How Is The Net Surplus Of A Cooperative Allocated And Distributed?

How Is The Net Surplus Of A Cooperative Allocated And Distributed?

              Generally, the distribution of a cooperatives surplus is determined by-laws. Surplus is determined at the close of a coops fiscal year or as prescribe by its by-laws.

          A cooperatives surplus is not profit in the usual sense of the word. Surplus is considered excess payment by the members or the loans they borrowed or the goods and services they bought from the cooperative.

          As far as the coop is concerned, this excess payment or surplus is considered as having been returned to the members if the surplus is distributed in the following manner.

          First priority goes to the reserve fund at least 10 percent of the net surplus. The reserve funds is meant or stabilize coop operations and may be used only for investments allowed by the code.

          Second priority goes to the Education and Training fund which is not more than 10 percent of net surplus. Fees and fines may also be credited of such funds. Normally, this fund is shared equally between the coop and is apex organization.

          Third priority is an optional fund, a land and building fund, community development fund and any other necessary funds. After all these have been allocated, the remainder is available to the general membership in the form of interest on his investment and patronage refund. Nevertheless, interest in share capital should exceed normal rate of return on investment .