendation were made.
i. co-operative societies should employ experienced competent and trained accounting staff to improve their accounting system.
ii. The accounts of co-operative societies should be audited by external auditors like corporate organization.
iii. The management of co-operative societies (committee) should receive management training and also every member of the co-operative should be educated.
Title page ii
Approval iii
Dedication iv
Acknowledgement v
Abstract vi
Proposal viii
Table of contents ix
CHAPTER ONE
INTRODUCTION 1
1.1 Background of study 1
1.2 Statement of problems 2
1.3 The objective of the study 2
1.4 Research hypothesis 3
1.5 Significance of the study 4
1.6 Scope and limitation of the study 5
1.7 Definition of terms 6
CHAPTER TWO
LITERATURE REVIEW 9
Definition of Accounting 10
Objectives and importance of accounting information 12
Importance of accounting 14
Definition and meaning of accounting
system/composition of system. 17
Accounting system. 18
Importance of maintaining adequate
accounting system 23
Definition and meaning of co-operative societies 26
Origin of co-operative society in Nigeria. 30
Problems of co-operative societies 32
CHAPTER THREE
RESEARCH METHODOLOGY 34
3.1 Sources of data 34
3.2 Sample use and determination of sample size 35
3.3 Method of investigation 36
CHAPTER FOUR
4.1 Presentation and analysis of data 37
4.2 Data analysis 37
4.3 Test of hypothesis 48
CHAPTER FIVE
5.1 Findings 57
5.2 Conclusion 59
5.3 Recommendations 60
Bibliography 62
Questionnaire 64
INTRODUCTION
Co-operative societies are part of the aim of government, they are nutured by the government the government believe that through co-operative societies that the standard of living of the masses will improve. They are meant to enhance the economic and social well being of the populace as this will help to record economic growth and subsequent development, that is why the government sponsor and run some of the activities of co-operative societies. For instance the government employ co-operative field staff to disseminate the gospel of co-operation, to nuture co-operative by giving them directives and prepare them for registration and also to audit the accounts of co-operative, societies.
Co-operative societies are business organization though in the class of non profit seeking form of business organization whether a business is profit oriented or non profit oriented, it should hare an accounting system.
Against this background, this research is designed to study the accounting system of co-operative societies how the information presented by the accounting system is utilized. Ie whether it is used in making decisions for the businesses.
1.2 STATEMENT OF PROBLEMS
Some of the problems attendant to co-operative societies which militated against the accounting system of co-operative societies in Enugu North local government area are as follows.
1. Paucity of accounting records and information
2. Lack of fund to employ trained accountant to manage the accounts of co-operative societies.
3. lack of management education to the committee members who are managers of the societies and the general members who potential committee members.
1.3 THE OBJECTIVES OF THE STUDY
The objectives of the study are as follows:
i. To identify and disclose whether adequate accounting records are maintained in co-operative societies.
ii. To determine the impact of the present level of accounting records on the profitability and viability of co-operative societies.
iii. To offer possible recommendation that would enhance the utility of accounting records kept in co-operative societies.
1.4 RESEARCH HYPOTHESIS
As to realize the objective of this study the following hypothesis have been formulated.
i. Co-operative societies do not maintain an adequate accounting system.
ii. The internal control system of co-operative societies is not adequate.
iii. Most co-operative societies do not comply with the established accounting standards.
iv. The present level of accounting records of co-operative societies have an adverse effect on its profitability and viability.
1.5 SIGNIFICANCE OF THE STUDY
This study will be of immense benefit to the co-operative, pre and post co-operators, student public and the government.
i. To co-operators, the study will help them to formulate a proper and better accounting system that will help in the growth and the realization of the goals and objectives of co-operative societies.
ii. To pre member of co-operative societies, it will serve as a guide in understanding the accounting system of co-operative societies which will serve as a guide in formulating their own accounting system when forming a new society.
iii. to post members, it helps them to see what was lacking in the accounting system and in the running of the fund of co-operative societies and the correction might be a temptation to delve back in to co-operation.
iv. To the student and public, it will serve as a rsearch literature to the public and also to students in accountancy and co-operative department who may decide to research more on this topic.
v. To the government the study will serve as a guide to policy making as regards to co-operative societies and also in structuring laws and rules for co-operative society.
1.6 SCOPE AND LIMITATION OF THE STUDY
There are many co-operatives societies in Enugu North local government area both registered and Non registered, the researcher choose his sample form the population of registered co-operative societies in Enugu North, the registered co-operative societies by virtue of their registration are believed to measure up to standard.
Hence: this study will take into consideration the nature and operation of the accounting system and internal control system of registered co-operatives in Enugu North local government area.
The researcher would have liked to study the population of the co-operative societies but for the constraint attendant of a researcher i.e time money and energy, the researcher studied a sample of 98.
1.7 DEFINITION OF TERMS
CO-OPERATIVE SOCIETY: Co-operative society may be defined as a form of business where in persons voluntarily associate themselves as human beings on basis of equality for the promotion of their economic and /or social standards.
CO-OPERATION: This service as another word for co-operative society.
COMMITTEE: This “means” the governing body of a registered society to whom the management of its affairs is entrusted”.
COUNCIL OF INSPECTION: They are “elected council of members who are not members of the committee to whom the supervision of the committee is entrusted”.
DIVIDEND: This is “a share of the net surplus of a registered society dividuded among its members in proportion to the paid up share capital help by them”.
MEMBER: This include a person joining in application for the registration of a society or admitted to membership after the registered in accordance with the bye laws and rules”.
MEMBER BONUS: “Means a share of the net surplus of a registered society divided among its members in proposition to the volume of business done by them with the society form which surplus of the society was derived”.
Net surplus: means the difference between income received or accrued during the financial year and the total of expenditure made or accrued during the year and previsions and allowances for the depreciation of fixed assets or the written off of losses or bad debts and for the creation or maintenance of reserves against bad debts or depreciation of stocks.
HONORARIUM “Means a share of the net surplus of a registered society divided amongst some or all of the members of the committee, or the council of inspectors or scrutinizers of the society in recognition of services for which otherwise no payment is received”.
ACCOUNTING: Defined by osisioma as “A language of business employed to communicate financial information it has the responsibility of keeping track of the essential information affecting the financial activities of an organization of interpreting the information in terms of relative success or failure and of helping to plan the course of future action”.
INTERNAL AUDIT: Internal audit is described as a review of operations and records, sometimes continuous undertake within a business by specially assigned staff.
Accounting System Of Cooperative Societies:
Cooperative societies, like other types of organizations, require an accounting system to effectively manage their finances, track transactions, and ensure transparency among their members. The accounting system for cooperative societies typically includes the following components:
- Chart of Accounts: Create a chart of accounts that categorizes all financial transactions into various accounts. Common accounts for cooperative societies include capital accounts, savings accounts, loan accounts, income accounts, and expense accounts.
- Financial Statements: Prepare financial statements regularly to provide an overview of the cooperative’s financial health. Key financial statements include the Income Statement (Profit and Loss Statement) and the Balance Sheet.
- Income Statement: This statement shows the cooperative’s revenue and expenses over a specific period, typically a fiscal year. It helps determine the organization’s profitability.
- Balance Sheet: The balance sheet provides a snapshot of the cooperative’s financial position at a specific point in time. It lists the cooperative’s assets, liabilities, and shareholders’ equity.
- Ledger Entries: Record all financial transactions in a ledger. Transactions should be categorized according to the chart of accounts. Common transactions include member deposits, loans issued, interest income, operating expenses, and more.
- Cash Management: Implement controls and procedures for handling cash. This includes recording all cash transactions, reconciling cash accounts regularly, and securing cash to prevent theft or misappropriation.
- Member Accounts: Maintain individual member accounts to track their contributions, savings, and loan balances. Members should have access to their account statements to ensure transparency.
- Loan Management: If the cooperative offers loans to its members, establish a system for managing loan applications, disbursements, repayments, and interest calculations. Proper documentation of loans is crucial.
- Audit and Compliance: Conduct regular financial audits to ensure the accuracy and integrity of financial records. Cooperative societies often have legal and regulatory requirements that must be met.
- Budgeting: Create an annual budget to plan income and expenses for the upcoming year. Compare actual financial performance to the budget regularly to identify variances.
- Tax Compliance: Comply with tax regulations applicable to cooperative societies. This includes filing tax returns, withholding taxes when required, and managing any tax liabilities.
- Reporting: Prepare financial reports for members and the board of directors, including income statements, balance sheets, and other relevant financial information. Timely and transparent reporting builds trust among members.
- Software and Technology: Consider using accounting software or specialized cooperative management software to streamline accounting processes and maintain accurate records.
- Internal Controls: Implement internal controls to prevent fraud and errors. This may include segregation of duties, approval processes for financial transactions, and regular reconciliations.
- Training: Ensure that staff and volunteers involved in financial management receive proper training in accounting principles and cooperative-specific financial processes.
- Reserve Funds: Establish and manage reserve funds to ensure the cooperative’s financial stability and ability to meet its long-term obligations.
- Dividend and Patronage Refunds: If applicable, calculate and distribute dividends or patronage refunds to members based on their transactions with the cooperative.
Cooperative societies should tailor their accounting systems to meet their specific needs, and they may also need to adhere to regional or national regulations governing cooperative financial reporting and management. Consulting with an accountant or financial advisor experienced in cooperative accounting can be beneficial in setting up and maintaining an effective accounting system for a cooperative society.