Q.What is meant by "distribution of surplus in proportion to patronage" in a cooperative society?
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Start your 14-day free trial to unlock the full solution →"Distribution of surplus in proportion to patronage" is one of the Rochdale Principles governing how a cooperative society shares out what it earns. After paying members a limited, fixed rate of interest on the capital they have contributed, and after setting aside any statutory reserves required by law, whatever surplus remains is not distributed according to how many shares a member holds — as a company's dividend would be — but according to the extent of business (patronage) that each member actually transacted with the society during the year.
For example, in a consumer cooperative store, a member who purchased more goods from the store during the year receives a proportionately larger share of the surplus, typically described as a "dividend on purchases"; a member who purchased little receives correspondingly little, regardless of how many shares either member holds. In a marketing cooperative, the equivalent would be distributing surplus in proportion to the volume of produce a member sold through the society. …
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