Accounting has often called the “language of business”. You will know if the business is ailing or dying or if it is in good health through the accounting reports. Members of the cooperative would be interested to know how much they would receive from their dividends or interest on share capital and patronage refund. Board of Directors would be interested in what level of profits are necessary to finance the expansion of the cooperative, to bolster upward its economic growth?

One cannot hope to answer three questions if we have no good accounting system and procedures with all its safeguards and control installed in our cooperative.


We live in an era of accountability. The accountants are accountable to the
cooperative, they are working with by performing their jobs well. The members are
accountable to the cooperative by paying their obligations and by giving their regular
deposits. The cooperative is accountable to its members and creditors who have supplied
money to the business, and to the government agencies who have interest in the financial
condition of the cooperative by being transparent in their transaction are striving to show
positive financial results. All must use accounting as a basis for controlling their resources
and measuring their accomplishments.
Objective of Accounting

The broad objective of accounting is to provide relevant financial information to internal and external decision-makers. In order to provide useful information about the cooperative and other business enterprise for that matter, we need some means of keeping
track the daily activities and then summarizing the results in accounting reports. The method used by a business to keep records of its financial activities and to summarize these activities in periodic accounting reports comprises the accounting system.


The purpose accounting system is to implement the theoretical concepts, principles and procedures of accounting and to facilitate management decisions. Our accounting system and procedures prescribed in the new accounting manual has been designed to collect and measure economic data pertaining to cooperatives. Economic data are collected from all parts of the operations by means of source documents such as official receipts, deposit slips, cash vouchers, checks, bills and so on. The source documents are important because (a) they provide date necessary for transaction analysis and (b) they constitute a tangible record so that each transaction and events, and the measurement of its effects on the cooperative can be subsequently verified.

Functions of Accounting System

1. Recording 

The first function of an accounting system is to create systematic record of the daily business activity, in terms of money. For example, loans are extended to the members, debts are incurred, and cash is received and paid out. These transactions are typical of business activities or events, which can be expressed in monetary terms and must be entered in accounting records. 

The recording process may be performed in many ways;

a) manually, that is, by writing with pen or pencil,

b) mechanically, that is processed by sorting equipment, tabulating machines and so on or by

c) electronically, that is by using electronic computers, or punching holes or making magnetic impressions on cards or tape. 

Whether our accounting system is maintained manually, mechanically or electronically, each entry is recorded in the format of the basic double entry accounting system. Thus, each entry recorded retains the dual balancing feature standing alone and also on a cumulative basis. For instructional convenience, the manual approach is used because the steps are essentially the same regardless of the means. A thorough understanding of the accounting process is critical to the successful use of any information system.

2. Classifying 

In addition to compiling a narrative record or events as they occur, we classify transactions and events into related group or categories. This is the second function of the accounting system. Classification enables us to reduce a mass of detail into compact and usable form. For example, grouping all transactions in which cash is received or paid out as a logical step in developing useful information about the cash position of business decision-makers.

3. Summarizing 

We process the data and summarize the classified economic effects in financial reports to meet the information needs of the decision-makers.

Three steps we have described – recording, classifying and summarizing- are the means of creating accounting information. The accounting process is not limited to creating information but also communicating this information to interested parties and interpreting accounting information as it relates to specific business decisions. 

One may then ask: “what is the difference between bookkeeping and accounting?” Bookkeeping means the recording of transactions, the record making phase of accounting. It is only a small part of the field of accounting and probably the simplest part. Accounting includes the design of accounting systems, preparation of financial statements, audits, cost studies, development of forecasts, income tax work, computer applications to accounting processes and the analysis and interpretation of accounting information as in aid to making business decisions. A person might become a reasonably proficient bookkeeper in a few weeks or months; to become a professional accountant, however, requires several years of study and experience.

Much is expected from the accountants. They prepare and collate financial statements which are some of the sources of information for the management, interested government agencies and other interested parties. In short, the accountants must observe ethical responsibilities and must act with integrity, objectivity and independence due care and other moral responsibilities. 

  • Integrity means that the accountant and other persons with accountabilities are honest, regardless of consequences. This holds true with the auditor, internal or external. Example of holding tightly the integrity of the accountant is when a superior who ahs been engaged in some anomalous transactions would ask the accountant to tamper documents to hide his activity and the accountant refuses to do it
  • Objectivity means that the accountant including the audit committee is impartial in performing his or her job. It is for that reason that relatives of the staff of the cooperative are not allowed to become members of the board for the reason that the staff, particularly the accountant may not be able to perform his/her work fairly and without bias.
  • Independence is the evidence of all relationships that could impair the objectivity of the External Auditor, such owning shares in the cooperative he/she is auditing. If such person owns shares in the cooperative, there is a tendency to overlook significant anomalous transaction that would affect his share of income in the cooperative.