Lecture Notes: Accounts and Book Keeping in Primary Level Cooperatives

Session 1: Basic Accounting Principles

Purpose of Accounting

• Accumulate and report financial information on business performance, financial position, and cash flows.
• Used for decision-making on business management, investment, or lending.
• Transactions recorded in accounting records via standardized transactions (e.g., invoicing) or journal entries.
• Common Accounting System components:
  • Universally accepted basic concepts and principles.
  • Standard financial statements (Balance Sheet, P&L Account, Trading Account).
  • Common general Ledger Heads of Account.
  • Essential and standard Books of Accounts.

Accounting Principles and Policies

1. Accounting systems maintain financial records, recognize, calculate, classify, summarize, and report transactions.
2. Financial statements are based on assumptions:
   • Going Concern: Business continues operations in the foreseeable future.
   • Consistency: Consistent accounting policies over periods.
   • Accrual: Revenues and costs recorded as earned/incurred.
3. Transactions divided into: credit and non-credit business activities.
4. Double Entry System: Each transaction involves a debit and a credit.
5. Fundamental principles:
   • Distinction between capital and revenue expenditure/receipts.
   • Financial statements prepared on historical cost.
   • Investments valued at lower of cost or market value.
   • Provisions for uncertain debts and assets.
   • Depreciation on straight line/diminishing balance methods.
   • Clearly separate provisions, contingencies, and reserves.

Session 2: Books of Accounting

Bookkeeping

• Recording financial data of business operations.
• Important for managers to understand financial status.
• Cycle of recording transactions:
  1. Record opening balances and transactions in a journal.
  2. Transfer to ledger accounts.
  3. Balance accounts, prepare trial balance.
  4. Prepare final accounts (trading & profit & loss accounts).
  5. Create a balance sheet for financial position.

Major Books for Cooperatives

• Share Capital Ledger.
• Membership Register.
• Saving Account Ledger.
• Deposit Ledger.
• Borrowings Ledger.
• Cash Book.
• Sales Register.
• Stock Register.
• General Ledger.
• Accounts Opened and Closed Register.
• Register for Acknowledgement of Debt.

Session 3: Role of NCDC and its Schemes

About NCDC

• Established in 1963 under Ministry of Agriculture & Farmers Welfare.
• Functions:
  • Planning, promoting, financing programs for agriculture and related sectors.
  • Loans and grants to cooperatives for various projects.
  • Assistance for creation of infrastructure, modernization, and diversification.
  • Focus on reducing input costs and enhancing output value.

Activities Funded by NCDC

• Marketing, processing, cooperative storage, essential article distribution.
• Industrial and service cooperatives, agricultural services.
• Support for weaker sections and computerization.
• Training and consultancy services.

New Initiatives

• SAHAKAR 22: Mission for new cooperatives initiatives by 2022.
• Focus on cooperative development in 222 districts.
• Development of training and consultancy through LINAC.

Session 4: Preparation of Financial Statements

Financial Statements

1. Trial Balance
2. Trading Account
3. Profit & Loss Account and Appropriation of Profits
4. Balance Sheet

• Reflect profitability and financial position.
• Prepared monthly (trial balance, trading and P&L accounts) and annually (balance sheet).

Annual Closing and Report

• Close real and personal accounts at year-end.
• Prepare financial statements for audit and stakeholder communication.

Session 5: Trial Balance, Reconciliation, and Audit Compliance

Trial Balance

• Ensures equality of debits and credits.
• Basis for adjustments and closing entries.

Final Accounts

• Components: Manufacturing Account, Trading Account, Profit & Loss Account, Balance Sheet.

Adjusting Entries

• Needed for accrual accounting.
• Types: Accrued revenue/expenses, deferred revenue/expenses, depreciation.

Bank Reconciliation Statement (BRS)

• Reconciles differences between bank statements and company ledgers.
• Important for accuracy in financial reporting.

Audit System

• Auditing verifies accuracy and reliability of accounts.
• Co-operative audits ensure adherence to cooperative principles and financial integrity.

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Note: These notes provide a structured outline of accounting principles, book-keeping practices, the role of NCDC, preparation of financial statements, and audit compliance relevant for primary level cooperatives.