Q.Fill in the blank and justify: A part of the annual surplus of a credit co-operative society that is set aside to strengthen it and meet future losses is called the __________.

Every sound co-operative keeps back part of its surplus rather than distributing all of it.

The correct word for the blank is reserve fund.

A credit co-operative society does not distribute the whole of its yearly surplus. A definite portion is set aside each year and built up into a reserve fund. This fund serves two purposes:

1. It strengthens the society's financial position, giving it a cushion of its own money over and above members' shares and deposits.
2. It meets unexpected losses — for example, loans that turn bad — without shaking the society's stability or the confidence of its members. …

Students sometimes write 'share capital' or 'deposits'. These are sources of the society's funds; the reserve fund is specifically the reta …