Co-operative Society: Principles, Types, Merits and Limitations Questions

Question 1

Define co-operative society.

Accepted Answer

A co-operative society is a voluntary association of persons formed to promote the common economic interests of its members through mutual help and democratic control.

Question 2

State any one principle of co-operation.

Accepted Answer

Democratic member control is a principle of co-operation, meaning one member has one vote irrespective of capital contribution.

Question 3

What is meant by “one member, one vote”?

Accepted Answer

It means every member has equal voting right in a co-operative society regardless of the number of shares held.

Question 4

Name any one type of co-operative society.

Accepted Answer

Consumer co-operative society is a type of co-operative society.

Question 5

State any one advantage of co-operative society.

Accepted Answer

Limited liability is an advantage; members’ liability is restricted and personal assets are generally protected.

Question 6

State any one limitation of co-operative society.

Accepted Answer

Limited capital is a limitation because co-operatives mainly depend on members’ contributions and cannot easily raise large funds.

Question 7

Explain features/characteristics of co-operative society.

Accepted Answer

A co-operative society has **voluntary membership** and is formed for mutual help. It follows **democratic management** with one member one vote. It has a **service motive** and aims at welfare of members rather than profit maximisation. Registered co-operatives have a **separate legal entity** and usually provide **limited liability** to members. Surplus is distributed fairly and used for reserves and welfare.

Question 8

Explain principles of co-operation.

Accepted Answer

Important co-operative principles include **voluntary and open membership**, **democratic control (one member one vote)**, and **member economic participation**. Co-operatives also emphasise **autonomy and independence**, **education and training** of members and employees, **co-operation among co-operatives**, and **concern for community** through sustainable development.

Question 9

Explain types of co-operative societies (any three).

Accepted Answer

Types of co-operatives include **consumer co-operative** which provides goods to members at reasonable prices, **credit co-operative** which provides loans and encourages savings, and **marketing co-operative** which helps members sell produce at better prices by eliminating middlemen. Other types include producer, housing and farming co-operatives.

Question 10

Explain merits and limitations of co-operative society.

Accepted Answer

Merits of co-operative society include **democratic control**, **service motive**, **limited liability**, elimination of middlemen and better welfare of members. Limitations include **limited capital**, possible **inefficient management** due to lack of professional skill, **government interference**, lack of secrecy and internal conflicts/politics among members. Hence performance depends on member cooperation and good management.

Question 11

Differentiate between co-operative society and company.

Accepted Answer

A **co-operative society** is formed mainly for service and welfare of members and follows **one member one vote**. A **company** is formed mainly for profit and voting rights depend on shareholding. Dividend in co-operative is generally limited and surplus may be distributed as patronage bonus, while company dividends depend on profits and policy. Companies have stricter compliance and ownership is through transferable shares.

Question 12

Write a short note on consumer co-operative society.

Accepted Answer

A consumer co-operative society is formed to protect consumers from exploitation and provide quality goods at reasonable prices. It purchases goods in bulk directly from producers/wholesalers and sells to members at fair prices, reducing middlemen costs. It ensures correct weights and quality and returns surplus to members through limited dividend and bonus.

Question 13

Define co-operative society and explain its features and principles of co-operation.

Accepted Answer

A co-operative society is a voluntary association of persons formed to promote the common economic interests of its members through mutual help and democratic control. It is based on the idea of self-help and service rather than profit maximisation.

**Features of co-operative society:** Membership is voluntary and open to persons having common interests. A registered co-operative has separate legal entity and usually provides limited liability to members. Management is democratic with one member one vote. The society works with service motive and aims at welfare of members. Surplus is distributed fairly in the form of limited dividend/patronage bonus and is also used for reserves and welfare. Co-operatives are regulated by law and work for collective benefit.

**Principles of co-operation:** Important principles include voluntary and open membership, democratic member control, and member economic participation. Co-operatives maintain autonomy and independence, provide education and training to members and employees, encourage cooperation among co-operatives to strengthen the movement, and show concern for community through sustainable development.

Thus, co-operatives operate on democratic values and mutual help to protect members’ interests.

Question 14

Explain types of co-operative societies and discuss merits and limitations of co-operative society.

Accepted Answer

**Types of co-operative societies:** (i) **Consumer co-operative** supplies consumer goods to members at reasonable prices and good quality. (ii) **Producer/industrial co-operative** is formed by producers/artisans to produce and sell collectively. (iii) **Marketing co-operative** helps members sell products at better prices by eliminating middlemen. (iv) **Credit co-operative** provides loans at reasonable interest and encourages savings. (v) **Housing co-operative** provides housing facilities and manages residential colonies. (vi) **Farming co-operative** supports farmers through collective farming and services.

**Merits:** Co-operatives are easy to form and provide democratic control with one member one vote. Limited liability protects members. They reduce exploitation by eliminating middlemen and help provide goods/credit/services at fair terms. Co-operatives encourage thrift, mutual help and social welfare and provide continuity despite change in membership.

**Limitations:** Co-operatives often suffer from limited capital as they mainly depend on members’ funds and limited dividends. Management may be inefficient due to lack of professional skills and political interference. Lack of secrecy, internal conflicts and weak motivation can affect performance. Excessive government regulation may reduce autonomy.

Therefore, co-operative society is useful for welfare-oriented activities but needs honest leadership and professional management for success.

Question 15

Differentiate between co-operative society and company. Also explain why co-operative societies are important in India.

Accepted Answer

**Co-operative society vs Company:** A co-operative society is formed mainly to serve members’ interests and follows democratic control with one member one vote. A company is formed mainly to earn profit and voting rights depend on the number of shares held. Co-operatives usually pay limited dividend and distribute surplus through patronage bonus/reserves, whereas companies distribute dividend based on profits and policy. Membership in co-operative is relatively open; company membership is based on shareholding and formalities. Companies generally have higher capital raising capacity and stricter statutory disclosure and governance requirements.

**Importance of co-operative societies in India:** Co-operatives play a major role in protecting consumers and small producers from exploitation by middlemen. They support rural development through credit, marketing and farming co-operatives and help farmers get better prices and inputs. Credit co-operatives provide loans at reasonable rates and encourage savings among weaker sections. Consumer co-operatives supply essential goods at fair prices. Co-operatives also promote employment, self-help, social welfare and community development. Hence, co-operative movement is significant for inclusive growth and balanced economic development in India.

Co-operative Society: Principles, Types, Merits and Limitations

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