CHAPTER .

1
WHAT IS FINALISATION OF ACCOUNTS
Accounts finalisation involves the closing of books of accounts for the
particular period under accrual systems of accounting with booking all
the expenses and incomes and other provisions which related to the
particular accounting period has been booked correctly and arrive the
financial statements like trail balance, profits and loss account, balance
sheet, and notes to accounts etc Finalisation means closure of books of
accounts for a particular period and preparing profitability statement and
balance sheet at the end of that period to know the operating results for
that period. It involves many activities and have to following accounting
guidelines, standards and statutory compliance. Finalisation is a wider
concept inherent in it. But in broader sence it seems to be preparation of
Final accounts which means balance sheets, P&L accounts, Schedule to
Accounts, Notes to Accounts etc.
Preparation of the statement of account comprising Balance sheet, Profit
and Loss Accounts and Notes forming part of the Accounts is the
finalisation of accounts after making adequate provision for expenses
depreciationetc. After that:1) Transfer all revenue accounts to Profit and Loss Account
2) Tally the Profit and Loss Account With Profit and Loss account
attached with the Balance Sheet.
3) Balance of all Assets and Liabilites are carried forward to the next
year which must match with the Balance sheet figures.

CHAPTER 2
PROCESS OF FINALISATION OF ACCOUNTS
Primary Book Journal
Definition and Explanation:
The word "journal" has been derived from the French word "jour". Jour means
day. So journal means daily. Transactions are recorded daily in journal and
hence it has been named so. It is a book of original entry to record
chronologically (i.e. in order of date) and in detail the various transactions of a
trader. It is also known Day Book because it contains the account of every day's
transactions.

Characteristics of Journal:
The following arte the advantages of journal:
1. Each transaction is recorded as soon as it takes place. So there is no
possibility of any transaction being omitted from the books of account.
2. Since the transactions are kept recorded in journal, chronologically with
narration, it can be easily ascertained when and why a transaction has
taken place.
3. For each and every transaction which of the two concerned accounts will
be debited and which account credited, are clearly written in journal. So,
there is no possibility of committing any mistake in writing the ledger.
4. Since all the debits of transaction are recorded in journal, it is not
necessary to repeat them in ledger. As a result ledger is kept tidy and
brief.
5. Journal shows the complete story of a transaction in one entry.
6. Any mistake in ledger can be easily detected with the help of journal
Form of Journal:

Date
(1)

Particulars
(2)

L.F.
(3)

Dr. Amount

Cr. Amount

TRANSACTION
Illustration.1:
On first April 1991 a VINAY started business with a capital of $15,000 and his
transactions of the month were as follows:
April 2 Purchased machinery for $7,000.
April 3 Bought furniture from S $300.
April 7 Purchased goods for cash $2,500
April 8 Sold goods to R & Sons $1,500
April 10 Bought goods from B, $1,000 and from C $2,000
April 12 Received cash from R & Sons $1,450, allowed him discount of $50.
April 15 Paid B cash $975, discount received $25.
April 16 Returned goods to C $500
April 17 Sold goods to Din Mohammad $800
April 20 Goods returned by Din Mohammad $200
April 21 Purchased from K goods of the list price of $600 subject to a 10
percent trade discount.
April 22 Paid C cash $1,500
April 25 Gave away a charity cash $50 and goods worth $30.
April 27 Distributed goods worth $200 as free samples and goods taken away
by the proprietor for personal use $100
April 28 Amount withdrawn by the proprietor for private use $200
April 31 Salaries paid for the month $500

Record these transactions in the journal.

Solution:
Journal
of VINAY ltd.
Date

April 1

Particulars

Cash Account

L.F

...Dr.

Debit

Credit

15,000

To Capital Account

15,000

(Capital introduced)

April 2

Machinery Account

7,000

To Cash Account

7,000

(Machinery purchased)

April 3

Furniture Account

2,500

To Cash Account

2,500

(Goods purchased for cash C)

April 7

Purchases Account

3,000

To Cash Account

3,000

(Goods purchased for cash)

April 8

R & Sons

1,500

To Sales Account

1,500

(Goods sold on credit)

April
10

Purchases Account

3,000

To B

1,000

To C

2,00

(Goods purchased on credit)

April
12

Cash Account

1,450

Discount

50

To R & Sons

1,500

(Cash received and discount allowed)

April
15

1,000
To Cash Account

975

To Discount account

25

(Salaries paid)
April
16

500
To Purchases Return Account

500

(Goods returned to C)

April
17

Din Mohammad

800

To Sales Account

800

(Goods sold on credit)

April
20

Sales Returns Account

200

To Din Mohammad

200

(Goods returned by him)

April
21

Purchases Account

540

To K

540

(Goods purchased on credit)

April
22

1,500
To Cash Account

1,500

(Cash paid to C)

April
25

Charity Account

80

To Cash Account

50

To Purchases Account

30

(Cash and goods given in charity)

April
27

Free samples Account

200

Drawings Account

100

To Purchases Account

300

(Goods distributed free and taken by the

proprietor for private use)

April
28

Drawings Account

200

To Cash

200

(Cash drawn by the proprietor)

April
31

Salaries Account

500

To Cash Account

500

(Salaries paid in cash)TOTAL

37320

LEDGER
Meaning of Ledger
6

37320

Although Journal is chronological record of all business transactions, yet it

cannot provide all information regarding a particular account at one place. The
journal cannot show the net effect of various transactions affecting a particular
person, assets, revenue and expense. For example, if a trader wants to know the
amount due to a particular supplier or the amount due from a particular
customer, he will have to go through the whole journal. It would be a tedious
and time consuming process. To overcome this difficulty, another book of
account, in addition to Journal/special purpose books, is maintained. This book
is called Ledger. Ledger is a book of account which contains a condensed and
classified record of all transactions of the business posted from the journal. It is
also called the book of final entry. In other words, the book, which contains
accounts, is known as the ledger, also called the Principal Book. Ledger
provides necessary information regarding various accounts. Personal accounts
in ledger show how much money firm owes to the creditors and the amount it
can recover from its debtors. The real accounts show the value of properties and
also the value of stock. Nominal accounts reflect the sources of income and also
the amount spent on various items.
In accounting all transactions are ultimately recorded in the ledger. In this book,
separate accounts are opened for each account head and all transactions
relating to a particular account head will be posted in the concerned account.
An account for each person, each type of revenue, expense, assets and liability
is opened in the ledger. For example, all transactions relating to a particular
supplier; say Vivek will be posted to the account of Vivek. This helps in
ascertaining the amount due to Vivek. Ledger is generally maintained in the
form of a bound register. First few pages of the ledger has ordinary horizontal
ruling for indexing. Remaining pages area ruled like an account and is
consecutively numbered. The index pages are used for writing the names of
accounts and the Folio No. (Page No.) where a particular account has been
opened for easy location. The ledger may also be maintained in loose-leaf form
instead of one bound book
Ledger is the King of all the books of accounts
Ledger is called the king of all the books of account, because it is the book
which alone can exhibit the position of each account head in a convenient
form. It can supply all the useful information such as the net result of various
transactions involving an asset, a liability, capital, revenue and an expense.
7

Ledger is the ultimate destination of all transactions because posting is made

from the journal to the ledger. The information available in the ledger in
classified and summarised form also facilitates the preparation of a Trading and
Profit and Loss Account and a Balance Sheet. Thus, Ledger is called the King of
all books because no other book of account can supply all the information like
ledger.

Importance, Advantages of Ledger

(a) Consideration of Scattered Information: The ledger brings out the
scattered information from the Journal. It shows the condensed information
under each account head.
(b) Full information at a glance: As the ledger records both the debit and
credit aspects in two different sides, the complete position of an account can be
ascertained at a glance.
(c) Balance: At the end of a specified period, the net effect of transactions on a
particular account head can be ascertained by finding out the balance of that
account. For example, how much is due from a customer or how much is
payable to a creditor or what is the total amount of purchases or what has been
the expenditure on different heads? All these information can be ascertained by
balancing the accounts appearing in the ledger.
(d) Trial Balance: As both the aspects are recorded, the net debit effect and the
net credit on the accounts must be equal on a particular date. This is verified by
preparing a statement called Trial Balance. This is possible only if the ledger
accounts are maintained.
(e) Preparation of final accounts: Ledger is the store-house of all
information relating to the transactions. It facilitates the preparation of a Profit
and Loss Account from the balances of revenue and expenses accounts. It also,
facilitates the preparation of a Balance Sheet from the balances of assets,
liabilities and capital accounts.

Purpose of Ledger:
A businessman requires various information to ascertain the net results,
financial position and progress of the business. Ledger can provide various
information, which are given below.
(a) Information regarding Debtors: A trader can know the amount of money
receivable from various customers and others who are known as debtors.
(b) Information regarding Creditors: A trader can know the amount of
money payable to various suppliers and others who are known as creditors.
(c) Information regarding Purchases and Sales: The total purchase of goods
and the total sale of goods during a specific period can be known by preparing
Purchase A/c and Sales A/c.
(d) Information regarding Revenue and Expenses: The amount of revenue
earned from different sources and the amount of expenses incurred on different
accounts heads for a

General Ledger: This ledger contains all accounts other than the accounts of
Debtors and Creditors for goods. All accounts falling in the category of Assets,
Liabilities (except debtors and creditors for goods), Capital, Revenue and
Expense are maintained in this proper ledger. For example, if a machine is sold
to Ram on credit, his account will appear in General Ledger; again, if goods are
sold to him on credit, his account will appear in the Debtors Ledger. General
Ledger is also known as Impersonal Ledger or Nominal Ledger.

Illustration 1:
On 1st January 2008, Aryan ltd. started business with a capital Rs. 18,000
9

Journal of M/r Aryan ltd.

Date

L.
F.

Particulars

Dr.
Amount
(Rs.)

Cr.
Amount (Rs.)

2008
Jan1

Cash A/c
Dr.
18,000
To Capital A/c
18,000
(Being cash brought in as capital)
In the above entry, the accounts affected are Cash A/c and Capital A/c.
Therefore, in the ledger, Cash A/c and Capital A/c will be opened. Posting in
both the accounts are shown as under.

Posting in cash account:

M/r Aryan ltd.
Ledger
Cash Account
Dr.
Date
2008
Jan1

Particulars

To Capital A/c

Cr
L
F

Amount
Rs.

Date

Particulars

L
F

Amount
Rs.

18,000

As the Cash A/c has been debited in the Journal, Cash account will also be
debited in the Ledger. This means that posting will be made in the debit side of
the Cash A/c. On the debit side, in the date column, date will be written. In the
Journal i.e. 2008, Jan. 1, the date of the transaction, will be written. In
particulars column, the account which has caused an effect in the Cash A/c
will be written. As per the entry in the journal, Capital A/c will be written in the
particulars column with To as prefix. In the J.F. column, the Folio number
(page number) where the entry appears in journal will be written. In the amount
column in the ledger, the figure stated against Cash account in the journal, as
shown above, will be entered.
10

Posting in the capital account:

M/r VINAY ltd.
Ledger
Capital Account
Dr.
Date

Particulars

Cr.
L
F

Amount
Rs.

L
F

Date

Particulars

2008
Jan 1

By Cash A/c

Amount
Rs.
18,000

Illustration 2 :
Purchase of furniture from Modern Furnishers Rs.12,000 on January 1,2008
Journal Entry:
Furniture A/C Dr.
12,000
To Modern Furnishers A/C Rs.
12,000
(Being furniture purchased)
The amount of Rs. 12,000 will be debited to the Furniture A/C and credited to
Modern furnishers A/C in the following way
Ledger
Furniture Account
Dr.
Date

Cr
Particulars

2008
Jan1 To Modern
Furnishers

L
F

Amount
Rs.

Date

Particulars

12,000

CHAPTER .3
SUBSIDIARY BOOKS
11

L
F

Amount
Rs.

Introduction:
So far we have discussed that transactions are first recorded in journal, and then
posted to ledger. In case of large organizations where there are numerous
transactions, it will be difficult to record all these transactions through journal.
Hence, for convenience of recording, the journal is divided into a number of
special journals. These are known as subsidiary books. The number of
subsidiary books maintained by a business organization depends on the size of
the organization and the nature of transactions. Now, we will discuss the
subsidiary books maintained by a business organization in general.
Though the principle of journalising all transactions, known as continental
system of bookkeeping is quite perfect in actual business but in a large business
it is found inconvenient to Journalise every transaction and sometime it
becomes rather impossible for one man to Journalise numerous transactions on
a business in one journal. Therefore, the journal is sub-divided into different
journals known as the subsidiary books or books of prime entry or books of
original entry. These are the books in which are recorded the details of
transactions as they take place from day to day, in a classified manner.
In every trading concern, the transactions, however numerous they may be, can
be grouped into small number of classes. They consist chiefly of receipts and
payments of cash, purchases and sales of goods, returns of goods purchased and
sold, bills receivable and bills payable. The journal is divided in such a way that
a separate book is used for each class of transactions.
The important subsidiary books used in modern business world are the
following:1. Cash Book: It is used to record all cash receipts and payments.
2. Purchases Book: It is used to record all credit purchases.
3. Sales Book: It is used to record all credit sales
4. Purchases returns book: It is used to record all goods returned by us to
our suppliers.
5. Sales Returns Book: It is used to record all goods returned to us by our
customers.

12

6. Bills Receivable Book: It is used to record all accepted bills received by

us.
7. Bills payable Book: It is used to record all bill accepted by us to our
creditors.
Journal Proper: It is used for recording those transactions for which there is no
separate book
Purchases Returns Book:
Definition and Explanation:
Purchases returns book is a book in which the goods returned to suppliers are
recorded. It is also called returns outward book or purchases returns day
book. Goods may be returned because they are of the wrong kind or not up to
sample or because they are damaged etc. The ruling of this book is absolutely
the same as of purchases day book. The book and entries are made therein just
the same as those made in the purchases day book.
Posting:
The total of the purchases returns or returns outwards book is credited to returns
outward account or purchases return account (being the goods sent out).
Individual suppliers to whom goods are returned are debited (because they
receive the goods).
Example:Purchases BookFrom the following transactions of a trader prepare
the purchases returns day book and post it into ledger:1991
$
January 8 Karim & Sons

135

"

20

Fazal Din & Co.

150

"

31

Saeed Bros.

250

Solution:
Purchases Book
13

Date

Particulars

D/N

L.F.

Amount
$
135
150
250

1991 Karim & Sons

Jan. 8 Fazal Din & Co.
" 20 Saeed Bros.
" 31

535

Purchases Returns Account

1991 By Purchases as per
Jan. 31 P.R.B.

$
535

Karim & Sons

1991 To Purchases returns
Jan. 8

135

Sales Book
Definition and Explanation:
A sales book is also known as sales day book is a book of original entry in
which are recordedthe details of credit sales made by a businessman. Total of
sales book shows the total credit sales of goods during the period concerned.
Usually the sales book is totaled every month. The sales day book is written up
daily from the copies of invoices sent out.
Posting:
The total of the sales book is credited to sales account. Customers whose names
appear in the sales book are debited with the amount appearing against their
names. Double entry is thus completed.

Example:Sales Book

14

From the following transactions of a trader prepare the sales day book of M.
Amin and post it into ledger:1991

January 5 Sold goods to ideal college

200

"

10

Sold goods to Ahmad & Co.

100

"

20

Credit sales to Karim Bakhish

400

"

31

Sold goods to cheap stores

100

Solution:
Purchases Day Book
Date
1991
Jan. 5
" 10
" 20
" 31

Particulars

D/N

L.F.

Amount
$
200
100
400
100

Idea college
Ahmad & Co.
Karim Bakhish
Cheap stores

800

Sales Returns Book:

Definition and Explanation:
Sales returns book is also called returns inwards book. It is used for
recording goods returned to us by our customers. The ruling of this books is
exactly as for sales day book.
Posting:
The of the returns inwards book or sales returns book is debited to returns
inwards account or sales returns account. The customers who have returned the
goods are credited with the amount shown against their names
Example:Sales Returns Book:
From the following transactions of a trader prepare the sales returns book and
post it into ledger:-

15

1991

January 8 Goods returned by Parker & Co.

40

"

20

Goods returned by Ideal Traders $52

52

"

31

Allowance granted to Riaz& Co.., for short delivery

100

Solution:
Sales Returns Book
Date

Particulars

D/N

L.F.

Amount
$
40
52
100

1991 Parker & Co.

Jan. 8 Ideal Traders
" 20 Riaz& Co.
" 31

192

Sales returns Account

1991 By Sundries as per
Jan. 31 S.R.B

$
192

Parker & Co.

1991
Jan. 8 By Sales returns

$
40

Bills Receivable Book:

Definition and Explanation:Bills receivable book is used
to record the bills received from debtors. When a bill is
received, details of it are recorded in the bills receivable book.
Posting:

16

In the ledgerthe account of the person from whom each bill is received is
credited with the amount of that bill and the periodical total of the book is
posted to the debit of bills receivable account.
the bills receivable book is ruled according to the requirements of a particular
account
Example:
From the following transactions of a trader prepare the bills receivable book and
post it into ledger:1991
January 5

Drew a bill on Abdullah & Co. at 2 m/d for $700.

"

10

Acceptance received from Rahim Bakhish at 3 m/d for $ 1,000.

"

20

A. Riaz gives his acceptance at 3 m/d for $800.

"

30

Bill at 2 m/d for $100 is drawn on Bashir.

Solution:
Bills Receivable Book
Date
1991
Jan. 5
" 10
" 20
" 30

Particulars
Abdullah & Co.
Rahim Bakhish
A. Riaz
Bashir

Term

2 m/d
3 m/d
3 m/d
2m/d

Due Date L.F.

March 8
April 13
" 21
March 3

Amount
$
700
1,000
800
100
2,600

Bills Payable Book:

Definition and Explanation:Bills payable book is used to
record bill accepted by us. When a bill drawn by our creditor is
accepted particulars of the same are recorded in this book.
Posting:In the ledger, the account of each person whose bill
has been accepted is debited with the amount of the bill. The
17

monthly total of the bills accepted is credited to the bills

payable account ledger.

Example:
From the following transactions of a trader prepare the bills
payable book and post it into ledger:January 5 Accepted a bill at 3 m/d for $200 drawn by Rahmat& Co.
"

20

gave acceptance at 2 m/d for $500 to Kamal.

"

30

Acceptance at 1 m/d for $ 500 given to Feroz& Co.

Solution:
Bills Payable Book
Date

Particulars

1991 Rahmat& Co.

Jan. 5 Kamal
" 20 Feroz& Co.
" 30

Term

3 m/d
2 m/d
1 m/d

Due Date
April 8
March 23
"
30

L.F.

Amount
$
200
500
500

1,200
Bills Payable Account

1991 By Sundries as per B/p Book

Jan. 31

CHAPTER.4

TRIAL BALANCE
18

$
1,200

Introduction
When all the transactions have been recorded in their
respective ledgers, there will be numerous books of
accounts. It would be difficult to tell at a spar of a
moment, which accounts has what balance. A trial
balance would help put this in perspective. A trial
balance is a statement showing the list of debit and
credit balances of accounts. It is a check on the
arithmetical accuracy of the double entry regarding the
business transactions at a given period of time. The
total of items recorded in all the accounts on the debit
side of the books should be equal in total with the items
in all the accounts on the credit side of the books. All
the debit balances are listed in one column and all the
credit balances listed in another. The totals of these two
columns should be identical
Meaning of Trial Balance
After posting the accounts in the ledger and balancing the same, a
statement is prepared to show separately the debit and credit balances.
Such a statement is known as Trial Balance.
The Trial Balance is a statement which shows the closing balances,
debit balances as well as credit balances of all ledger accounts. This
statement is always prepared in T Shape. In the left hand side, debit
balances and in the right hand side, credit balances of ledger accounts
are written and both sides are totalled. The totals of the both the sides,
should always be equal. This equality in the totals of debit side and
credit side ensures the completion of double entry system of bookkeeping. It also ensures the arithmetical accuracy of ledger accounts.

19

Objectives :After studying this chapter you should be able to:

Identify the purpose of a trial balance
Establish the elements in a trial balance
Extract a trial balance from ledgers.
Exercise more on ledger entries leading to a trial balance
Purpose of a trial Balance:
A trial balance is an attempt to check the accuracy of the double entry
in the ledger accounts. Given that every credit entry should have a
corresponding debit entry, then a difference in the trial balance is an
indication of existence of errors that may have been made in the
ledgers. However it must be noted that though the total of all the
credit entries should agree with the total of all the debit entries, this
does not necessarily guarantee the accuracy of the entries in the ledger
accounts.
Structure of a trial balance :
A trial balance has two sides, the debit and the credit side. The debit
side summarizes all debit balance figures while the credit side
summarizes all credit balance figures in the ledgers.
TRIAL BALANCE
DR
Assets

CR

xxx

Expenses

xxx

Income (e.g. sales)

Purchases
Capital

xxx
xxx
xxx

Liabilities

xxx
20

xxx

xxx

CHAPTER .5
FINALISATION OF CO-OPERATIVE SOCIETY
INTRODUCTION
MEANING
A co-operative Society is a body corporate with perpetual succession. It can
acquire, hold and dispose off properties, enter into contracts and it can sue and
it can be used. In the state of Maharashtra a society is formed, regulated and
governed and controlled by the Maharashtra Co-operative Societies Act, 1960.
(Section 36 of M.C.S. Act, 1960).All the Co-operative Societies have to
maintain the records as per the Maharashtra Co-operative Societies Act, 1960,
M.C.S. Rules, 1961 and the Byelaws of the Society.

NON-PROFIT ORGANISATIONS
There are certain institutions whose main aim is not to earn profit. They are
established to provide services and their sole motto is to render services, e.g.,
schools, libraries, sports clubs, hospitals and professionals like, doctors,
lawyers, chartered accountants, company secretaries and co-operative housing
societies, etc. Though the main aim of these bodies is not to earn profit but still
they are interested in knowing whether their current income is more than the
current expenses or not. They are also keen in knowing the financial position of
their concern. Co-operative Societies are not charitable societies. They carry on
Economic Activities. The profit is not the motive but the proper accounts need
to be maintained and presented before the members for their approval in the
Annual General Body meeting. The same need to be properly audited as per the
21

provisions of the Act.

DEFINITIONS UNDER MCS ACT:1) Co-operative society:-Under section 2(27) of the act, Society means a
co-operative society registered or deemed to be registered under this
Act. Co-operative society is corporate body distinct from its member.
Section 167 of co-operative societies A ct state that provisions of
companies Act are not applicable to Co-operatives.
2) Working capital:-Under section 2(31) of the Act, Working capital
means funds at the disposal of society inclusive of paid up share capital,
funds built up out of profits and money raised by knowing and other
means. The definition of the term is different as generally working
capital means Net current assets less current liabilities. The audit fees of
certain types of socities such as Urban co-operative banks, salaray
earners credit socities are related to the amount of the working capital.
3) Auditor:- Rule no 69 of co-operative societies rules states that the audit
of co-operative societies shall be conducted either by departmental
auditor or certified auditors. The term certified auditors includes the
following:
a) Chartered accountant
b) A person who holds a government diploma in co-operative
accounts and audit.
c) A person who has served as an auditor in the co-operative
department of the state government .
4) Bye-laws:- Under section 2(5) bye-laws registered under this Act and
for

the time being in force and includes registered amendments of such

bye-laws. bye-laws of a co-operative society may be be compared with

the articles of a company. The bye-laws cannot be contrary to the
22

provisions of the co-opreatives societies Act. The bye-laws generally

includes the followings clauses for internal management of cooperatives society1. Name and address of society
2. Area of operation
3. The manner in which , and the limits upto which the funds of the
4.
5.
6.
7.
8.
9.

society should be raised.

Objects of society
Maximum amount of the share capital that may held by a member
Terms and qualifications for admission of membership
Rights , duites and liabilities of members
Maximum loans admissible to a member
Disposal of net profit

(Rule 8 of Maharashtra State Co-operative Societies Rules, 1961 give

the various details if the items in the bye-laws of the society. Any
amendments , changes or deletion in bye-laws shall have to be
approved by a resolution at special general meeting and also a wirtten
approval for the District Deputy Registrar is necessary. The first byelaws of the society are required to be approved by the Registrar, as
per Rule No. 9.)
5) Co-operative year:- The Act as fixed 31st day of March as day of
bal;ancing of accounts of the society. However ,any other day can be
fixed by the society for this purpose with the prior approval of the
registrar. It means that the co-operative year need not necessarilyber
from 1 st April to 31st March. Normally , now-a-days societies follow 31
March as the year-ending to comform with the Income-tax Act.
6) Member:- Under Section 2(19), a member of a Co-operative Society
means a person joining in an application for the registration of a Cooperative Society, which is subsequently registered , or a person duly
admitted to a membership of Society after registration and includes and
23

associates, nominal or a sympathiser member. Following are the

different types of the membersa) Associate Member : Associate Member means a member who
holds jointly share of society with others, but whose name does
not stand first in share certificates.
b) Nominal Member : Nominal Member means a person admitted
to membership as such after registration in accordance with its
laws.
c) Sympathiser Member : Sympathiser Member means a person
who sympathises with aims and objects of the society and who is
admitted by society as such member.
Objectives of Co-operative Society
A co-operative housing society may be formed for all or any of the following
objectsTo enable each of its members to purchase land and to erect a dwelling-house thereon; or
to erect a dwelling-house on land already owned by him; or
to erect a dwelling-house on Crown land leased by him for a term of not
less than 50 years being Crown land within an area approved by the
Governor in Council for the purposes of this Act;
subject to section thirty-four of this Act to purchase land upon which is
situated a dwelling-house; or

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 to maintain and keep in proper repair his dwelling-house; or

where the approval of the Governor in Council given after consideration
of a report by the registrar is first obtained-to discharge a mortgage held
by another society upon any land; or
to discharge a mortgage or any other charge or security over or affecting
any land which mortgage charge or security was granted or executed by
the member in question in anticipation of the society's making an
advance to him and with the approval of the registrar to the making of
the advance.

CHAPTER.6
2.BOOK OF ACCOUNT TO BE MAINTAINED
ACCOUNT
An account is formal presentation of the transactions pertaining to an item
or person or an income or expense. An account is generally prepared in T
form wherein the left hand side is called the debit side and the right hand
side the credit side. All accounts (except the cash or bank), which are
maintained in cashbook, are maintained in ledger.
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ACCOUNTING YEAR
The erotically speaking a business may adopt any period of 12 months as its
accounting year except for first accounting year which may be less or more
than a period of 12 months. Under income tax act however every person is
required (W.E.F 1.4.1989) to adopt a uniform accounting year i.e. financial
year, commencing on 1st April and ending on 31st march next year.
Accordingly, since 1993, the co-operative year also has been changed to
Financial Year

Provisions under Bye-laws of Co-operative Housing Societies

As per bye law no 142 and as per standard accounting principles following
accounts books need to be maintained in respect of the financial transaction of
the society.
a)The cash and the bank book
b)The general ledger
c)The personal ledger (member wise monthly collection register)
26

d)Bill register (month wise charges register)

e)Expense vouchers with receivers signature, authorization to pass vouchers
and corresponding
bill and receipt
f) Monthly /quarterly bills raised on the members for outgoings of the society.
g)Receipts of the collection of charges transfer fees and other funds of the
society.
h)Bank passbook, check issued with counter files ,pay in slips book of the bank.
i) Issues of individual pass books issued to the members in respect of their
transaction with the society

ADVANTAGES & DISADVANTAGES OF COOPERATIVE SOCIETY

Advantages of Cooperative Society

A Co-operative form of business organization has the following advantages:
1. Easy Formation: Formation of a co-operative society is very easy
compared to a joint stock company. Any ten adults can voluntarily form
an association and get it registered with the Registrar of Co-operative
27

Societies.
2. Open Membership: Persons having common interest can form a cooperative society. Any competent person can become a member at any
time he/she likes and can leave the society at will.
3. Democratic Control: A co-operative society is controlled in a
democratic manner. The members cast their vote to elect their
representatives to form a committee that looks after the day-to-day
administration. This committee is accountable to all the members of the
society.
4. Limited Liability: The liability of members of a co-operative society is
limited to the extent of capital contributed by them. Unlike sole
proprietors and partners the personal properties of members of the cooperative societies are free from any kind of risk because of business
liabilities.
5. Elimination of Middlemens Profit: Through co-operatives the
members or consumers control their own supplies and thus, middlemens
profit is eliminated.
6. State Assistance: Both Central and State governments provide all kinds
of help to the societies. Such help may be provided in the form of capital
contribution, loans at low rates of interest, exemption in tax, subsidies in
repayment of loans, etc.
7. Stable Life: A co-operative society has a fairly stable life and it continues
to exist for a long period of time. Its existence is not affected by the
28

death, insolvency, lunacy or resignation of any of its members.

Disadvantages of Cooperative Society

1. Limited Capital: The amount of capital that a cooperative society can
raise from its member is very limited because the membership is generally
confined to a particular section of the society. Again due to low rate of
return the members do not invest more capital. Governments assistance is
often inadequate for most of the co-operative societies.
2. Problems in Management: Generally it is seen that co-operative
societies do not function efficiently due to lack of managerial talent. The
members or their elected representatives are not experienced enough to
manage the society. Again, because of limited capital they are not able to
get the benefits of professional managemen
3. Lack of Motivation: Every co-operative society is formed to render
service to its members rather than to earn profit. This does not provide
enough motivation to the members to put in their best effort and manage
the society efficiently.
4. Lack of Co-operation: The co-operative societies are formed with the
idea of mutual co-operation. But it is often seen that there is a lot of
friction between the members because of personality differences, ego
clash, etc. The selfish attitude of members may sometimes bring an end to
the society.
5. Dependence on Government: The inadequacy of capital and various
other limitations make cooperative societies dependant on the government
for support and patronage in terms of grants, loans subsidies, etc. Due to
29

this, the government sometimes directly interferes in the management of

the society and also audits their annual accounts.

CHAPTER.7
FORMATION OF CO-OPERATIVE SOCIETY

a) Formation of Co-operative Housing Society:Practically every developer has to form a Co-operative Housing Society at
one point of time or another. With the limited amount of options available
with regard to management of the affairs of the building i.e.
Condominium

30

 Private Limited Company and

Co-operative Society, (excluding the unrealistic rental housing)
it will not be an exaggeration to state that in at least 90% cases
particularly in Mumbai the Promoters and/or the Builders have formed
a Co-operative Housing Society.

There are basically four types of Co-operative Housing Societies

connected with the housing.

(a)Open Plot Societies- members purchase or take one lease a plot of land
and they construct the building.
(b)Flat Owners Societies- When a builder constructs flats and sells them to
Flat Owners, the Society when formed is called Flat Owners Society
(c)Tenant Societies- When Landlord forms a Society of tenants, it is called
Tenants Society.
(d)Housing Board Societies- When a Society is formed by Allotted of
flats and building is constructed by the Housing Board Authorities, i.e.
Mumbai Housing and Development Board, then the Society so formed is
of the type of Housing Board Society .

The procedure for Registration of a society begins with electing a Chief

Promoter in a meeting of the Promoter.

31

Normally, the name reservation proposal should be accompanied with the

signature of at least 10 Promoters who have attended the meeting. It is a
common belief that the Society should consist of at least 10 members.

Flat means a separate set and self-contained set of premises used or

intended to be used or intended to be used for residence, or office or
show-room, or shop, or go down and includes a garage, or dispensary, or
consulting room, or clinic, or flour mill, the premises forming part of a
building and includes an apartment.

The Chief Promoter should submit Registration Proposal to the

Registering Authority within a period of 3 months from the date of
issue of Letter of Reservation in the name of the proposed Society.

The documents that are normally to be submitted to the

Registering Authorities are as under :1. Application for registration of Society in Form A along with Statement A.
Enclosure to application for Registration as per Rule 4(1) of Maharashtra
Co-operative Societies Rules, 1961.
2. Information about proposed society in Statement B (vide Govt. Circular
dated 2-5-1980).
32

3. Information about promoter members of the proposed society in

Statement C (vide Govt. Circular Dt. 2-5-1980).
4. A Statement of Accounts as per Form D.
5. Model Bye-laws.
6. Bank Balance Certificate.
7. R.B.I. / Treasury Challan for payment of Registration Fee of Rs. 500/-.

8. Title Clearance Certificate from an Advocate

9. A true copy of the approved Building Plan.

10.Letter of Authority Granting permission to commence construction

work/Completion Certificate (if applicable).

11.Affidavit on Rs. 20/- Stamp Paper from at least 10 promoter members to

the effect that they are residing in the area of operation of the Society
(Proposed), made before a Competent Authority.
12.Affidavit from the Chief Promoter on Stamp Paper of Rs. 20/- executed
before the Competent Authority in form Y.

13.Certified True Copy of agreement made on Stamp paper and registered

33

between the builder, promoter and purchasers of flat.

14.Where the promoter members are firms/ companies, a letter of authority

from such firms/companies authorizing the promoter to sign on behalf of
firm/company.

15.In case of such proposed societies, names of 60% of the flat holders of
the total number of flats constructed or proposed to be constructed as per
the plan approved, must be included in Statement A to be attached to the
Registration Proposal.

b) Stamp duty:Present rates of stamp duty for residential premises in the city of Mumbai are
RS. 38,750/- on Rs. 10, 00,000/-. Thereafter it is @ 8% for the additional
value. The rate of stamp duty for shops/Galas/office Premises and Garage
even if used for car parking is 10% in Mumbai Stamp duty has to be paid on
the agreement Value or the market value of the property whichever is higher.
Stamp duty has to be paid every time the flat is being sold. Stamp duty has to
be paid even if it is a transfer within family.
34

c) Registration of Documents:The documents have to be registered within a period of fours months from the
date of its execution. The parties can go to the office of the Joint Sub-Registrar
individually /collectively to register the document. If for certain reasons the
parties cannot attend the office of the sub-Registrar within a period of the four
months then in such cases the parties can execute a deed of confirmation and
complete the registration formalities.

d) Stamp paper:As per the amendment of section 34 of the Bombay Stamp Act 1958, the stamp
paper should be in the name of one of the parties executing the document.

CHAPTER .8
AUDIT REPORT
SHIV SHAKTHI CO-OPERATIVE HOUSING SOCIETY

REMARK AND SUGGESTION

1) To be making provision of major repair fund as per Bye-Laws 13(b) of each
member on squire fir basis or value of cost which is decided in general body
meeting and invested as fixed deposit in RDCC bank.

35

2) Monthly meeting of committee and annual general body should be

conducted as per the laws, with prior agenda to each member. Minutes of
general body meeting and committee meeting should be recorded in
register (two separate register).
3) Collect registered agreement from all members of society and take building
cost those units in balance-sheet.
4) Every voucher should be signed by chairman, secretary or treasurer.
5) Member information register form T and member registration register
form J should be update time to time.
6) Close the saving account of chief promoter Raigad district central co-op.
bank Ltd, New Panvel
7) Cash in hand to be maintained as stated in bye laws and shall make
necessary transaction of payment by cheque only.
8) Audit should be done after ending of every financial year
Shiv Shakthi co-op. housing society Ltd., New Panvel (E)
RECEIPT AND PAYMENT for the year ended 01-04-09 to 31-03-2010
RECIEPT

Rs.

PAYMENT

Rs.

Opening cash/bank balance

R.D.C.C. bank
Abhyudaya co-op. bank
RDCC bank
(chief promoter)

1270
206219
20251.50
4420

Maintenance & repair

Stationery and Xerox
Pest control
Water bill

30713
672
1000
27846

Electric bill

950

36

Member contribution
Water, shed & color
Transfer premium
Bank interest

TOTAL

178995
168930
30000
3288

613373.50

Bonus
Meeting
Bank charge
Crack filling, shed & coloring
Flooring work
Fix deposit
Salary
Festival & pooja exp
Plastic tank

2200
2292
211
293700
7000
80000
24200
12548
15250

Closing cash balance

R.D.C.C. bank
Abhyudaya co-op bank
RDCC bank (chief promoter)

6021
81583
22767.50
4420

TOTAL

613373.50

Shiv Shakthi co-op. housing society Ltd., New Panvel (E)

INCOME & EXPENDITURE for the year ended 01-04-09 to 31-03-2010
INCOME

Rs.

EXPENDITURE

Rs.

Member contribution

178995

Maintenance & repair

30713

Water, shed & color

168930

Stationery and Xerox

672

Recovery in Yr
168930

Pest control

1000

(+) trf. From B/S recovery

Water bill

27846

In last Yr.
135433

Electric bill

950

Bonus

2200

Meeting

2292

Bank charge

211

Crack filling, shed & coloring

293700

Bank interest

3288

37

TOTAL

486646

Flooring work

7000

Plastic tank

15250

Salary

24200

Festival & pooja exp

12548

Depreciation(dead stock)

2573

Surplus balance

65491

TOTAL

486646

Shiv Samrath co-op. housing society Ltd., New Panvel (E)

BALANCE SHEET for the year ended 31-03-2010
LIABILITIES

Rs.

ASSETS

Rs.

Paid up share capital

4250

Closing cash/bank balance

6021

Reserve and other fund

R.D.C.C. bank

81583

Reserve fund

Abhyudaya co-op bank

22767.50
4420

30770

(+) trf. Premium 30000

60770

RDCC bank (chief promoter)

Member contribution

--

Investment & deposit

Current liabilities & provisions

--

Income & expenditure A/C

Fixed deposit

80000

Current assets, loans &

advances

--

Fixed assets
38

Surplus balance 74571.50

Dead stock
12864

(+) surplus in Yr. 65491.00

140062

(-) depreciation

TOTAL

205082.50

TOTAL

2573

10291

205082.50

AUDIT REPORT
(Maharashtra state co.operative act 1960 section no. 81(5-B) & rules 69)
I have examined the attached balance sheet as 31 st march 2010, 31st march 2011
and the income & expenditure account for financial year 01-04-09 to 31-032011 of the Shiv Shakthi co-op. housing society Ltd., New Panvel (E) and
report that:1. We have obtained all the information and explanation which the best of
my knowledge and belief were necessary for the purpose of our audit.
2. In our opinion, proper book of accounts as required under the M.C.S
Act, rules and Bye Laws of the society has been kept by the society.
3. In our opinion and the best of our information and according to the
explanation given to us.
a) the accounts subject to and read with the statement of general
39

remarks there on stated in PART-I and PART-II attached here with gives
information required under the Maharashtra Co-operative societies Act
and present true and fair view of financial transaction of the society.
b)the balance sheet and income and expenditure account are in
agreement with the books of account and the said balance sheet gives
true and fair view of state of affairs of the society as on 31 st march 2010
and 31st march 2011 and the income and expenditure accounts gives true
and fair view of the surplus/deficit for the period ended on that date

CHAPTER.8
CONLUSION
I conclude based upon the data in my project I have learned what is cooperative
housing society and there are many advantages and disadvantages in
cooperative housing society. Though the main aim of these cooperative housing
society is not to earn profit but still they are interested in knowing whether their
current income is more than the current expenses or not. They are also keen in
knowing the financial position of their concern. Co-operative Societies are not
charitable societies. They carry on Economic Activities. The profit is not the
motive but the proper accounts need to be maintained and presented before the
members for their approval in the Annual General Body meeting.

While doing this project I learn how to register the cooperative housing society,
step involve while registering a society. While studying the auditing report of
two year 2010 and 2011 and making project on a Shiv Samrath cooperative
housing society was also a knowledgeable experience for me.

40

CHAPTER.9
BIBLIOGRAPHY
The Maharashtra Co-operative Societies Rules, 1961
wikipidia

sahakarayukta.maharashtra.gov.in/

41