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Difficulty: MediumCooperative Societies: Types, Principles, Features, and Operation

A consumer cooperative society recorded a net trading surplus at the end of its financial year after setting aside statutory reserves. According to the Rochdale principles of cooperation, how should the remaining surplus be distributed among the members?

  1. Divided among members in proportion to the value of purchases each made during the financial yearAnswer
  2. B
    Distributed strictly in proportion to the number of capital shares owned by each member
  3. C
    Shared equally among the elected management committee members as annual performance bonuses
  4. D
    Transferred completely to local government authorities as tax on commercial profits

Answer

Distributed to members in proportion to the value of purchases made during the financial year (patronage dividend).
Under the Rochdale principles of cooperation, net trading surplus in a consumer cooperative society is distributed to members as a dividend on patronage, meaning members receive payments proportional to their transaction volume or purchases during the financial year.

Step-by-Step Solution

1
Identify the core principle governing surplus distribution in a Rochdale cooperative society.
Cooperative societies operate on the principle of dividend on patronage.
Unlike joint-stock commercial companies where profits belong to shareholders based on capital invested, cooperative surplus belongs to members according to their degree of business participation.
2
Evaluate how consumer cooperative members generate trading surplus.
Surplus is generated from prices paid by purchasing members during trading.
Refunding excess payments proportionally back to buying members ensures equity and mutual benefit.

Key Concept

Patronage Dividend in Cooperative Societies
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Topics

Cooperative Societies: Types, Principles, Features, and Operation

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