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Mahatma Education Society’s

PILLAI’S COLLEGE OF ARTS, COMMERCE AND SCIENCE

RE-ACCREDITED BY NAAC WITH ‘A’ GRADE

Dr.KM Vasudevan Pillai’s Campus, Sector 16 New Panvel

Pin code- 410206

DECLARATION BY THE STUDENT

I, P.Shruti Student of M Com Part-I Roll Number 1854 hereby declare that the project for the

paper Financial accounting, ―Indraprastha Housing cooperative housing society‖ submitted by

me for semester-II during the academic year 2012-2013, is based on actual work carried out by me

under the guidance and supervision of Farat sheikh I further state that this work is original and not

submitted anywhere else for any examination.

Signature of student

EVALUATION CERTIFICATE

This is to certify that the undersigned have assessed and evaluated the project on

―INDRAPRASTHA HOUSING COOPERATIVE SOCIETY ―submitted by P.Shruti Student of

M Com Part II. This project is original to the best of our knowledge and has been accepted for

Internal Assessment.

Internal Examiner External Examiner Principal



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Mahatma Education Society’s

PILLAI’S COLLEGE OF ARTS, COMMERCE & SCIENCE

RE- ACCREDITED BY NAAC WITH ‘A’ GRADE

A PROJECT ON

“INDRAPRASTHA COOPERATIVE HOUSING SOCIETY"

In The Subject Financial Accounting SUBMITTED TO UNIVERSITY OF MUMBAI, FOR SEMESTER -II OF

MASTER OF COMMERCE

BY P.SHRUTI

PART II AND ROLL NO- 1854

UNDER THE GUIDANCE OF

Farat Sheikh



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CONTENTS

PARTICULARS PAGE NO.

1 Meaning & definiton of cooperative housing society 3

2 Registration 5

3 advantages 8

4 disadvantages 9

5 Books of account to be maintained 11

6 Audit of accounts 12

7 Types of audit 13

8 Classification of audit 16

9 Audit of balance sheet 18

10 Audit of Income and expenditure 21

11 Audit reports after completion of audit 22

12 General remarks of audit report 25



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MEANING:

The first ever Co-operative movement was started by ROBERT OWEN in the year

1844, with 28 members called as ROCHDALE Society of Equitable Pioneers. It

was a consumer's Co-operative Society.

The term co-operation is derived from the Latin word co-operari, where the word co

means ‗with‘ and operari means ‗to work‘. Thus, co-operation means working

together. So those who want to work together with some common economic objective

can form a society which is termed as ―co-operative society‖.

It is a voluntary association of persons who work together to promote their economic

interest. It works on the principle of self-help as well as mutual help.

The main objective is to provide support to the members. Nobody joins a cooperative

society to earn profit. People come forward as a group, pool their individual

resources, utilise them in the best possible manner, and derive some common benefit

out of it.

Promotion of thrift, self help and mutual aid are the fundamental principles of

cooperation

The Co-operative Society is yet another form of business organisation. It is formed in

a similar manner like a Joint Stock Company. It is a unique form of organisation. It is

started with the motive of organising and rendering services to its members.

DEFINITION

"Co-operative housing society" means a co-operative society -

(i) registered or deemed to be registered as a co-operative housing society under this

Act;

(ii) the principal object of which is to provide its members open plots under plot

housing, dwelling units or flats (whether in a multi-storied building or otherwise)

in a complex under group housing and in case where open plots or dwelling units

or flats are already acquired to provide its members common amenities and



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services including services relating to the arrangement of finances for facilitating

construction of dwelling units in order to solve their needs of dwelling units

through mutual-aid in accordance with the co-operative principles, and includes a

house building, co-partnership, co-ownership housing society, co-operative

housing maintenance society, multipurpose co-operative housing society and any

other co-operative society of like nature and purpose;

Act and rules applicable: A cooperative society functions as per the provision of:

Cooperative society‘s act under which the same is registered

Cooperative society‘s rules made there under

Bye laws approved by the registrar at the time of registration and amendments made

from time to time approved by the registrar.

Notification and orders

Registration of society :

A co-operative society can be registered in Maharashtra State with the Registrar of

Co-operative Societies.

Any person competent to contract, as per the Indian contract Act, 1872 can join in the

formation of a co-operative.

A group of ten persons who reside in the area of operation of the proposed society and

are from different families, can join in application for registration of a society

A society with the objects of promoting the economic interests or the general welfare

of the members only can be registered.

No society which is contrary to the policy directives of the State can be registered.



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Registration can be obtained from the registrar on filling up the application form

withthe necessary fees and the bye-laws.

Rights of member :

The legislation provides for open membership.

Eligible person can appeal to the Registrar if his membership application is

rejected by the society.

A person can file membership application to the Registrar, if it is not accepted

by the society.

A member has voting rights in election of the Managing Committee and in

general meeting of the members. Every member has one vote, irrespective of

the total number of shares held by him.

Proxy-voting is not allowed A member can inspect the books of account of the

society and obtain its copies.Division/Amalgamation/Transfer and conversion

of a co-operative is allowed

A Co-operative Society can enter into collaboration with any Government

Undertaking or any other undertaking with the prior permission of the State

Government for business. It can also enter into a partnership with other co-

operatives.

There are three types of members in a society - Nominal, Associate and

Sympathiser. A Nominal or a Sympathizer member cannot possess shares of

the society and as such do not have the rights of an associated member.

Types of Co-operative Societies:



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Although all types of cooperative societies work on the same principle,m they differ with

regard to the nature of activities they perform. Followings are different types of co-operative

societies that exist in our country.

1. Consumers’ Co-operative Society: These societies are formed to protect the interest of

general consumers by making consumer goods available at a reasonable price.

They buy goods directly from the producers or manufacturers and thereby eliminate the

middlemen in the process of distribution. Kendriya Bhandar, Apna Bazar and Sahkari

Bhandar are examples of consumers‘ co-operative society.

2. Producers’ Co-operative Society: These societies are formed to protect the interest of

small producers by making available items of their need for production like raw materials,

tools and equipments, machinery, etc. Handloom societies like APPCO,Bayanika, HaryanaHandloom, etc., are examples of producers‘ co-operative society.

3. Co-operative Marketing Society: These societies are formed by small producers

and manufacturers who find it difficult to sell their products individually. The society collects

the products from the individual members and takes the responsibility of selling those

products in the market. Gujarat Co-operative Milk Marketing Federation that sells AMUL

milk products is an example of marketing co-operative society.

4. Co-operative Credit Society: These societies are formed to provide financial support to

the members. The society accepts deposits from members and grants them loans at reasonable

rates of interest in times of need. Village Service Co-operative Society and Urban

Cooperative Banks are examples of co-operative credit society.

5. Co-operative Farming Society: These societies are formed by small farmers to work

jointly and thereby enjoy the benefits of large-scale farming. Lift-irrigation cooperative

societies and pani-panchayats are some of the examples of co-operativefarming society.

6. Housing Co-operative Society: These societies are formed to provide residential houses

to members. They purchase land, develop it and construct houses or flats and allot the same

to members. Some societies also provide loans at low rate of interest to members to construct

their own houses. The Employees‘ Housing Societies and Metropolitan Housing Co-

operative Society are examples of housing co-operative society.

Characteristics of Co-operative Society:

A co-operative society is a special type of business organisation different from other forms of

organsation you have learnt earlier. Let us discuss its characteristics.

i. Open membership:



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The membership of a Co-operative Society is open to all those who have a common interest.

A minimum of ten members are required to form a cooperative society. The Co – operative

societies Act does not specify the maximum number of members for any co-operative

society. However, after the formation of the society, the member may specify the maximum

number of members.

ii. Voluntary Association:

Members join the co-operative society voluntarily, that is,by choice. A member can join the

society as and when he likes, continue for as long as he likes, and leave the society at will.

iii. State control:

To protect the interest of members, co-operative societies are placed under state control

through registration. While getting registered, a society has to submit details about the

members and the business it is to undertake. It has to maintain books of accounts, which areto be audited by government auditors.

iv. Sources of Finance:

In a co-operative society capital is contributed by all the members. However, it can easily

raise loans and secure grants from government after its registration.

v. Democratic Management:

Co-operative societies are managed on democratic lines.The society is managed by a group

known as ―Board of Directors‖. The members of the board of directors are the electedrepresentatives of the society. Each member has a single vote, irrespective of the number of

shares held. For example, in a village credit society the small farmer having one share has

equal voting right as that of a landlord having 20 shares.

iv. Service motive:

Co-operatives are not formed to maximise profit like other forms of business organisation.

The main purpose of a Co-operative Society is to provide service to its members. For

example, in a Consumer Co-operative Store, goods are sold to its members at a reasonable

price by retaining a small margin of profit. It also provides better quality goods to its

members and the general public.

v. Separate Legal Entity: A Co-operative Society is registered under the Co-operative

Societies Act. After registration a society becomes a separate legal entity, with limited

liability of its members. Death, insolvency or lunacy of a member does not affect the

existence of a society. It can enter into agreements with others and can purchase or sell

properties in its own name.



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vi. Distribution of Surplus: Every co-operative society in addition to providing services to

its members, also generates some profit while conducting business. Profits are not earned at

the cost of its members. Profit generated is distributed to its members not on the basis of the

shares held by the members (like the company form of business), but on the basis of

members‘ participation in the business of the society. For example, in a consumer co-operative store only a small part of the profit is distributed to members as dividend on their

shares; a major part of the profit is paid as purchase bonus to members on the basis of goods

purchased by each member from the society.

vii. Self-help through mutual cooperation: Co-operative Societies thrive on the principle of

mutual help. They are the organisations of financially weaker sections of society. Co-

operative Societies convert the weakness of members into strength by adopting the principle

of self-help through mutual co-operation. It is only by working jointly on the principle of

―Each for all and all for each‖, the members can fight exploitation and secure a place in

society.

Advantages of Co-operative Society

A Co-operative form of business organization has the following advantages:

i. 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 Societies.

ii. Open Membership: Persons having common interest can form a co-operative society.

Any competent person can become a member at any time he/she likes and can leave the

society at will.

iii. 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.

iv. 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 co-operative societies are free from any kind of risk because of business liabilities.



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v. Elimination of Middlemen’s Profit: Through co-operatives the members or consumers

control their own supplies and thus, middlemen‘s profit is eliminated.

vi. 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.

vii. Stable Life: A co-operative society has a fairly stable life and it continues to exist fora

long period of time. Its existence is not affected by the death, insolvency, lunacy or

resignation of any of its members.

Limitations of Co – operative Society :

Besides the above advantages, the co-operative form of business organisation also suffers

from various limitations. Let us learn these limitations.Co-operative Society 99

i. 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.

Government‘s assistance is often inadequate for most of the co-operative societies.

ii. 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 management.

iii. 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 membersto put in their best effort and manage the society efficiently.

iv. 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.

v. 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 this, the government sometimes directly interferes inthe management of the society and also audit their annual accounts.



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BOOKS OF ACCOUNTS:

AUDIT IN A CO-OPERATIVE HOUSING SOCIETIES :

Societies are supposed to get their account regularly audited from the Statutory Auditor. The

appointment of Statutory Auditor should be done in the General Body meeting of the Society.

All the records of the Society particularly those related to accounts should be placed before

the Auditor. The auditor is the friend; philosopher and guide of the Society and the

observations made by the Auditor should be taken in the right spirit by the Society.

Appointment of an Internal Auditor is an option for the Society. The advantage of Internal

Audit is to ensure that the accounts, staff as well as the persons handling the finance of the

Society remain more vigilant. Office bearers of the Society should ensure that the Society

maintains the statutory registers and the audit are completed by the Society regularly. It may

be emphasized that the time limit for calling the General Body Meeting of the Society is on

or before 14th August of every year. If for any reason the audit of the Society is not

completed then also the Society should proceed to call the Annual General Body Meeting of

the Society.

As provided under the double entry system the financial transaction of the society

should be recorded. Accordingly as per the system of accounting following day books/

Ledgers are required to be maintained.

a) Monthly/quarterly collection register,

b) Members ledger,

c) Cash book,

d) General ledger,

e) Journal book etc.

Cash Book : No specific form for Cash Book is prescribed under the M.C.S.Act, 1960. A

cashbook is one of the various important books and registers required to be maintained byevery organisation handling cash and bank transactions. It is the base for all other registers



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like general ledger, personal ledger from which final statements of accounts i.e.,Receipts &

Payments Statements, Profit & Loss Account and Balance Sheet are prepared.

General Ledger: No form of this Ledger has been prescribed under the M.C.S.Rules, 1961.The Federation has prepared a form of this ledger and kept the bound ledger books for sale. A

receipt and payment statement for any given period and trial balances on any given date

could be prepared from the General Ledger. This book is as important as a Cash Book.

Personal Ledger: No Form of this ledger has been prescribed under the M.C.S.Rules,1961.

The Federation has however prepared the form and kept the bound registers forsale. This

Register differs from the General Ledger in that, the General Ledger indicatesthe position of

any head of account while the personal Ledger gives the Position of an account of anyindividual member or non-member with whom the society has made transactions. Entries in

the cashbook are posted in the general ledger according to the heads of accounts, under which

sums are credited or debited in the cashbook. In the same way entries in the cashbook

pertaining to receipts from individual members or other persons and payment made to

individual members or other persons are posted to respective accounts of the individual

members or other persons in the Personal Ledger.

AUDIT OF ACCOUNTS OF THE SOCIETY:

INTRODUCTION

Auditing is a verification and examination of books of accounts and submits a

report thereon by the auditor

AUDIT IN A CO-OPERATIVE HOUSING SOCIETIES

Societies are supposed to get their account regularly audited from the Statutory

Auditor. The appointment of Statutory Auditor should be done in the General Body

Meeting of the Society. All the records of the Society particularly those related to

accounts should be placed before the Auditor. The auditor is the friend, philosopher and

guide of the Society and the observations made by the Auditor should be taken in the

right spirit by the Society. Appointment of an Internal Auditor is an option for the



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Society. The advantage of Internal Audit is to ensure that the accounts, staff as well as the

persons handling the finance of the Society remain more vigilant. Office bearers of the

Society should ensure that the Society maintains the statutory registers and the audit are

completed by the Society regularly. It may be emphasised that the time limit for calling

the General Body Meeting of the Society is on or before 14th August of every year. If for

any reason the audit of the Society is not completed then also the Society should proceed

to call the Annual General Body Meeting of the Society. The audit report as well as the

audit rectification report has to be approved by the Managing Committee. Bye Law No.

151 to 153 of the Model Bye-laws prescribe the procedure with regards to the audit

procedure. The Rectification report has to be in Form ‗O‘as per Rule 73 of the

Maharashtra Co-operative Societies Rules 1961. Audit Fees have to be paid @ Rs. 36/-

per member per annum for audit. Societies are supposed to maintain 19 Books/Statutory

Registers. Please ensure that the Statutory Registers are duly filed before the audit

commences. The Books/Registers that have to be maintained by the Society are as under.

TYPE OF AUDIT

There are mainly two types of audit carried out by co-operative societies.

1) Internal audit

2) Statutory audit

INTERNAL AUDIT:

This type of audit is optional and society member appoints internal auditor if

consider it necessary. His remuneration and appointment has to be fixed at the general

body meeting.

STATUTORY AUDIT:

This type of audit is compulsory. All societies should get their account audited by



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statutory auditor. The account statements should be submitted for audit to the statutory

auditor by 31stMay.

TYPES OF AUDITORS:

The Housing Societies are required to file Income Tax returns every year and also make the

payment of TDS, Service tax and file TDS returns, service Tax returns wherever applicable.

1. Independent Auditors

Independent auditors are usually CPA‘s who are either individual practitioners or members of

public accounting firms who render professional auditing services to clients. In general,

licensing involves passing the uniform CPA examination and obtaining practical experiencein auditing.

2. Internal Auditors

Internal auditors are employees of the organization they audit. This type of auditors is

involved in an independent evaluation of evidence, called internal auditing, within an

organization as a service to the organization. The objectives of internal auditing is to assist

the management of organization in the effective discharge of its responsibilities.

3. Government Auditors

Government auditors are employed by various local local, state, and federal governmental

agencies. At the federal level, the three primary agencies are are the General Accounting

Offices (GAO), the Internal Revenue Services (IRS), and the Defense Contract Audit Agency

)(DCAA).

APPOINTMENT OF STATUTORY AUDITOR

An non aided society is free to appoint their own auditor from the panel

maintained by the district deputy registrar by passing a resolution in GBM. However the

name of the auditor so appointed should be intimated to the asst. registrar/deputy registrar

by the society. It should however ensure that the same auditor is not appointed for more

than two years, in other words a new auditor should be appointed at least for every 3 rd



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year. This is to ensure objectively fresh outlook and safe guard in the audit work stating

the fact that society in non aided

Aided society: A society, which has taken financial assistance or guarantee from

the government undertakings or financial institutions, can be audited only by an auditor

appointed by asst. registrar / deputy registrar and not by anybody else

On getting the audit report the secretary of the society should prepare draft audit

rectification report (in form o) on the objections raised, suggestions made and place the

same before the next held committee meeting for approval. After the audit rectification

report is approved in the committee or general body meeting, the same should be

forwarded to the following places.

1. Deputy/Asst. registrar of the ward

2. Auditor of the society

3. District federation of the society

4. Notice board of the society

AUDIT FEES

As per circular no cc/ad/a the commissioner for co-operation and registrar, fees of

co-operative housing society for its audit is for societies located in corporation area and

cantonment area is Rs. 36 per member the municipal towns Rs. per member and village

level RS 12 per member.

The society shall pay 80 % of the amount to the auditor directly by cheque the society should

simultaneously credit directly in to government treasury under the budget head 0425 co-

operation 101 audit (042500) balance 20% amount. However presently there is a stop on the

payment 20% audit fees to government treasury

However presently the Honorable High Court, Mumbai has decided against the Government

circular and now we need not pay any amount from the audit fees to the Government treasury



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DUTIES OF AN AUDITOR

Apart from the several duties that an auditor is required to perform, he is also

required to answer two sets of questionnaires referred to as Audit memos. The Auditmemo in

Form No.1 is of a general nature and applicable to all the societies. In additionto this the

other questionnaire is required to be answered in different societies. Forinstance Form No.28

needs to be answered in respect of co-operative housing society.

AUDIT CLASSIFICATION :

Every statutory auditor is required to classify the society on the completion of audit. The

classification letters could be ‗A‘ or ‗B‘ or ‗C‘ or ‗D‘. Several factors need to be taken into

consideration before awarding the classification letter to the Society.Some of the factors that

require attentions are as under

a) Overdue dept position

b) Comparison of the profits of the last three years and the return on capital employed.

c) The manner of maintaining accounting records and systems. The office of the

Commissioner of Co-operation and Registrar of Co-op. Societies, Maharashtra Statehas also

laid down criteria for the audit classification for Urban Co-op. Banks Suchparameters have

been laid vide notification No. CC/ADT/A/UGB/A.B/ of 1992.(Enclosed find a copy see

annexure) It further appears that the classification is arequirement for all the societies since

one of the questions in the form relate to the classification.



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BALANCE SHEET

Balance sheet is prepared to ascertain the true financial position of a Housing Society at the

end of the year. It is a statement showing the state of affairs of a Housing Society as on a

specified date. The state of affairs includes what the Society owns and what the society owes.It displays the properties, assets and other rights owned by the Society on the right hand side,

whereas the liabilities to outsiders and amount invested by the members ascapital on the left

hand side.

ASSETS

Asset means right of ownership over anything valuable. Anything, which will

enable the Society to get cash or a benefit in future, is an asset. This refers to propertiesthatcan be expressed in terms of money, e.g. plant & machinery, vehicles, stock, cashetc. It also

includes money due to the Housing Society from debtors for goods andservices or for money

lent. Rights available to a Society such as patent or copyrights,goodwill etc. are also included

in assets.

LIABILITIES

This represents financial obligations of a Housing Society other than Members Funds. It is

the amount owing to the creditors for goods or services received or formoneys borrowed.

Liabilities = Assets - Capital. Liabilities can be divided into two categories:

(a) Current Liabilities:

These are usually paid within a period of one year and are paid out of current assets e.g.

Creditors, Bills payable, bank overdraft etc.



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(b) Long term Liabilities or Fixed Liabilities:

These do not become due for payment in one year and do not require current assets for their

payment e.g. long-term loans, issue of debentures etc.,

CAPITAL

This is the amount invested by the members in the Co-operative Housing Society. It also

includes the Surplus/ Profit of the business also, to the extent they are not withdrawn by the

members for their personal purposes. However, any losses/ Deficit/ deferred revenue

expenditures, which may have been shown on asset side of balance sheet, will have to be

deducted from capital of the Society to ascertain true amount of the Capital.

DEBTORS (ACCOUNTS RECEIVABLE) :

It represents the indebtedness of members, customers for merchandise or services supplied to

them. It is the right of the Society to receive the moneys against supplies of goods or services

CREDITORS (ACCOUNTS PAYABLE)

It represents indebtedness of business to its suppliers for merchandise or services supplied by

them to the Society. It is the obligation of Society to pay for any goods or services received

by it.

INDRAPRASTHA CO-OPERATIVE HOUSING SOCIETY LTD.

Balance sheet as on 31st

march 2011

Previous

year

31/03/2010

Liabilities Current

year

31/03/2011

Previous

year

31/03/2010

assets Current year

31/03/2011

25000.00

AUTHORISEDSHARE CAPITAL

500 Shares of Rs. 50

each/-

25000.00

Fixed assetsFurniture and

fixtures

61115

less depreciation

350

60765

24000.00

Paid up &

subscribed capital480 shares of Rs. 50

each/- 24000.00

12,78,279.0

Members

contribution

towards Land and

Building , stamp

duty , registration &

conveyance

expenses

12,78,279.0



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276292

Reserves and surplusGeneral reserve

276292

2500

Entrance fees

Opening balance2500

350000

Common amenity

fundOpening balance

350000

57076 Repairs fund 57076

677785.00

Sinking fundOpening balance

46658

Additions 3300 737582 6,268.00

DUES FROM

MEMBERS

(ANNEXXURE — 1) 20000,

15,95,296.0

Members

contribution towards

Land and Building,

stamp duty,

registration &

conveyance expenses

15,95,296.0

356.00

1,12,925.46

CASH & BANK

BALANCE

Cash in hand

Mumbai district

cooperative ltd.

755.00

60,580.00

LOAN

Rajpradeep Agrawal 5000.00

Nil LOANS AND

ADVANCES

90.00

Advance from

members

FIXED DEPOSITS 35,200.00

9,220.00

PROVISION FOR

EXPENSESAudit fees

1,300.00

Education Fees

477.00

Provision For

Electricity

1,778.00

Salary & wages

2,500.00Accounting

5,500.00

11,555.00

MISCELLANEOUS

EXPENDITUREPROFIT & LOSS

2,62,960.44

Add: addition

During

45,268.00 3,08,228.44

16,97,972.9 17,04,597.9 16,97,972.9 17,04,597.9

REPORT AS PER EVEN DATED FOR INDRAPRATHA HOUSING SOCIETY



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DUES FROM MEMBERS. (ANNEXXURE — 1)

Suresh Mahadev CR.472.00

Ajinkya Dev CR...10,000.00

Neha Nitin 6,300.00

Vignesh Rao 7,200.00

Aishwarya nair 4,260.00

Rahul Sharma 11,280.00

Total 18,568.00

RECEIPTS AND PAYMENTS ACCOUNTS

A Receipts and Payments Account is the summary of all cash transactions. It

starts with the opening balance of cash in hand and/or at bank, which is obviously put onits

debit side. All receipts in cash (or by cheque) are recorded on the debit side underappropriate

headings. Similarly, all payments are recorded on the credit side. All cashtransactions are

thus recorded in this account, irrespective of whether it be of capital or revenue nature or it

pertains to the current year, the previous year or the next year. The difference between the

two sides represents the cash in hand or balances at bank, at the close of the accounting

period. If, however, the credit side exceeds the debit side, it represents the bank overdraft.

INCOME & EXPENDITURE ACCOUNT



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A Receipts and Payments Account does not reveal the net income earned or loss suffered

during the year. An Income and Expenditure Account is, thus, prepared toascertain the net

surplus or deficit. It is prepared from the Receipts and Payments Account.

The Receipts of revenue nature (pertaining to the profession) appear on the credit side of the

Income and Expenditure Account. Professional fees outstanding should be ignored,and no

adjustment is required therefore.

Payments of revenue nature pertaining to the current year are taken on the debit side of the

Income and Expenditure Account. Any outstanding expense should be added and expenses

paid in advance should be deducted. Both these amounts shall also figure in the Balance

Sheet. Besides, receipts and payments of capital nature shall appear in the Balance Sheet

Indrapratha co-operative housing society ltd.

INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31ST

MARCH,

2009

Previous

Year

31/032010

Expenditure Current year 31/03/2011

Previous Year

31/032008

Income Current year

31/03/2011

45,580.00To Municipal

Taxes 40,842.00 1,21,440.00

ByContribution

From

Members 1,49,840.00

6,625.00To Electricity

Charges 12,205.00 3,270.00

By Interest on

Saving

Account 2,358.00

2,107.00To Insurance

Premium 3,371.00

57,600.00To Salary &

Wages 60000.0029,000.00 To Major

Repair

(Daberwala)

21,730.00

To Repairs &

Maintenance 61544.00

433.00

To Printing

&Stationery 490.00

20.00 To Bank

Charges

57,610.00 To BalconyRepairs



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1,960.00

To

Conveyance 2,085.00

57.00

To Education

Fees 57.00

775.00

To Sundry

Expenses (in.

BMC) 3,000.00

1,300.00 To Audit fees 1,300.00

5,000.00

To Accounting

Charges 5,500.00

4,800.00 To Bonus

Salary

2,500.00

408.00 To

Depreciation

on furniture

367.00

2,000.00 To Legal Fees 3,000.00 1,15,595.00 By Excess of

expenses

over Income

45,268.00

3,300.00 To Transfer to

Sinking Fund

3,300.00

2,40,305.00 1,99,561.00 2,40,305.00 1,99,561.00

AUDIT REPORTS TO BE GIVEN ON COMPLETION OF AUDIT

Covering Report of True and Fair View of Financial Statements.

General Remarks pointing out irregularities and compliances required and which may be read

in the General body meeting of the society.

Special Report only in case of violations of provisions of Act, Rules and Notifications which

require the attention of Regulator i.e. Registrar.

Form No. 1: This form has to be filled up by all the auditors of co-operative societies,

including the housing societies, giving the General information of society, period of audit,

audit classifications, number of members, maintaining statutory records, discussion of audit

report with committee, etc. This form is available on the website of the Registrar of Co-

operative Societies.



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Form No. 28. This is a specific form designed by the department to be given by the housing

society auditors. It has information about the loan taken for construction, appointment of

contractors, approvals obtained for construction, number of flats, shops, etc. planned, fund

raising etc are incorporated.

The audit report also should accompany, the Balance Sheet, Income and Expenditure

Account for the year and the receipt and payment account duly certified by the Auditors

along with the signature of the office bearers.

The auditors also required to send a copy of the Auditor report to the Registrar as per the

requirement of the MCS Act.

After the audit is completed, the society is required to prepare an audit rectification report in

"Form O" and the same should be certified by the auditor and advise the society to forward

the same to the Registrar.

The auditor is required to give an audit Classification as A,B, C or D in covering report and

also in Form No. 1 prescribed by the Commissioner of Co-operation and Registrar of Co-

operative Societies. The classification is based on the entire working of the society, its record

keeping, compliance of the Act, Rules and Bye-laws and then the profitability of the society.

COMMON MISTAKES COMMITTED IN CO-OPERATIVE SOCITIES

Non-payment of Income Tax on items appearing hereunder

a) Penal Interest,

b) Leave and license Charges,

c) Miscellaneous Receipts,

d) Contribution towards voluntary donation,

e) Income from Advertisement hoardings,

f) Income from sale of Well-Water,

g) Income from parties conducted on Societies Terrace.

Tax deducted at source (T.D.S) on payments made to contractors in excess of

Rs.20,000/- E.g., Lift Maintenance Contract, Security Service Contract, and

Maintenance Contract.

Water charges and debris charges are not paid to MMC at the time of major repairs.

Compound Interest is collected from members.



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Supervision fees to be paid to the Government at the time of making payment of

audit fees, it is not deposited in R.B.I. (This was applicable earlier. Now this is not

required).

Annual statement of Accounts is not submitted to the Office of the Deputy.

Registrar/Asst. Registrar.

Audit rectification report is not submitted by the Society to the office of the Deputy

Registrar/Asst. Registrar. Audit rectification report not submitted to the Society.

Cash on hand maintained by the Society is normally in excess of Rs.300/-.

Bearer cheques are given by the Society in excess of the amount of Rs.1,000/-.

Insurance of building is not taken out by the Society.

Investment of Society funds is done in certain securities in violation of the

provisions of the bye-laws of the Society.

Utilising sinking fund amounts to meet the day-to-day expenses.

Lift maintenance charges are not recovered from members having flats on ground

floor.

The receipt and payment account is not circulated to members along with the

statement of accounts.

Managing Committee Meetings are not held once a month.

Transfer Fee in excess of the provisions of the bye-laws is recovered.

Waiver of amounts of some members without obtaining the registrars permission.

The Society remains a silent spectator to the unauthorised construction carried out by themembers.



GENERAL REMARKS FORMING THE PART OF OUR AUDIT REPORT FOR THE

YEAR ENDED 31ST

MARCH 2010

The books of above society have been audited for the co-operative year ended 31ST March,

2010. The statements of accounts produced by the society have been duly checked with

records made available for audit and explanation given at the time of audit. The following

observation, suggestions and irregularities are noticed, the remarks for which are as under:

(1) Balance confirmation form occupants/member are not produced before us hence balance

outstanding shown against the member dues are certify by the committee member and it is

accepted by us.

(2) Society should suppose to become the member of the Mumbai Dist. Housing Federationas required under the Bye-laws of the society.

(3) During last three years the Society is suffering from Excess of Expenses over Income so

we request the Society to Increase the Contribution from Members.

(4) The society should not make cash payment exceeding Rs.1000/-

(5) Interest on F.D. is subject to confirmation.

(3) Audit Rectification Report: On receipt of the Audited Report from the Statutory Auditors,

the secretary of the society shall prepare draft audit rectification report on the objection raised

in ‗O‘ prescribed under Rule 73 of the Rule and place the same before the meeting of thecommittee.

Types of Co.docx

Documents