15 Questions
Where can cooperatives derive their capital from according to the given text?
Member’s share capital, loans, revolving capital, and subsidies, donations, legacies, grants, aids
What is the limitation on share capital holdings by a member of a primary cooperative?
No more than 10%
Which of the following is NOT a source from which cooperatives can derive their capital?
Dividends from profits
What does the term 'revolving capital' consist of?
Deferred payment of patronage refunds or interest on share capital
Which statement is true about the treatment of capital derived from subsidies and donations?
It forms part of the donated capital or fund of the cooperative
What is the basis for governing the capitalization of cooperatives and their accounting procedures?
Provisions of this Code and the regulations to be issued
What happens to the shares of a deceased member of a cooperative?
The shares will be transferred to the heir, provided the total shareholding does not exceed 10% of the share capital.
Who is responsible for conducting the financial audit of cooperatives?
An independent external auditor
What qualifications must an external auditor have to conduct the financial audit of a cooperative?
Independence from the cooperative and membership in PICPA
Who is responsible for conducting the social audit of cooperatives?
An independent social auditor accredited by the Authority
What happens if the total shareholding of a deceased member's heir exceeds 10% of the share capital?
The excess shares will revert to the cooperative upon payment to the heir of the value of such shares.
What is required for an external auditor to conduct the financial audit of a cooperative?
Independence from the cooperative and membership in PICPA
What is the role of the board of directors in relation to audit reports?
Presenting the complete audit report to the general assembly
Who is responsible for accrediting social auditors of cooperatives?
The Authority
What happens if a deceased member's heir fails to qualify as a member?
The share or shares excess will revert to the cooperative upon payment to the heir of the value of such shares.
Study Notes
Sources of Capital for Cooperatives
- Cooperatives can derive their capital from members' shares, loans, subsidies, and donations.
Limitations on Share Capital Holdings
- A member of a primary cooperative is limited to holding no more than 10% of the share capital.
Sources of Capital
- Cooperatives cannot derive capital from public issue of shares or stock exchanges.
Revolving Capital
- Revolving capital consists of shares, deposits, and loans.
Treatment of Capital from Subsidies and Donations
- Capital derived from subsidies and donations is treated as non-distributable reserve and cannot be distributed among members.
Capitalization of Cooperatives
- The basis for governing the capitalization of cooperatives and their accounting procedures is the Cooperative Societies Act.
Shares of a Deceased Member
- Upon the death of a member, their shares are transferred to their heir, who must then qualify as a member.
Financial Audit of Cooperatives
- The external auditor is responsible for conducting the financial audit of cooperatives.
Qualifications for External Auditors
- External auditors must be certified public accountants (CPAs) or registered with the relevant professional bodies.
Social Audit of Cooperatives
- The social audit of cooperatives is conducted by the social auditor.
Shareholding of a Deceased Member's Heir
- If the total shareholding of a deceased member's heir exceeds 10% of the share capital, the excess shares must be sold.
Requirements for External Auditors
- External auditors must be certified and have no conflict of interest to conduct the financial audit of a cooperative.
Role of the Board of Directors in Audit Reports
- The board of directors is responsible for ensuring the reliability of audit reports and implementing audit recommendations.
Accreditation of Social Auditors
- Social auditors of cooperatives are accredited by the relevant national cooperative association.
Failure to Qualify as a Member
- If a deceased member's heir fails to qualify as a member, their shares are forfeited.
Test your knowledge of cooperative capitalization and accounting procedures governed by the provisions of the Code. Explore the sources from which cooperatives may derive their capital.
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