Handbook For FPOs Accounting by Uttarakhand

Handbook on Maintenance of Accounts
& Preparation of Financial Statements

for Farmer Producer Organisations
Title : Handbook on Maintenance of Accounts &
Preparation of Financial Statements for Farmer
Producer Organisations
Written and Published by : Farm Sector Development Department,
Uttarakhand Regional Office, Dehradun
Date of Publishing : March 2018
Place of Printing : Dehradun
Number of Copies : 200
Contact : 113/2, Rajpur Road, Dehradun – 248001
Tel: 0135-2748611
website : www.nabard.org
www.youtube.com/nabardonline
© 2018 National Bank for Agriculture and Rural Development Unless otherwise stated
in this document, no part of this document may be reproduced or transmitted in any
form by any means without the written authorization from NABARD
Abbreviations
Sl. No. Abbreviations Full Form
1 FPO Farmer Producer Organisation
2 GoI Government of India
3 BRS Bank Reconciliation Statement
4 Dr Debit
5 Cr Credit
6 B/S Balance Sheet
7 Bal Balance
8 P&L Profit & Loss
9 POPI Producer Organisation Promoting Institution
10 NBFC Non-Banking Financial Company
11 FSSAI Food Safety and Standards Authority of India
12 PAN Permanent Account Number
13 CEO Chief Executive Officer
14 GSTIN Goods & Services Tax Identification Number
15 PRODUCE Producers Organization Development and Upliftment Corpus
16 NABCONS NABARD Consultancy Services
17 RO Regional Office
18 UK Uttarakhand
19 SMF Small and Marginal Farmers
20 OFPO Off Farm Producer Organization
21 SF/MF Small Farmer/Marginal Farmer
22 DPR Detailed Project Report
23 PO Producer Organisation
24 NGO Non-Government Organization
25 KVK Krishi Vigyan Kendra
26 MIS Management Information System
27 SFAC Small Farmers' Agri-Business Consortium
28 NABARD National Bank for Agriculture and Rural Development
29 FPC Farmer Producer Company
30 PC Producer Company
31 MoA Memorandum of Agreement
32 AoA Articles of Association
33 DIN Director Identification Number
34 FDA Food and Drug Administration
35 NOC No Objection Certificate
36 AGM Annual General Meeting
37 CSR Corporate Social Responsibility
38 FI Financial Institution
39 LF Ledger Folio
40 GST Goods & Services Tax
41 FIFO First In First Out
42 CB Cash Book
43 BB Bank Book
44 b/d Brought down
45 A/c Account
46 WIP Work in Progress
47 FG Finished Goods
48 RBI Reserve Bank of India
49 RM Raw Material
50 SBI State Bank of India
51 CC Cash Credit
Chapter 1
INTRODUCTION
Out of around 13 crore farmer households in India, over 85% are small and marginal farmers
(SMF) with the average size of land holding being 1.33 ha/farmer. The major issue faced by
the SMF is the viability of farming on account of various factors like shrinking of land
holdings, difficulty in accessing critical inputs, poor transfer of technology, absence of
bargaining power for fetching better price for their produce and lack of an effective risk
mitigation framework. These factors are causing an increase in the per unit cost of cultivation
and declining/negative
profit due to which many SMF are resorting to subsistence farming or
abandoning farming and migrating to cities in search of low skilled employment
opportunities. To overcome these issues, SMF can co-operate with each other & form an
association or farmers groups called Farmer Producer Organisation (FPO).
It is the absence of collectivization that limits the bargaining power of farmers and increases
input cost required for conducting any farm activity. The lack of collectivization also leads to
adoption of poor agronomic practices and harvesting infrastructure, which affects the
productivity/production adversely & ultimately the farm income. FPOs offer a mechanism
that empower its members to leverage their collective strength and bargaining power to
access financial and non-financial inputs and services on more equitable terms & also selling
their produce at better prices.
Several institutional models are available in India to organize farmers together & form a FPO
e.g. Formation of Producer Company under Section IX A of Indian Companies Act, 2013,
Formation of FPO under Cooperative Societies Act/Indian Trust Act etc. These organisations
facilitate aggregation of inputs, enhance bargaining power, provide access to formal credit,
reduce input costs, create opportunities for value-addition services and increase farm income
Efforts of GoI and NABARD in formation of FPOs
Producers’ Organisation Development & Upliftment Corpus (PRODUCE) fund of Rs. 200
crores was created by Government of India with NABARD in 2014-15, for building of 2000
Farmer Producer Organisations (FPOs) to supplement the efforts of NABARD in promoting
FPOs. PRODUCE fund is being used to address the initial financial requirements of the
1
emerging FPOs. Many of the FPOs formed under PRODUCE Fund are in a position to avail of
credit from financing institutions for new business activities.
Activities of FPO, which are eligible for support are agriculture/activities allied to agriculture
including dairy, poultry, fisheries etc. The support covers cost towards promotion of FPOs
including capacity building of Board of Directors/CEOs, business planning, registration,
preparation of DPR, MIS development, conduct of audit, market linkages and linkage to
value chain, administrative expenses of promoting agency, deliberations/interaction meets,
documentation, research, publicity, monitoring of progress and such other items of
expenditure required for promotion of FPOs.
NABARD has promoted around 2157 FPOs with the grant support under PRODUCE Fund.
Considering the immense potential of forming FPOs, particularly in uncovered areas/regions,
where there is large proportion of SF/MF, there has been growing demand to build new
FPOs. Therefore, NABARD continued to support formation of FPOs by providing grant for
the purpose of training of Board members and CEOs, plus Rs. 40000.00 towards registration
charges of each FPO.
NABARD also launched a scheme for supporting Off-farm Producer Organisation. Producers
dealing in off farm sector activities like handloom, handicrafts etc. can form Off-farm
Producer Organisation (OFPO) and provide a strong platform to take up collective business
activities.
2

Chapter 2
FARMER PRODUCER ORGANISATION:

CONCEPTUAL UNDERSTANDING
2.1. Definition
A Producer Organisation (PO) is a legal entity formed by primary producers, viz. farmers,
milk producers, fishermen, weavers, rural artisans, craftsmen. A PO can be a producer
company, a cooperative society or any other legal form which provides for sharing of
profits/benefits among the members. In some forms like producer companies, institutions of
primary producers can also become member of PO. A PO formed by Farmers is called as
Farmer Producer Organisation (FPO)
2.2. Aim/Objective of FPO
The main aim of FPO is to earn better income & surplus for the producers/members of FPO.
Small producers do not have the volume individually (both inputs and produce) to get the
benefit of economies of scale. Besides, in agricultural marketing, there is a long chain of
intermediaries who very often work non-transparently leading to the situation where the
producer receives only a small part of the value as compared to the price, the ultimate
consumer pays. With formation of a FPO, it can gain from the process of aggregation, the
primary producers can avail the benefit of economies of scale on account of better bargaining
power while procuring inputs as also selling their produce. Once basic activity of FPO is
stabilized, it can expand vertically/horizontally for value addition by undertaking processing
activity thereby extending further benefit to farmers.
2.3. Essential Features of a FPO
The essential features of a FPO are:
It is formed by a group of producers for farm activities.
It is a registered body and a legal entity.
Producers are shareholders in the organisation.
It deals with business activities related to the primary produce/product.
It works for the benefit of the member producers.
A part of the profit is shared amongst the producers.
3

Rest of the surplus is added to its owned funds for business expansion.
2.4. Promotion and Support for FPOs
An individual person or institution, which can enter into legally valid contracts with other
institutions including the FPO, which they seek to promote, can be a Producer Organisation
Promoting Institution (POPI). POPI with the noble objective of socio-economic development
of producers can promote FPO using their own resources out of goodwill or through financial
support from donor/financing agency. The following persons/agencies can promote a FPO:
¾ Any experienced person/NGO/Community Based Organisation
¾ Corporates, Banks, Financial Institutions, Development Agencies
¾ Government Departments, KVKs, Commodity Boards, Agri Universities/Research

Agencies
¾ Cooperative Societies, Large Producer Companies, Producer Associations or Federations
2.4.1. Role of PO Promoting Institution(POPI)
The broad responsibilities of a POPI include:
¾ Cluster identification
¾ Diagnostic and feasibility studies, including value chain analysis
¾ Mobilization of producers and registration/incorporation of FPO & facilitating framing

rules/by-laws, Article/Memorandum of Association
¾ Capacity building of FPO management/producers and organizing exposure visits
¾ Business planning & Resource mobilization
¾ Developing robust systems and procedures in FPO and MIS development
¾ Facilitating business decisions/Operations, audit and compliances
¾ Technical handholding and other incubation services for sustainability
Farmer Producer Organisation can be registered under any of the following legal provisions:
1) Cooperative Societies Act/ Autonomous or Mutually Aided Cooperative Societies Act

of the respective State
4

2) Multi-State Cooperative Society Act, 2002
3) Producer Company under Section 581(C) of Indian Companies Act, 1956, as amended
in 2013
4) Section 25 Company of Indian Companies Act, 1956.
5) Societies registered under Society Registration Act, 1860
6) Public Trusts registered under Indian Trusts Act, 1882
While choosing a legal form, the following factors may be kept in view:
Primary producers should benefit from the surplus generated by the PO.
Process of Registration should not be too demanding in terms of time and resources.
The legal form needs to fit into its business needs, organisational priorities, social
capital and management capacity.
2.5. Support available for promotion of FPO
NABARD, SFAC, Government Departments, Corporates and Domestic & International Aid
Agencies provide financial and/or technical support to the Producer Organisation Promoting
Institution (POPI) for promotion and hand-holding of a FPO. Each agency has its own
criteria for selecting the project/promoting institution to support.
Promotional Support
Grant support for training and capacity building initiatives, which directly benefit the FPOs
like skill development, business planning, technological extension through classroom
training, exposure visits, agricultural university tie ups, expert meetings, tie-up with
agribusiness incubators/professional agencies for business facilitation/incubation services.
Credit Linkage Support
NABARD facilitates credit linkage of FPOs through its own subsidiary organisation like
NABKISAN Finance Ltd., Commercial Banks, Regional Rural Banks, Cooperative Banks,
NBFCs and other lending agencies. In order to ensure proper utilization of loan, necessary
capacity building support is also extended to FPOs.
2.6. Important activities of a FPO
The primary producers have skill and expertise in producing. However, they lack scale of
5

operation and generally need support for marketing of their produce to fetch better price.
Therefore, the FPO will engage itself in any one or more activities in the value chain of the
produce right from procurement of raw material to delivery of the final product at the
ultimate consumers’ doorstep. Normally, the FPO undertakes the following activities:
1) Procurement & distribution of inputs
2) Disseminating market information to members
3) Dissemination of technology and innovations to its members
4) Facilitating finance for inputs procurement
5) Aggregation and storage of produce
6) Primary processing like drying, cleaning and grading
7) Brand building, Packaging, Labeling and Standardization
8) Quality control
9) Marketing of produce aggregated, to institutional buyers
10) Participation in commodity exchanges
11) Export
6

Chapter 3
VARIOUS STAGES IN FORMATION OF A FPO
Aggregating producers into collectives is one of the best mechanism to improve access of
small producers to investment, technology and market. The facilitating agency or POPI
should, however, keep the following factors in view:
1) Current issues leading to low income to producers
2) Types of small scale producers in the target area, volume of production,

socioeconomic status, marketing arrangement
3) Current demand in the existing market to absorb the additional production without
significantly affecting the prices
4) Willingness of producers to invest and adopt new technology, if identified, to increase

productivity or quality of produce
5) Challenges in the market chain and market environment
6) Vulnerability of the market to shocks, trends and seasonality
7) Previous experience of collective action (of any kind) in the community
8) Key commodities, processed products or semi-finished goods demanded by major

retailers or processing companies in the surrounding areas/districts
9) Support from Government Departments, NGOs, specialist support agencies and

private companies for enterprise development
10) Incentives for members (also disincentives) for joining the FPO
Once the farmers /informal interest groups in the cluster acquire sufficient understanding of
the FPO concept, perceived business risks and positive impact of organizing into FPO, they
can be facilitated to come together and form a FPO with initial shareholder membership of
not below 100 farmers.
Stages in formation of FPO
¾ Constitution of Board of Directors – as per provisions of the Act/by-laws

¾ Preparation of Legal Documents – Article of Association/Memorandum of Association
¾ Registration/Incorporation under the relevant Act
¾ Appointment of Professional CEO/other key staff as per business needs
7

¾ Obtaining Certificate of Incorporation/Registration of FPO
¾ Conduct of First General Body Meeting and formal establishment
In case of incorporation of FPO as Farmer Producer Company (FPC), the following steps are
involved:
¾ Preparation of Legal Documents

¾ Registration
3.1. Registration of a FPO
In order to ensure sustainability to the FPO’s activities, FPOs are to be registered under any
Statute as mentioned in Chapter 2. Expenditure towards incorporation such as registration
fee, stamp duty, preparation of documents and facilitation charges etc., will depend on the
legal structure of the FPO. The estimated cost of incorporating a FPO as a producer company
is given below:
Estimated cost for incorporation of a producer company
Particulars Item of expenditure Amount

(Rs.)
Application for Name of PC Fees 500
Digital signature Fees 2600
Stamp duty Memorandum of Association and Articles of 1500

Association
Registration/Filing fees MoA, AoA, Form-1, Form-18, Form-32 17200
Fees of Chartered Accountant or Consultancy charges 10000

Company Secretary
Stamps cancellation - 300
Affidavit expenses Fees of Notary 500
Share transfer fees and - 5000

processing
Miscellaneous expenses - 2000
Total 39600
8

Registration of a FPO involves the following steps:
1. Obtain Digital Signatures of the nominated Directors

2. Apply for Name Availability(Form – IA)
3. After availability of name, necessary documents to be prepared like:
¾ Memorandum of Association(MoA)
¾ Articles of Association(AoA)
¾ Form No. 18 for Registered Office
¾ Form No. 32 for Directors’ Appointment
¾ Apply online for DIN for Proposed Directors
¾ Form 1
¾ Power of Attorney in favour of consultant to authorize him to make necessary
changes
3.2. Various legal compliances
As the FPO is a registered entity having its own existence, it is required to comply with
certain legal compliances, as mentioned below:
a) Licenses required, depending upon nature of business a FPO may require Building
Plan approval from Competent Authority, License from Industries Department, FDA,
FPO, Pollution Control, NOC from Fire Department, FSSAI etc.
b) Compliance with Taxation Laws (Income Tax, Commercial Tax Act etc.) –
FPO has to procure a PAN number from the Income Tax Department and GSTIN
from the Commercial Tax Department to carry out business(for selling/offering the
chargeable goods and services). In the wake of recent Budget announcement of 2018-
19, FPOs registered under Companies Act with an annual turnover upto Rs. 100 crore,
are eligible for 100% Tax exemption for a period of five years from financial year
2018-19.
c) Compliance under Companies Act or Act under which FPO is registered

for maintenance of Records and Preparation of Financial Statements –
For a FPO registered under Companies Act, following returns are to be
filed:
(i) Balance-Sheet - Form 23AC to be filed by all companies
(ii) Profit & Loss Account - Form 23ACA to be filed by all companies
(iii) Annual Return - Form 20B to be filed by companies having share capital
(iv) Compliance Certificate - Form 66 to be filed by companies with paid up capital
between Rs. 10 lakh to Rs. 2 crore
9

For a FPO registered under Companies Act, following Statutory Registers,
Books are to be maintained:
i) Share/Debenture transfer register [Section 108]
ii) Copy of every instrument deed, etc., creating any charge which requires
registration [Section 136]
iii) Register of charges [Section 143]
iv) Register of members [Section 150]
v) Index of members [Section 151]
vi) Copies of annual returns and certificates and documents required to be
annexed thereto [Section 159 to 161]
vii) Minute books of Board Meetings & meetings of committee of the Board
[Section 193]
viii) Minute books of general meetings [Section 193]
ix) Register of dividend declared and remaining unpaid [Section 205]
x) Proper books of accounts [Section 209]
xi) Proper books of accounts in relation to transactions effected at Branch Office.
xii) Register of contracts, companies and firms in which directors are interested
[Section 301].
xiii) Register of directors, etc.[Section 303]
xiv) Register of directors’ share-holdings, etc. [Section 307]
xv) Books of accounts of producer company [Section 581ZE(1)]
xvi) Register of particulars of investments of producer companies [Section
581ZL(7)].
d) Holding of Meetings - The Companies Act, 2013 has given elaborate provisions for
holding and conducting meetings. It is necessary to observe those provisions; failing
which the decisions taken will not be considered binding. These meetings include:
i) First General Body Meeting

ii) Annual General Meeting (AGM)
iii) Extra Ordinary General Body Meeting
iv) Meetings of the Board of Directors
3.3. Preparation of Business Plan
A business plan is like a roadmap; it provides direction to a FPO to plan for the future and
avoid bumps in the road. Creating a good business plan requires substantial investment of
10

time and human resources, but it is a worthwhile investment that pays off in the long run.
A business plan should be a working document; it should not be something that is created
and then remains filed away. Rather, a business plan should be reviewed periodically (e.g.,
quarterly or more frequently) and, if the organisation is not on track to meet its goals,
measures should be taken to improve performance. Alternatively, the plan could be revised to
reflect a more realistic set of goals and a strategy for attaining them.
A business plan is a set of business goals and contains defined ways for achieving those goals.
A basic business plan is a simplified version that can be developed to register a cooperative or
other producer organisation. It can also provide guidance on how to run the business during
the early stages of its operation.
The Board members and select producers with support of Resource agency, can undertake
business planning keeping in view the inputs from diagnostic study, shared vision of
members, nature and scope of commodities, institutional structure, infrastructure in terms of
storage, technical extension, quality inputs, etc. and market landscape, business
options/potentials in the area and financial capability. Accordingly, operational plan will be
prepared and financial resources would be mobilized from various possible funding sources
such as banks, other lending agencies, Government donor agencies, CSR funds of corporates,
etc.
3.3.1. Development and use of a basic business plan
It is essential for a FPO to understand and feel a sense of ownership over its business plan.
While an outside organisation can help develop the plan, the FPO should provide inputs
throughout the process to ensure buy-in. To successfully adopt the plan, a business needs to
understand and apply the implementation process and operate within the proposed financial
projections.
A basic business plan will help the FPO to answer important questions, such as:
• Why are farmers interested in forming a FPO?
• What is the goal of the FPO?
• What products does the FPO want to sell?
• Where will the FPO sell its products?
• How will the FPO accomplish its goal?
• When does the FPO hope to achieve its goal?
11

3.3.2. Basic Business Plan Development
Outline of a Basic Business Plan: Business plans may differ in their design, detail and
complexity. However, most are presented in a similar format. The basic business plan outline
is designed to:
• Meet the requirements for registering a FPO.
• Serve as a management tool for the organisation’s elected leaders and managers.
• Provide a format for clarifying business activities, management structure, by laws and
other elements required by a FPO to successfully function.
An outline of a basic business plan is given as Appendix I
4. Working Capital requirements of a FPO: For effective conduct of operations as

also to expand the activity of FPOs, it may require funds. Fund requirements of a FPO
may be classified into: Short term and Long Term, depending upon its nature. Thus, a
FPO may approach Bank/FI for availing term loans (longer duration loans) for their
fixed/block capital requirements such as requirement for infrastructure, machinery,
warehouses, shops, etc., and they may seek working capital loans (short duration loans
normally upto a period of 1 year) for their revenue/working capital requirement. Most of
the FPOs require working capital fund support for initial activities like input
procurement & distribution, procurement of agriculture produce, etc. Therefore,
understanding working capital and its assessment is important for a FPO.
Working capital is the capital required by an organisation which is used in its day to day
operations and managing business. It includes cash, inventory, accounts receivable,
accounts payable, the portion of debt due within one year and other short-term accounts.
In simple words working capital is money required by a company for conducting its
regular operations & defined as under:
Working Capital = Current Assets (cash and other assets that are expected to be
converted to cash within a year) - Current Liabilities (debts or obligations that are due
within one year)
An illustration of “Assessing Working Capital requirement of a FPO” is provided as

Appendix II to this Manual.
12

Chapter 4
GOVERNANCE OF FPO
Governance of FPO refers to the ways of conducting its activity by a FPO. It includes Board of
Directors, allocation of authority & responsibility among the management, systems,
processes & procedures, internal checks & controls, compliances & audit. Over a period of
time, FPO should build/develop a strong governance to safeguard interest of shareholders,
particularly farmers/members associated with a FPO.
To understand the governance of a FPO, it can be viewed at three levels as indicated below:
1. Members/shareholders
2. Board of Directors
3. CEO/Office bearers
4.1. Members/Shareholders
A member is defined as a person or producer institution, whether incorporated or not,

admitted as a member of a Producer Company and who retains the qualifications necessary
for continuance as such. Being a membership based entity, membership shall be voluntary
and is available to all eligible members (in case of a Company, criteria of membership is
defined in the Articles of Association of a company) who can participate and avail the
facilities or services of the Producer Company. Shares in a Company can be held in more than
one name, which is called ‘Joint Membership’. Under the Companies Act, there is no ceiling
on the number of persons holding shares jointly.
Members act through the General Body, and the Body alone can:
a) Approve the Budget and adopt the Annual Accounts of the Company;
b) Approve the patronage bonus;
c) Authorize the issue of bonus shares;
d) Appoint an auditor;
e) Declare a dividend and decide on the distribution of patronage;
f) Amend the Memorandum of Association and Articles;
g) Approve or act on any other matters that are specifically reserved in the Articles for
decision by the Members.
13

4.2. Board of Directors
Every FPO should have a Board of Directors of not less than five and not more than fifteen
members. The Board may act only in areas not reserved for the General Body and may not
exercise executive functions. In general, the Board has authority and is responsible for
formulating, supervising, and monitoring of the performance of the FPO in respect of the
following matters:
a) Determination of the dividend payable.
b) Determination of the quantum of withheld price and recommended patronage to be
approved at General meeting.
c) Admission of new members.
d) Pursue and formulate the organisational policy, objectives, establish long-term and
annual objectives, and approve corporate strategies and financial plans
e) Appointment of a CEO and other officers, as may be specified in the Articles.
f) Exercise superintendence, direction and control over CEO and other officers.
g) Sanction any loan or advance, in connection with the business activities of the Producer
Company to any member, not being a director or his relative.
h) Investment of the funds of the Company in the ordinary course of its business.
i) Acquisition or disposal of property of the company in its ordinary course of business.
j) Check that proper ‘books of account’ are maintained.
k) Ensure that annual accounts are placed before the annual general meeting with the
auditor’s report.
l) Take such measures or do such other acts as may be required in the discharge of its
functions or exercise of its powers.
4.3. CEO/Office Bearers

Individual appointed to look after the day-to-day affairs of the company, like CEO,
accountant, godown keeper etc. have to adopt systems & procedure as has been stipulated by
the management. They have to adhere to the policies approved by the Board & implement the
decisions taken by the Board & Governing Body.
4.3.1. Chief Executive Officer (CEO)

Board of Directors have to appoint a full time CEO amongst persons other than members.
The qualification, experience and the terms and conditions of services shall be decided by the
Board. The CEO shall be the ex-officio Director of the Board and shall not retire by rotation.
The CEO shall be entrusted with substantial powers of management as may be determined by
the Board. He/She is accountable for the performance of the FPO, both, to the Board of
14

Directors and to the Members. The CEO shall be authorized to exercise the powers and
discharge the functions as described below:
a) do administrative acts of a routine nature including managing the day-to-day affairs of
the FPO;
b) operate bank accounts or authorize any person, subject to the general or special approval
of the Board;
c) make arrangements for safe custody of cash and other assets of the FPO;
d) sign business related documents as may be authorized by the Board’ for and on behalf of
the FPO;
e) maintain proper books of account, prepare annual accounts, place the audited accounts
before the Board and in the annual general meeting of the Members;
f) furnish the members with periodic information to appraise them of the operation and
functions of the FPO;
g) make appointments to posts in accordance with the powers delegated to him by the
Board;
h) assist the Board in the formation of goals, objectives, strategies, plans and policies;
i) advise the Board with respect to legal and regulatory matters concerning the proposed
and ongoing activities and take necessary action in respect thereof;
j) exercise the powers as may be necessary in the ordinary course of business;
k) discharge such other functions, and exercise such other powers, as may be delegated by
the Board;
l) to provide timely information to the Members and Board of Directors for scheduled
meetings or emergency or short notice meetings.
4.4. Audit of Accounts

It is compulsory to conduct Internal Audit in the case of FPO (registered under Companies
Act) in terms of Part IX A of the Companies Act, 1956, Section No. 581ZF. Internal audit of its
accounts should be carried out, at such interval and in such manner as may be specified in its
article of association, by a chartered accountant.
15

Chapter 5
BOOKS OF ACCOUNTS & PREPARATION

OF FINANCIAL STATEMENTS
FPOs are registered under different statutes as mentioned in Chapter 2. Therefore, they are
required to comply with the certain requirements with regard to maintenance of accounts for
their operations and preparation of financial statements. Besides, there is a need to assess the
operational performance of these entities to know the benefits that have accrued to farmers
due to their association with FPOs. Against this background, maintenance of proper books of
accounts and other subsidiary registers assumes significance. While maintaining these
records, the requirement of the statute, under which a FPO is registered would be taken care
of. Each FPO should maintain the following records/ books to facilitate legal compliance as
also evaluation of its performance.
5.1. Books of Accounts and Records are sub-divided into following two broad
categories:
1. Financial Books
1. Cash Book
2. Bank Book
3. Bank Reconciliation Statement
4. Journal
5. Ledger
6. Share Capital Register
7. Subsidiary Books
(i) Input(Purchase, Sale & Stock) Register
(ii) Produce(Purchase, Sale & Stock) Register
2. Non-Financial Books
1. Members’ Profile Register
2. Members’ Progress Register
3. Minutes Book/Register
16

5.2. Objectives of maintaining books of account and records:

1. Financial Books
i. To know the position of cash and bank balances on a day-to-day basis and
facilitate preparation of Bank reconciliation statements.
ii. To facilitate preparation of financial statements viz. P&L A/c, Balance Sheet
and cash flow statement.
iii. To know profit earned or loss incurred by FPO. Book keeping keeps complete
records of business transactions. Thus, profit or loss of business transactions
can be easily ascertained/ known.
iv. Knowledge of assets and liabilities belonging to FPO – When a FPO keeps the
books of different business assets and liabilities in a systematic manner, it can
easily know the position of assets and liabilities as on a particular date.
v. To facilitate audit of books of accounts.
vi. Compliance with legal requirements.
vii. Facilitate preparation of MIS required by the management and filing of
different returns with government authorities.
2. Non-Financial Books and Records

i. To know the socio-economic status of members after joining the FPO.
ii. To track record of the improvement in socio-economic condition of the
members.
iii. To monitor the effectiveness of governance system of FPO.
iv. To facilitate preparation of business plan with concrete steps in order to make
the most optimal use of the available resources.
5.3. Different kinds of Financial and Non-Financial Books
5.3.1. Cash Book
Cash receipts and cash payments, pertaining to FPO only, may be recorded in cash book
against appropriate account heads (discussed in a separate chapter). The format of cash book
is given below:
CASH BOOK
Debit side (Dr.) Credit side (Cr.)
Date V.No. Particulars L.F Amt.(Rs.) Date V.No. Particulars L.F Amt.(Rs.)
17

• All the items of cash receipts are recorded on the debit side (left hand side) and all the
items of cash payments are recorded on credit side (right hand side) in order of date of
the cash transaction.
• The difference between the total of two sides shows balance of cash in hand i.e. excess of
summation on debit side over the summation on credit side.
• The entries made in cash book are posted to ledger.
• Cash Book may be balanced whenever there is a cash transaction and CEO may put
his/her signature after it.
The columns of the Cash Book are explained below:
a) Date : The date of transaction is written in this column.
b) Particulars : In this column in case of receipt transaction the corresponding account

head being credited is written on debit side. Further in case of cash payment the
corresponding account head being debited is written on credit side.
c) L.F (Ledger Folio): The page number of the Ledger where the concerned transaction is
posted is written in this column.
d) Amount : The amount of the transaction is recorded in this column. The amount of cash
received is recorded on the debit side in amount column and the amount of cash paid is
recorded on the credit side in amount column.
e) V.No. (Voucher Number): A voucher is necessary for each item of receipt and
payment. Generally, a voucher has a serial number and this number-is written in this
column (V.No.)
When cash is received from a debtor or customer, generally a ‘receipt’ or ‘cash memo’ is
issued to the debtor which is a supporting document for Receipt Voucher. Again, when
money is paid to a creditor or supplier an invoice cum receipt is obtained from him which is
supporting document for Payment Voucher. These supporting documents are to be attached
to the voucher and filed in voucher file.
5.3.2. Bank Book
All transactions related to receipt of money in Bank and payment made through bank are
recorded in the bank book. The format of Bank book is similar to that of cash book. However,
18

it is important to note that transactions routed through a Bank only (i.e. money received in
Bank & payment made through Bank) be recorded in this book.
BANK BOOK
Name of Bank: …………………………………
Account Type & No. …………………………
Debit side (Dr.) Credit side (Cr.)
Date V.No. Particulars L.F Amt.(Rs.) Date V.No. Particulars L.F Amt.(Rs.)
The difference between debit side (left hand) & credit side (right hand) of Bank book on any
particular day will reveal the balance in Bank account of FPO. Debit balance (excess of total
of debit side over credit side total) represent bank balance, while credit balance (excess of
credit side total over debit side total) represent Bank overdraft. The Bank book is closed by
striking a balance on a given date. CEO may put his/her signature in Bank Book when Bank
balance is struck.
Bank book helps to reconcile difference between balance as per bank book of FPO & balance
as per pass book of Bank account of FPO.
5.3.3. Preparation of Bank Reconciliation Statement(BRS)
Normally, bank balance as per bank book of FPO and that as per pass book of Bank should be
similar. However, on a particular day this balance may differ. Therefore, to know the reason
for difference in balance as per these books, a reconciliation statement is prepared which is
called Bank reconciliation statement. The format for reconciliation statement is as under:
19

Bank Reconciliation Statement as on ……………………
Name of Bank: ……………………………
Account Type & No. ………………………
Particulars Amount(Rs.)
Debit Balance as per Bank Book of FPO A
Add : Transactions which have reduced bank balance as per FPO books B
but not recorded in Bank Pass Book (e.g. Payment made through
Bank by FPO or cheque issued by FPO not presented to Bank)
Less: Transactions which have increased the Bank balance as per FPO C
book but not accounted/recorded by Bank in Pass book (e.g.
Amount received from the customer by bank or cheque deposited
in the Bank)
Balance as per Bank Pass Book D (A+B-C)
No item of transaction should appear in the Bank Reconciliation Statement, for want of its
accounting in the books of FPO e.g. interest credited or Bank charges levied by Bank not
accounted for by FPO. Such transaction should be recorded before BRS is prepared, in the
Books of FPO instead of allowing them to appear in BRS.
5.3.4. Journal
Financial transaction which does not involve immediate receipt or payment through
Cash/Bank is recorded in a journal e.g. Credit purchase or credit sale. Besides this,
accounting entries pertaining to closing stock/ opening stock, provision for depreciation,
provision for outstanding expenses and income, prepaid expenses, income received in
advance, adjustment and rectification entries are passed through journal.
20

The format of journal is as under:
Date Particulars L.F Amount(Rs.) Amount(Rs.)
Account head to be debited ………………… XXX

……….. Dr.
Account head to be credited …..…….… Cr.

XXX
(Narration)
The account head debited/ credited in journal should be posted in ledger
The various columns of journal are explained in detail below:
1. Date : This column is used to write the date of the business transaction.
2. Particulars column: In this column the names of the two connected account heads are
written. In the first line, the name of account head to be debited and in the second line
the name of account head to be credited is written. It is not necessary to place the word
‘Cr” before the name of the account credited. Below the account heads narration is
written, usually, within brackets.
3. Ledger Folio (L.F): The page numbers of the ledger where the concerned accounts
have been posted are written in this column against the name of each account head. Thus,
if a folio number stands written in this column, it will mean that the transaction has been
posted in ledger.
4. Amount: Against account heads debited/ credited, the amount is indicated. It has to be
ensured that total amount of account heads debited should be equal to total amount of
account heads credited.
5.3.5. Ledger
Ledger is a summarized record of accounting entries for account heads debited or credited in
Cash book, Bank book or Journal for the given period of time (i.e. year). Entries made in
prime books (cash book, bank book, journal) are posted in ledger to know the cumulative
position under each account head. A separate folio is maintained for each account head. On
posting of transaction from prime book (cash/ bank book & journal) into ledger, a reference
folio number of prime book is indicated in ledger.
21

The format of Ledger Book is given below:
Name of the Account Head
Debit Side(Dr.) Credit Side(Cr.)
Date Particulars Bank/Cash Amt.(Rs.) Date Particulars Cash/Bank Amt.(Rs.)

Book/ Book/
Journal Journal
Folio Folio
Characteristics of Ledger Account:
The ledger has the following main characteristics:
a) It has two sides – left hand side (debit side) and right hand side (credit side).
b) Account heads appearing on the debit side of the cash/bank book will be credited in the
ledger whereas, account heads appearing on the credit side of cash/bank book will be
debited in the Ledger.
c) Ledger Posting of Journal – account heads debited in the Journal entry will be posted in
ledger by recording the entry on debit side of the account head, while, account heads
credited in the journal, entry will be posted in the ledger by recording on the credit side of
the account head.
d) The difference between the totals of the two sides of account appearing in ledger
represents balance. The excess of debit side total over credit side of the account indicates
debit balance, while excess of credit side total over debit side total in the account
indicates the credit balance. If the two sides are equal, there will be no balance.
e) Generally the balance is drawn at the year end and recorded on the lesser side to make
the two sides equal. The balance is known as closing balance.
f) The closing balance of the current year becomes the opening balance of the next year in
case of account heads involving assets or liability.
g) Closing balance of account heads involving income or expenditure are transferred to

Trading and Profit & Loss account. These balances are not carried to next year as opening
balance.
22

Uses of Ledger
a) Preparation of Trial Balance: Once all transactions are posted in ledger and all ledger
accounts are balanced, the next step is preparation of trial balance. A trial balance is
summarized, position of each account head opened in ledger. The closing balance arrived
at for each account in the ledger is carried to the trial balance.
b) Preparation of Receipts & Payment Statement: In case FPO is registered under

Public Trust Act, it will prepare Receipts & Payment Statement instead of trial balance.
The said statement can also be prepared from the Ledger. While preparing Receipts &
Payment Statements, total of transactions posted for the year is to be considered i.e.
opening balances are not to be factored while carrying balances to Receipt and Payment
Statement.
5.3.6. Share Capital Register
A Share Capital Register is a list of active owners of a FPO's shares, updated on an ongoing
basis. The register contains details of each member's name, address and number of shares
held by each member. In addition the register can have details of member’s
occupation/activity. The Share Capital Register is fundamental to the examination of the
ownership of a FPO.
A typical Share Capital Register’s format is given below:

Sl. Name of Address Occupation/ No. Face Amount Date of Remarks
No. Shareholder Activity of Value of paid(Rs.) acquisition
Share share(Rs.) of shares
held
5.3.7. Subsidiary Books to record Purchase/Sale/Stock

FPO normally undertakes purchases at two levels:
i) Aggregation of input requirement of farmers & its purchase from the market for
distribution among farmer members.
ii) Aggregation of produce from member farmers & its purchases from the members for
selling in the market
In order to have proper control over purchases of input & produce made by FPO,
distribution/sale of inputs/produce & proper accounting of closing stock, FPO needs to
maintain following registers for recording purchase, sale & stock of input & purchase, sale
& stock of produce.
1. Input(Purchase, Sale & Stock ) Register
2. Produce(Purchase, Sale & Stock ) Register
23
The format of registers are indicated below:
Input (Purchase/Sale/Stock) Register
Name of Input: …………………………………………… Year ………….

Purchases Sale/Distribution to member Stock
Bill No.,
Date &
Date & Total Cash Book/ Name of Total Cash Book/ Member Closing
Rate Amount GST Bill Rate Amount GST Rate Amount
Name of Qty Amount Bank Book member Qty Amount Bank Book Progress Stock
(Rs.) (Rs.) (Rs.) No. of (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
Supplie (Rs.) Folio No. farmer (Rs.) Folio No. Folio Qty.
FPO
r
(17)
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) = (18) (19)
(2-10)
To be filled in based on Supplier’s Bill Cash Book To be Cash Book

Folio, if filled in Folio, if
purchases based purchases
are made on sale are made
in Cash & invoice in Cash &
Bank Book of FPO Bank Book
Folio, if Folio, if
payment payment
is made is made
through through
Bank A/c Bank A/c
24

Important points about the maintenance of Input (Purchase, Sale & Stock)
Register:
1. A separate Folio may be earmarked for each item of input procurement made by FPO
2. Total of ‘Amount’ column of purchases in the register to be tallied with the total amount
as appearing in the ledger against the account head ‘Input Procurement’ for the respective
inputs
3. Total of ‘Amount’ column under Sale/Distribution to members in the register is to be

tallied with the Account head for the distribution of respective input in the Ledger i.e.
Input Distribution A/c – Respective Input
4. In case, sale of input is made to more number of farmers on any day, the total of day’s
sale/distribution may be accounted in Cash/Bank Book instead of making separate entry
for sale to each farmer in Cash/Bank Book.
5. Farmer wise input distribution entries will be made in Farmers/Members progress

register based on entries made in input (purchase/sale/stock) register and cross reference
of these registers will be indicated.
6. Rate for distribution of input will be decided by the Board, taking into account, the
market rate of the input.
7. Sale/distribution of input may be based on ‘First in First out (FIFO)’ method.

Accordingly, accounting entries for closing stock valuation may be done on the basis of
rates charged in last purchases made by FPO.
25
Produce (Purchase/Sale/Stock) Register
Name of Produce: …………………………………………. Year ……………

Purchase Sale of Produce Stock
Cash
Bill Member Cash
Name Total Book/ GST Total
No. Rate Amount Progress Buyer’s Rate Amount Book/ Rate Amount
of Qty Amount Bank Date Qty * Amount Qty
& (Rs.) (Rs.) Register Name (Rs.) (Rs.) Bank Book (Rs.) (Rs.)
Farmer (Rs.) Book (Rs.) (Rs.)
Date Folio Folio No.
Folio No.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (17)
To be filled in based on FPO’s Bill Cash To be filled in based on sale invoice of FPO. Cash Book
Book Folio, if
Folio, if *GST may be included in case the good or services are purchases
purchases chargeable are made
are made in Cash &
in Cash & Bank Book
Bank Folio, if
Book payment is
Folio, if made
payment through
is made Bank A/c
through
Bank A/c
26

Important points to be noted about maintenance of Produce (Purchase/sale
/stock) register:
1. A separate page may be earmarked for each produce procured by FPO from farmers.
2. Date wise produce procurement done from farmers/members may be recorded under
purchase segment of the register. Total produce for the particular day may be totalled
and accounting entry for the day’s procurement may be passed through cash book/bank
book, depending on mode of payment.
3. Cash/Bank Book folio may be indicated in the register to ensure and confirm
accounting entry of the procurement.
4. The produce procured details may also be entered in members progress register & folio
no. of members progress register entered in the produce purchase register.
5. Total of ‘Amount’ column under ‘purchase segment’ of this register should be tallied
with the total amount/balance appearing against produce procurement A/c of
respective produce in the ledger.
6. Sale of produce procured will be recorded under ‘sale segment’ of register, based on
bill/invoice
7. Total of amount column of sale register to tally with the total/balance amount
appearing against ‘produce sale – A/c of respective produce in the ledger. Under ‘stock’
segment entries may be made as & when there is change in stock position of the
produce.
8. Stock valuation may be made & entries for closing stock to be passed accordingly, at the
end of the year
9. Cash/Bank book folio where entry of sale transaction is made should be indicated under
CB/BB folio depending upon mode of payment.
Non –Financial Records/Books
5.3.8. Members’ Profile Register

A FPO having farmers as its members, has to keep record in place for getting basic
information about its members.
A sample Member’s profile register is as follows:
Sl. Name Village Area under Crops Yield No. of Breed of
& Cultivation cultivated achieved Animals/Birds Animal/Bird
Address
of Before Joining FPO
Farmer
27
5.3.9. Members’ Progress Register
The objective of FPO formation is to benefit from collectivization & reflect in the
enhancement of income of farmers/members of FPO. Hence, this register is to be maintained
to track progress of farmers due to their association with FPO. This register is to be
maintained year-wise to record progress made by the farmer on three fronts viz. input
consumption, production of produce & income enhancement. The format of the register is
indicated below:
Name of the Farmer/member: ……………………………………….

Serial No. (Reference) in Share Capital Register ……………
Folio of member’s profile register. ……………………………..
Year Input Consumption Produce production Income

earned
Name of Qty Amount Folio of Produce Qty Folio of Amount

input input Name produce paid by
(Rs.)
register register FPO
Note: A separate folio should be earmarked for each member/farmer to record the year wise
progress made.
5.3.10. Minutes Book/Register

Meetings of shareholders/board of directors/AGM/Extra Ordinary General Body meeting
etc. are meant for discussing agendas like:
1. Preparation of business plan
2. Reviewing progress of FPO in terms of activity expansion
3. Strategic decisions like which crop/breed of animal to be cultivated/adopted in
next season/cycle.
4. Measures to enhance profitability of FPO & income of farmers
5. Share capital contribution (enhancement/reduction etc.)
6. Dividend payout
7. Borrowings from Bank
8. Deciding on rates to be charged to farmers for input supply & rate to be paid for
produce procurement
28
9. Adoption of accounts
10. Appointment of auditors
11. Periodic review of business plan implementation
12. Review of FPO operations & benefit received by farmers
Deliberations in the meeting should be documented in the Minutes Book/Register. A typical

Minutes Book format is given below:
Type of Meeting
Date of Meeting
Members Present(Name & Signature)
Agenda items
Details of deliberations
Decisions Taken
5.4. Closing of Books of accounts & preparation of Financial Statements

In order to facilitate review of operations of FPO, books of accounts are closed periodically
i.e. at the end of each quarter, besides annual closing of books of accounts. The following
statements are prepared on closing of books of accounts:
5.4.1. Trial Balance
A trial balance is a bookkeeping or accounting report that lists the balances in each account of
a FPO's ledger. The debit/credit balance of ledger accounts are listed in Trial Balance. The
total of each of these two columns should be identical.
The trial balance has following proforma:
Trial Balance as on …………………………….
Ledger Account Number Ledger Account Head Debit Credit
The debit balance in ledger will be written under Debit column while Credit balance appears
in Credit column. Cash/Bank balances appearing in Cash/Bank Book will also be included in
Trial Balance.
29
Based on Trial balance & other adjustments (provision for depreciation, expenses, income &
closing stock, proposed dividend etc.), financial statements are prepared. While, for-profit
organisations prepare Trading and Profit & Loss account, non-profit organisations
(institutions registered under Public Trust Act) prepare Income & Expenditure account.
FPOs registered under Companies Act are required to prepare following Financial
Statements:
1. Trading and Profit & Loss Account

2. Balance Sheet
Besides above statement, it is advisable to prepare Cash Flow statement for the year to know
the Cash Flow emanating from operational activities, investment activity & financing activity,
for the FPO. Interconnection of Trail Balance, Profit & Loss Statement and Balance Sheets is
depicted in the following figure:
5.4.2. Trading and Profit & Loss Account

This statement reflects operational performance of FPO, while trading account shows gross
profit earned, Profit & Loss account shows net profit earned after operational, administrative
and selling expenses.
30
The format of Trading and Profit & Loss Account is indicated below:
Name of FPO: …………………………………………………

Trading and Profit & Loss Account for the year ended on …………………….
Dr. Cr.
Amount Amount
Amount (Rs.) – Amount (Rs.) –
Particulars Particulars
(Rs.) Previous (Rs.) Previous
Year Year
Opening Stock of By sales of
- Inputs - Inputs
- Produce - Produce
To purchase of By closing stock of
- Inputs - Inputs
- Produce - Produce
To Carriage inward
To wages
Gross Profit carried
down
Sub Total Sub Total
By gross profit
To Salary
b/d
To rent, electricity, taxes etc.
By Other operating
To Audit Fee
income
To other expenses
By interest earned
To Depreciation on assets
To Carriage outward
To interest on borrowings
Net Profit c/d
Sub Total Sub Total
To proposed dividend Net profit b/d
To General Reserves
To other (specific) reserve
To balance of profit tr. to
B/S
Total Total
31

5.4.3. Balance Sheet/Asset Liability Statement
The balance sheet is a statement that lists the values of a FPO’s assets, liabilities and
shareholder/members’ equity at the end of an accounting period. In other words, the balance
sheet provides an overview of the resources the FPO owns, the debts that it owes and the
amount of the shareholder/members’ equity & its application as on a particular date.
Recall the accounting equation: Assets = Liabilities + shareholder/members’ Equity.
From the balance sheet one can determine a FPO’s net worth as well as its working capital.
Net worth is the amount by which total assets exceeds total liabilities. Working capital is
current assets minus current liabilities. The level of working capital should be high enough to
cover the time needed to convert raw materials into finished goods, finished goods into
sales/debtors and realization of cash from Debtors.
The format of Balance Sheet is given below:
Name of FPO: …………………………………………………

Balance Sheet as on …………………….
Liabilities & Capital Amount Amount Assets Amount Amount

(Rs.) (Rs.) – (Rs.) (Rs.) –
Previous Previous
Year Year
1. Share Capital 1. Fixed Assets

a) Authorized (……. a) Furniture
Shares of Rs. …. acquired out
Each) of grant
received from
NABARD
Cost
b) Subscribed & Paid- Less: Depreciation
up (……. Shares of till date
Rs. …. Each)
2. Reserve & b) Other assets
Surplus Cost
a) General reserve Less: Depreciation
till date
b) Other reserves
32

c) Balance of P&L A/c 2. Investments
2. Grant & 3. Current

Donations Assets
received
(i) From NABARD
a) Furniture/Office a) Loans &
expenses Advances
Received
Less : Utilized
b) Revolving Fund b) Closing stock
of inputs
c) Registration
charges
Received
Less : Utilized
d) Salary of CEO c) Closing stock

Received of produce
Less : Utilized
d) Cash & Bank

(ii) From State Govt.
balances
a) Capital Grant(in
Kind)
4. Secured Loans
a) Term Loan
b) Cash Credit
c) Bank overdraft
5. Unsecured Loans
6. Current
Liabilities &
Provisions
a) Sundry Creditors
b) Proposed dividend
c) Others
Total Total
33

Chapter 6
ACCOUNT HEADS TO BE USED FOR
DIFFERENT ACTIVITIES OF A FPO
In order to facilitate proper maintenance of prime books, secondary books and preparation of
financial statements i.e. Trading and Profit & Loss Account and Balance Sheet as also cash
flow statement, account heads to be used by FPOs are broadly divided into four groups.
1. Account heads pertaining to input procurement and its distribution.

2. Account heads pertaining to aggregation of produce.
3. Account heads pertaining to sale of produce.
4. Account heads pertaining to operational expenditure, income & capital items.
Different FPOs may be involved in different kind of activities as also same FPO can be
connected with more than one activity. This Chapter illustrates activity wise accounting
heads to be used while writing books of accounts by FPOs. In this Chapter, Account heads
have been suggested for three activities viz. Farming/Cultivation of Land for Food
grains/Vegetables etc., Dairy and Poultry. For any other activity of FPO, Account heads can
be created by adopting a similar approach/path i.e. divide account heads under four broad
groups viz. Input Procurement & Distribution, Produce aggregation, Sale of Produce &
Operational expenditure capitalization on the lines suggested herein below. The account
heads suggested provide maximum transparency in the operations of FPO & facilitate better
governance.
Illustrations:
1. Activity: Farming or Land Cultivation
Sl.
Input Procurement & Distribution
1.
Nature of Transaction Account Heads
i) Purchase of Seed/Saplings Input Procurement A/c - Seeds/Saplings
ii) Purchase of Fertilizer Input Procurement A/c - Fertilizer
34

iii) Purchase of Pesticide Input Procurement A/c - Pesticide
iv) Transportation of Inputs Carriage Inward A/c - Inputs
v) Sale/Distribution of Seed/Saplings Input Sale/Distribution A/c -

Seed/Saplings
vi) Sale/Distribution of Fertilizer Input Sale/Distribution A/c - Fertilizer
vii) Sale/Distribution of Pesticide Input Sale/Distribution A/c - Pesticide
viii) GST paid on chargeable goods/services GST Paid A/c - Input
2. Aggregation of Produce

a) Aggregation of Food grain Produce Procurement A/c -Food grain
b) Aggregation of Fruits/Vegetables Produce Procurement A/c – Fruits &

Vegetables
c) Sorting, Grading, Packaging of Produce Cleaning & Packaging Expenses A/c
d) Transportation of Produce Carriage & Cartage A/c - Produce
3. Sale of Produce
Sale of Produce in the Wholesale Produce Sale(Wholesale) A/c - Food

a)
Market(Food grains) grains
Sale of Produce in the Wholesale Produce Sale(Wholesale) A/c - Fruits &

b)
Market(Fruits & Vegetables) Vegetables
Sale of Produce in Retail Market(Food

c) Produce Sale(Retail) A/c - Food grains
grains)
Sale of Produce in the Retail Produce Sale(Retail)A/c - Fruits &

d)
Market(Fruits & Vegetables) Vegetables
GST received on chargeable

e) GST received A/c - Output
goods/services
4. Operational Expenditure/Income & Capital items

Registration of FPO(in excess of grant
a) Office Expenses A/c Registration
received from NABARD for the purpose)
35

b) Interest received on SB Account Interest Income A/c – Bank Interest
c) Interest on borrowings for Term Loan Interest on Loans A/c – Term Loan
Interest on borrowings for working

d) Interest on Loans A/c – Working Capital
capital Loan
e) Meeting expenses/tea snacks etc. Other Expenses A/c - Miscellaneous
f) Office rent paid Office Expenses A/c - Rent
g) Salary of staff paid Office Expenses A/c - Salary
h) Electricity bill paid Office Expenses A/c - Bills paid
i) Auditors fees Paid Office Expenses A/c - Auditor Fees
j) Purchase of computers Fixed Assets A/c - Computers
k) Purchase of furniture Fixed Assets A/c - Furniture
Acquisition of Agricultural
l) Agriculture Machinery & Equipment A/c
Machinery/Equipment for custom hiring
1. Assets acquired out of Govt. Grant

Agri implements(in kind grant) received A/c - Agri implement
m)
from Govt. or any other agency
2. Capital grant received(in kind) for
asset acquisition
n) Collection of share capital Share Capital A/c - Members
Borrowing from Bank for term 1. Borrowings A/c – Term Loan

o)
loan/working capital
2. Borrowings A/c – Working Capital
Grant received from NABARD(Produce Grant received from NABARD(Produce

p)
Fund) for promoting FPO Fund) A/c(to be shown on liability side
in Balance Sheet)
i) Grant received from

NABARD(Produce Fund) A/c –
Furniture
ii) Grant received from

Salary of CEO
36

iii) Grant received from
Revolving Fund
iv) Grant received from

Registration charges

Grant spent for eligible expenditure:
(i) (a) Furniture purchased out of (i) (a) Expenditure from NABARD
NABARD grant may be debited to grant(Produce Fund) A/c – Furniture
(i) (b) Expenditure on Office (i) (b) Expenditure out of NABARD

expenses, postage, electricity grant(Produce Fund) A/c 0 Office
expenditure to be debited to expenses A/c
(ii) Expenses on Salary of CEO may (ii) Expenditure out of NABARD

be debited to grant(Produce Fund) A/c – CEO
salary
(iii) Revolving Fund (iii)There will not be utilization of grant

from revolving fund for specific item.
However, it will remain with FPO for
business operations
(iv) Expenditure on registration of (iv) Expenditure out of NABARD

FPO may be debited to grant(Produce Fund) – Registration
charges
Note: Expenditure under (i)(b), (ii) &

(iv) above may be deducted from Grant
received from NABARD(Produce Fund)
account under (i), (ii) & (iv) appearing in
the Balance Sheet.
37

Account heads to be used at the time of closing of accounts, at the end of
accounting year
Activity: Farming or Land Cultivation
Sl. Activity Account Head
1 Depreciation on assets Dr Depreciation on asset A/c
Cr Provision for depreciation A/c –Name of asset
2 Input procurement remained Dr Closing Stock A/c - Input

undistributed Cr Trading A/c
3 Unsold Produce Dr Closing Stock A/c - Food grain
Cr Trading A/c
Dr Closing Stock A/c - Other Produce
Cr Trading A/c
4 Unpaid expenses Dr Respective expenditure A/c
Cr Outstanding expenses A/c - Name of

expenditure
5 Dividend Proposed Dr Dividend on Equity Capital A/c
Cr Proposed dividend on Equity share
6 Balance of Profit transferred Dr Profit & Loss A/c

to Reserve Account Cr General Reserve A/c
2. Activity: Poultry Farming(Broiler and/or Layer)
Sl.
1. Input Procurement & Distribution
a) Purchase of Day Old Chicks Input Procurement A/c - Day Old Chicks
b) Purchase of Feed Input Procurement A/c - Feed
Purchase of Equipment
c) Input Procurement A/c - Equipment
(Waterer/Feeder etc.) (Waterer/Feeder etc.)
38

d) Transportation of Inputs Carriage Inward A/c - Inputs
Sale/Distribution of Day Old

e) Input Sale/Distribution A/c - Day Old Chicks
Chicks
f) Sale/Distribution of Feed Input Sale/Distribution A/c - Feed
g) Sale/Distribution of Equipment Input Sale/Distribution A/c - Equipment

(Waterer/Feeder etc.) (Waterer/Feeder etc.)
h) GST paid on chargeable

GST Paid A/c – Input
goods/services
Aggregation of Live Birds/Chicken Produce Procurement A/c - Live Birds/ Chicken

a)
Meat Meat
b) Aggregation of Eggs Produce Procurement A/c - Eggs
c) Dressing, Packaging of Produce Cleaning & Packaging Expenses A/c
d) Transportation of Produce Carriage & Cartage A/c - Produce

3. Sale of Produce
Sale of Produce in the Wholesale Produce Sale(Wholesale) A/c -Live Bird/

a)
Market(Live Bird/Chicken Meat) Chicken Meat
Sale of Produce in the Wholesale

b) Produce Sale(Wholesale) A/c - Eggs
Market(Eggs)
Sale of Produce in
Retail Produce Sale(Retail) A/c - Live Bird/ Chicken
c)
Market(Live Bird/Chicken Meat) Meat
Sale of Produce in the Retail

d) Produce Sale(Retail) A/c - Eggs
Market(Eggs)

goods/services
39

4. Operational & Capital Expenditure/Income

a) Office Expenses A/c - Registration
Interest on borrowings for Term

c) Interest on Loans A/c – Term Loan
Loan

capital Loan
f) Office rent Paid Office Expenses A/c - Rent
h) Electricity bill paid Office Expenses A/c - Bills paid
Equipments acquired out of grant

l) received from Govt. or any other Assets acquired out of Govt. Grant A/c -
Equipments
agency
m) Collection of share capital Share Capital A/c - Members
n) Insurance of Birds Insurance A/c - Birds
Vaccination/Veterinary Aid of Medical A/c - Vaccination/Veterinary aid of

o)
Birds birds
Construction of brooder cum

p) Construction A/c - brooder cum grower house
grower house
40

q)
loan/working capital 2. Borrowings A/c – Working Capital
Grant received from NABARD(Produce Fund)

Grant received from A/c(to be shown on liability side in Balance
Sheet)
NABARD(Produce Fund) for
promoting FPO i) Grant received from NABARD(Produce
Fund) A/c – Furniture
ii) Grant received from NABARD(Produce

Fund) A/c – Salary of CEO
iii) Grant received from NABARD(Produce

Fund) A/c – Revolving Fund
iv) Grant received from NABARD(Produce

Fund) A/c – Registration charges
Grant spent for eligible

expenditure:
(i) (a) Furniture purchased out (i) (a) Expenditure from NABARD
grant(Produce Fund) A/c – Furniture
r) of NABARD grant may be
debited to

expenses, postage, grant(Produce Fund) A/c 0 Office expenses
electricity expenditure to be A/c
debited to
(ii) Expenditure out of NABARD grant(Produce
(ii) Expenses on Salary of CEO Fund) A/c – CEO salary
may be debited to
(iii)There will not be utilization of grant from
(iii) Revolving Fund revolving fund for specific item. However, it
will remain with FPO for business
operations
(iv) Expenditure on registration
(iv) Expenditure out of NABARD grant(Produce
of FPO may be debited to
Fund) – Registration charges
Note: Expenditure under (i)(b), (ii) & (iv) above

may be deducted from Grant received from
NABARD(Produce Fund) account under (i), (ii)
& (iv) appearing in the Balance Sheet.
41

accounting year
Activity : Poultry Farming(Broiler and/or Layer)

2 Input procurement remained Dr Closing Stock A/c - Input

3 Unsold Produce Dr Closing Stock A/c - Eggs

Cr Trading A/c
Dr Closing Stock A/c – Chicken Meat

Cr Trading A/c

Cr Outstanding expenses A/c - Name of
expenditure


3. Activity: Dairy Farming
Sl.
Input Procurement & Distribution
1.
Input Procurement A/c - (Animal breed

a) Purchase of Dairy Animal
name)
Input Procurement A/c - Dry Fodder

b) Input Procurement A/c - Green Fodder
Purchase of input required by members Input Procurement A/c - Feed Concentrate
42

Purchase of Equipment (Milking Input Procurement A/c - Equipment
c)
Machine/Container etc.) (Milking Machine/Container etc.)
d) Transportation of Inputs Carriage Inward A/c - Inputs
Input Sale/Distribution A/c - (Name of

e) Sale/Distribution of Animals
Breed)
Input Sale/Distribution A/c - Dry Fodder
f) Sale/Distribution of Fodder Input Sale/Distribution A/c - Green Fodder
Input Sale/Distribution A/c - Feed

Concentrate
g) Sale/Distribution of Equipment Input Sale/Distribution A/c - Equipment

(Milking Machine/Container etc.) (Milking Machine/Container etc.)
h) GST paid on chargeable goods/services GST Paid A/c - Input
a) Aggregation of Milk Produce Procurement A/c Milk
Cleaning, Pasteurization, Packaging of

b) Cleaning & Packaging Expenses A/c
Produce
c) Transportation of Milk Carriage & Cartage A/c - Milk
3. Sale of Produce
Sale of Produce in the Wholesale

a) Produce Sale(Wholesale) A/c - Milk
Market(Milk)
Sale of Other Dairy Products in the

b) Wholesale Market (Curd, Ghee, Paneer Produce Sale(Wholesale) A/c - Curd, Ghee,
Paneer etc.
etc.)
c) Sale of Produce in Retail Market(Milk) Produce Sale(Retail) A/c - Milk
43

Sale of Produce in the Retail Market Produce Sale(Retail) A/c - Curd, Ghee,
d)
(Curd, Ghee, Paneer etc.) Paneer etc.

goods/services
4. Operational & Capital Expenditure/Income

a) Office Expenses A/c - Registration
c) Interest on borrowings for Term Loan Interest on Loans A/c – Term Loan

capital Loan
f) Office rent paid Office Expenses A/c - Rent
h) Electricity bill Paid Office Expenses A/c - Bills paid
1. Assets acquired out of Govt. Grant A/c –

Equipments(in kind grant) received Equipments
l)
from Govt. or any other agency 2. Capital grant received(in kind) for asset
acquisition
m) Collection of share capital Share Capital A/c - Members
n) Insurance of Animals Insurance A/c - Animals
44

o) Vaccination/Veterinary Aid of Animals Medical A/c - Vaccination/Veterinary aid of
Animals
p) Construction of Shed Construction A/c - Shed
q) Processing of Milk Processing A/c - Milk
r) Sale of Heifer Animal Sales A/c - Heifer

s)
loan/working capital 2. Borrowings A/c – Working Capital
Grant received from NABARD(Produce Grant received from NABARD(Produce

Fund) for promoting FPO Fund) A/c(to be shown on liability side in
Balance Sheet)
i) Grant received from NABARD(Produce

Fund) A/c – Furniture
ii) Grant received from NABARD(Produce

Fund) A/c – Salary of CEO
iii) Grant received from NABARD(Produce

Fund) A/c – Revolving Fund
iv) Grant received from NABARD(Produce

Fund) A/c – Registration charges
Grant spent for eligible expenditure:
t) (i) (a) Furniture purchased out of (i) (a) Expenditure from NABARD
NABARD grant may be debited grant(Produce Fund) A/c – Furniture
to

expenses, postage, electricity grant(Produce Fund) A/c 0 Office
expenditure to be debited to expenses A/c
(ii) Expenses on Salary of CEO may (ii) Expenditure out of NABARD

be debited to grant(Produce Fund) A/c – CEO salary
(iii) Revolving Fund (iii)There will not be utilization of grant

from revolving fund for specific item.
However, it will remain with FPO for
business operations
45

(iv) Expenditure on registration of (iv) Expenditure out of NABARD
FPO may be debited to grant(Produce Fund) – Registration
charges
Note: Expenditure under (i)(b), (ii) & (iv)

above may be deducted from Grant received
from NABARD(Produce Fund) account
under (i), (ii) & (iv) appearing in the Balance
Sheet.

accounting year
Activity : Dairy Farming
2 Input procurement remained Dr losing Stock A/c - Input

3 Unsold Produce Dr Closing Stock A/c - Milk
Cr Trading A/c
Dr Closing Stock A/c - Other Products viz. Curd,

Ghee, Paneer etc.
Cr Trading A/c
Cr Outstanding expenses A/c - Name of expenditure

46

Appendix I
BASIC BUSINESS PLAN OUTLINE
The elements of a basic business plan are listed below. The information for each section can
be collected through a series of questions that are presented in the next section.
1. Purpose and Objective
2. Type of Business
3. Product
4. Customers
5. Competitors
6. Management
7. Source of Funds
8. Budget
9. Cash Flow (recommended, but not required)
10. Bylaws (usually an annex)
3.5. Developing a Basic Business Plan
The following series of questions is meant to help the group consider a range of factors
required to develop a FPO’s structure and the basic business plan.
1) Purpose and Objectives
a. Why do you want to form a FPO?

________________________________________________________________
___________________________________
b. What will be the purpose and objectives of your FPO?
________________________________________________________________
___________________________________
47

2) Type of Business
a. What type of business activities will your FPO be involved in?

________________________________________________________________
________________________________________
b. Where will the FPO be located?
________________________________________________________________
________________________________________
3) Product(s) and Services
a. What product(s) and/or services will the FPO be selling?
________________________________________________________________
________________________________________
4) Customers
a. Who will the customers be for the product(s) the FPO will be selling?
________________________________________________________________
________________________________________
5) Competitors
a. Are there other organisations, cooperatives or businesses selling or producing the

same product(s) in the community?
________________________________________________________________
________________________________________
b. How many other organisations, cooperatives and businesses in the community are
selling or producing the same product(s)?
________________________________________________________________
________________________________________
48

c. Have these other organisations, cooperatives and businesses been expanding in the
last year?
________________________________________________________________
________________________________________
d. How will our FPO compare with these organisations, cooperatives and businesses?
________________________________________________________________
________________________________________
6) Management
a. Who will be responsible for managing the business of the FPO after it begins
operations?
________________________________________________________________
________________________________________
7) Sources of Funds
a. How does the FPO intend to raise funds for its operations?
________________________________________________________________
________________________________________
8) Budget (Projected Profit and Loss Statement)
a. What is the projected budget for the FPO for the first six months?
49

Appendix II
ASSESSING WORKING CAPITAL

REQUIREMENT OF A FPO
Working capital requirements depend upon the operating cycle of the company’s business.
Operating Cycle
Operating cycle means the length of time required to convert items like raw material (RM),
work in progress (WIP), finished goods (FG) and receivable into cash. If raw material/ agri
produce, etc., are to be held by and FPO for a longer point before actually selling and getting
cash then the operating cycle is longer. On the other hand if the time gap between
procurement and sale is less then, the operating cycle is shorter.
Components of Working Capital
The following components of the day to day business operations require liquid fund and
which form the requirement of working capital when not met by the current assets:
Purchase of agri-inputs to be supplied to its members

Purchase of raw materials in case of processing
Purchase of agricultural produce in case of simple trading
Storage of raw material/ finished goods/ agri produce
Processing (food processing/ seed processing, etc.)
Transportation of raw material, agro produce, items for selling, etc.
Staff salary, travel, rent, electricity, telephone, Insurance of goods and other
administrative expenses which can be termed as management and administration cost
Methods for assessment of working capital
There are various ways in which working capital of a FPO is assessed based on nature
of business and other related factors. As per the RBI guidelines banks have been
advised to sanction limits after proper appraisal of the genuine working capital
requirements of the borrowers keeping in mind their business cycle and short term
credit requirement. For small units operating cycle method and turnover method are
used to assess the working capital requirements. FPOs on their part may learn the
50

following simple methods for estimating their working capital requirements. These
methods are used by the financing institutions for calculating working capital loan:
a) Operating Cycle Method

This method estimates the fund requirement for activities which begins with
acquisition of raw materials and ends with collection of receivables.
Stages:
1) Raw materials
2) Work-in-process
3) Finished Goods
4) Receivables
Less: Creditors
Example:
i. Procurement of raw material : 30 days
ii. Conversion/process time : 15 days
iii. Average time of holding of finished goods: 15 days
iv. Average collection period : 30 days
v. Total operating cycle : 90 days
vi. Operating cycle in a year : 4
vii. Total operating expenses per annum : Rs.60 lacs(say)
viii. Working capital requirement : 60/4= 15 lacs
b) Turnover Method:
The WC requirements may also be worked out on the basis of Nayak Committee
recommendations which is popularly known as Turnover Method. Under this
method the working capital is assessed on the basis of 20% of the projected annual
turnover. In such cases the borrower has to bring in minimum of 5% of turnover
as margin. Based on the above, the working capital can be assessed as per following
illustration.
Example:
Projected sales = Rs. 5,00,000
Working capital requirements: 25% of projected sales i.e. Rs. 1,25,000
Margin (contribution of Owner) : 5% of projected sales i.e. Rs. 25,000
Working capital to be funded by bank : Rs. 1,00,000
51

Appendix III
CASE EXERCISE
Case study for Maintenance of Books of Accounts, Registers & Preparation of
Trading Profit & Loss Statement and Balance Sheet Statement of a FPO
A group of 100 farmers decided to come together & form a FPO. Accordingly, through
Producers Organisation Promoting Institution (An NGO), they formed a FPO namely UK
Farmer Producer Company.
• Board of Directors was constituted and the first General Body meeting was held.
• All the members contributed Rs. 1000.00 each as share capital.
• Amount received from members was deposited in Current account of FPO with SBI.
• Registration expenditure of Rs. 40000.00 was incurred by the FPO through Bank. The
same was reimbursed by NABARD as grant.
• FPO was sanctioned a cash credit limit of Rs. 5.00 Lakh by SBI at an interest rate of 9%
p.a. Total interest charged for the CC account was Rs. 6000.00 for the year ended
31.03.2017
• The transactions of the FPO are given below(Year 2016-17):
1. An amount of Rs. 2000.00 was withdrawn from Bank account to meet petty
expenditures
2. FPO procured following inputs to be distributed amongst the farmer/members and
paid the amount to the supplier from CC account maintained with SBI:
Input Name Qty. purchased Rate per unit Total amount of

expenditure incurred by
FPO(Rs.)
Seed 500 Kg Rs. 100/Kg 50000.00
Fertilizer 100 Bags Rs. 300/Bag 30000.00
Pesticide 10 Liters Rs. 300/Ltr. 3000.00
Total 83000.00
52

Transportation cost of Rs. 500.00 was paid by cash.
3. Taking into account the demand for input, further purchase were made as under:
Input Name Qty. purchased Rate per unit Total amount of

expenditure incurred by
FPO(Rs.)
Seed 200 Kg Rs. 105/Kg 21000.00
Fertilizer 100 Bags Rs. 310/Bag 31000.00
Pesticide 5 Liters Rs. 310/Ltr. 1550.00
Total 53550.00
4. FPO distributed the inputs amongst its 03 members. Member farmers were charged
at par with the cost at which those were procured, transportation cost will not be
charged to the farmers, as decided by Board of Directors. Details of sale is as follows:
Farmer Seed Fertilizer Pesticide Total Amount(Rs.)
A 200 Kg 50 Bags 3 Ltr. 35900.00
B 200 Kg 50 Bags 3 Ltr. 35900.00
C 200 Kg 50 Bags 4 Ltr. 37200.00
Total 600 Kg 150 Bags 10 Ltr. 109000.00
Farmers paid the amount in Bank account of FPO.
5. Farmers supplied their produce to FPO as per following details. Sorting and grading
cost of Rs. 300 was paid by the FPO in cash:
Farmer Food grain Procurement Food grain sold by Food grain selling
supplied Price FPO in Market price in wholesale
market
A 8000 Kg Rs. 19/Kg 7000 Kg Rs. 21/Kg
B 8000 Kg Rs. 19/Kg 7000 Kg Rs. 21/Kg
C 8000 Kg Rs. 19/Kg 7000 Kg Rs. 21/Kg
Total 24000 Kg Rs. 456000.00 21000 Kg Rs. 441000.00
53

Farmers were paid the amount from CC limit. From the sale proceeds, FPO repaid an
amount of Rs. 400000.00 in CC account.
6. CEO was appointed & paid a salary of Rs. 9000.00 per month, for which the grant
was received from NABARD amounting to Rs. 120000.00. One Assistant was
appointed and was paid a salary of Rs. 1000.00 per month from the FPO’s own funds.
7. FPO purchased Furniture of Rs. 20000.00. For these items grant received from
NABARD was Rs. 50000.00. Depreciation is provided @ 10%.
8. FPO received Rs. 50000.00 towards revolving fund assistance from NABARD.
9. Amount received for produce sold was received in Bank Account of FPO.
10. Office rent (@ Rs. 500.00 per month) of Rs. 6000.00 was paid for the year through
Bank.
11. Electricity Bill (@ Rs. 500.00 per month) was paid for the year through Bank. The
item was eligible under NABARD grant mentioned at Sl. No. 7 above.
12. State Govt. provided agricultural equipment in kind worth Rs. 40000.00 with 90%
subsidy. Depreciation on Agricultural equipments was @ 10%. Margin money of 10%
was paid through CC limit.
13. Audit fees of Rs. 2000.00 was paid through Bank
14. Dividend proposed @2%, which was approved by shareholders.
Exercise: Show the Books of Account of FPO and prepare Trading Profit & Loss A/c
and Balance Sheet of FPO for the year 2016-17.
54

Solution:
Books of UK Farmer Producer Company

Cash Book of FPO
Dr. Cr.
Date V. Particulars L.F Amt.(Rs.) Date V. Particulars L.F Amt.(Rs.)

No. No.
To share 100000.00 By Bank A/c (being 100000.00

capital A/c - share contribution
members of members
deposited into
(being share
Current A/c No….)
contribution
received from
100 farmers
@Rs. 1000.00
each)
To 2000.00 By carriage inward 500.00
Bank(amount A/c – Input
withdrawn for
(being input
expenses)
procurement
transportation
charges)
By 300.00
cleaning/packaging
exp.(being
expenditure on
cleaning, sorting
etc.)
Sub Total 100800.00
By Bal. c/d 1200.00
Total 102000.00 Total 102000.00
(Note: Date, Voucher No. & Ledger Folio No. has been left blank for sake of convenience for
case exercise, however the same may be mentioned by the FPO invariably, while writing
books of account)
55

Bank Book of FPO
Dr. Cr.
Date V. Particulars L.F Amt.(Rs.) Date V. Particulars L.F Amt.(Rs.)
No. No.
To Cash A/c 100000.00 By Cash amount 2000.00

(being share withdrawn
contribution of
members
deposited into
Bank A/c No…..)
To grant received 40000.00 By expenditure 40000.00

from out of NABARD
NABARD(Produce grant(Produce
Fund) A/c – Fund) A/c –
Registration Registration
charges charges
(being grant (being registration
received from expenses of FPO
NABARD towards paid)
registration
expenses
To Input 60500.00 By expenditure 20000.00

Sale/Distribution out of grant from
A/c – Seeds NABARD(Produce
(being amount Fund) A/c -
received towards Purchase of
input sale to A, B Furniture
& C – seeds)
To Input 45500.00 By borrowings 400000.00

Sale/Distribution from SBI CC(WC
A/c – Fertilizer loan)
(being amount (being borrowings
received towards repaid)
input sale to A, B
& C- fertilizer)
To Input 3000.00 By expenditure 108000.00

Sale/Distribution out of NABARD
A/c – Pesticide grant (Produce
(being amount Fund) A/c –
received towards Salary of CEO
input sale to A, B
& C – pesticide)

56

To grant received 50000.00 By Office 12000.00
from Expenses A/c –
NABARD(Produce Salary
Fund) A/c – (being salary paid
Revolving Fund to Assistant)
(being grant
received from
NABARD for
revolving fund
assistance)
To grant received 120000.00 By expenditure 6000.00

from out of NABARD
NABARD(Produce grant(Produce
Fund) A/c – Fund) A/c -
Salary of CEO Office expenses -
(being grant electricity charges
received from
NABARD towards
Salary of CEO)
To grant received 50000.00 By Office expenses 6000.00

from A/c - Rent
NABARD(Produce
Fund) for
Furniture & Office
Expenses
(being grant
received from
NABARD for
furniture & office
expenses)
To Produce 441000.00 By Office expenses 2000.00

Sale(wholesale) A/c - Audit fees
A/c – Food grains
(being amount
received from
buyer towards
Food grains)
Sub Total 596000.00
By Bal c/d 314000.00
Total 910000.00 Total 910000.00
(Note: Date, Voucher No. & Ledger Folio No. has been left blank for sake of convenience for
case exercise, however the same may be mentioned by the FPO invariably, while writing
books of account)
57

Journal of FPO
1.
Date Particulars L.F Amount Amount

(Rs.) (Rs.)
Input procurement A/c – Seed Dr 50000.00

Input procurement A/c – Fertilizer Dr 30000.00
Input procurement A/c – Pesticide Dr 3000.00
To Borrowings from SBI – Working Capital Loan Cr 83000.00
(being input procured & paid through CC limit of SBI)
2.

(Rs.) (Rs.)
Input procurement A/c – Seed Dr 21000.00

Input procurement A/c – Fertilizer Dr 31000.00
Input procurement A/c – Pesticide Dr 1550.00
To borrowings from SBI – Working Capital Loan Cr 53550.00
(being input procured & paid through CC limit of SBI)
3.

(Rs.) (Rs.)
Produce procurement A/c – Food grains Dr 456000.00

To borrowings from SBI – Working Capital Loan Cr 456000.00
(being produce procurement from farmers A, B & C)
4.

(Rs.) (Rs.)
Asset acquired out of Govt. grant A/c Dr 40000.00
To Capital grant received in kind for asset acquisition 36000.00
Cr 4000.00
To borrowings from SBI – Working Capital Loan Cr
(being asset received from Govt. agency & margin paid
from CC limit of SBI)
58

5.

(Rs.) (Rs.)
Interest paid on borrowings-WC loan Dr 6000.00
To borrowings from Bank Cr 6000.00
(being interest on CC limit)
6.

(Rs.) (Rs.)
Depreciation on asset A/c Dr 6000.00
To Provision for depreciation A/c - Furniture Cr 2000.00
To provision for depreciation A/c – Agri equipments Cr 4000.00
(being depreciation charged @10% on furniture acquired

out of NABARD grant & agri equipments acquired out of
govt. grant)
7.

(Rs.) (Rs.)
Dividend A/c Dr 2000.00
To proposed dividend A/c Cr 2000.00
(being proposed dividend @2% on Capital)
(Note: Date & Ledger Folio No. has been left blank for sake of convenience for case exercise,
however the same may be mentioned by the FPO invariably while writing books of account)
59

Ledger of FPO
1. Input Procurement A/c - Seeds

Dr. Cr.
Date Particulars BB/CB/ Amt. Date Particulars BB/CB/ Amt.
J Folio (Rs.) J Folio (Rs.)
To borrowings 50000.00
from SBI CC
A/c
To borrowings 21000.00 By Bal 71000.00
from SBI CC
A/c
Total 71000.00 71000.00
2. Input Procurement A/c - Fertilizer

Dr. Cr.
To borrowings 30000.00
from SBI CC A/c
from SBI CC A/c
Total 61000.00 61000.00
3. Input Procurement A/c - Pesticide

Dr. Cr.
Date Particulars BB/CB/ Amt.(Rs.) Date Particulars BB/CB/ Amt.(Rs.)
J Folio J Folio
3000.00
To borrowings
from SBI CC
A/c

from SBI CC
A/c
Total 4550.00 4550.00
60

4. Carriage Inward A/c - Inputs
Dr. Cr.
Date Particulars BB/CB/ J Amt. Date Particulars BB/CB/ Amt.
Folio (Rs.) J Folio (Rs.)
To Cash 500.00 By Bal 500.00
A/c(Carriage
Inward A/c –
Inputs)
Total 500.00 Total 500.00
5. Input Sale/Distribution A/c - Seeds

Dr. Cr.
Date Particulars BB/CB/ J Amt. Date Particulars BB/CB Amt.(Rs.)
Folio (Rs.) /J
Folio
To Bal 60500.00 By 60500.00
Bank(Input
Sale/Distribu
tion A/c –
Seeds)
Total 60500.00 Total 60500.00
6. Input Sale/Distribution A/c - Fertilizer

Dr. Cr.
Date Particulars BB/CB/ J Amt. Date Particulars BB/CB Amt. (Rs.)
Folio (Rs.) /J
Folio
To Bal 45500.00 By Bank(Input 45500.00
Sale/Distribu-
tion A/c –
Fertilizer)
Total 45500.00 Total 45500.00
7. Input Sale/Distribution A/c – Pesticide

Dr. Cr.
By Bal 3000.00 By Bank(Input 3000.00
Sale/Distribution
A/c – Pesticide)
Total 3000.00 Total 3000.00
61

8. Produce Procurement A/c -Food grain
Dr. Cr.
Date Particulars BB/CB/ Amt.(Rs.) Date Particulars BB/CB/ Amt.
J Folio J Folio (Rs.)
from SBI CC
A/c
Total 456000.00 456000.00
9. Cleaning & Packaging Expenses A/c

Dr. Cr.
Date Particulars BB/CB/ Amt.(Rs.) Date Particulars BB/CB/ Amt. (Rs.)
J Folio J Folio
To Cash A/c 300.00 By Bal 300.00
(Cleaning &
Packaging
Expenses)
10. Produce Sale(Wholesale) A/c - Food grains

Dr. Cr.
Date Particulars BB/CB/ Amt. Date Particulars BB/CB/ Amt. (Rs.)
J Folio (Rs.) J Folio
To Bal 44100.00 By Bank 441000.00
A/c(Produce
Sale(Wholesale)
A/c - Food grains)
Total 44100.00 Total 44100.00

11. Expenditure from grant received from NABARD(Produce Fund) A/c – Registration
charges
Dr. Cr.
To 40000.00 By Bal 40000.00
Expenditure
out of
NABARD grant
A/c –
Registration
charges
Total 40000.00 Total 40000.00
62

12. Grant received from NABARD(Produce Fund) A/c – Registration charges
Dr. Cr.
Date Particulars BB/CB/J Amt. Date Particulars BB/CB/ Amt.
Folio (Rs.) J Folio (Rs.)
To Bal 40000.00 By Bank 40000.00
A/c(grant
received from
NABARD(Produce
Fund) for
registration
charges)
Total 40000.00 Total 40000.00
13. Office Expenses A/c - Rent

Dr. Cr.
Date Particulars BB/CB/J Amt. Date Particulars BB/CB/J Amt.
Folio (Rs.) Folio (Rs.)
To Bank A/c(Rent) 6000.00 By Bal 6000.00
Total 6000.00 6000.00
14. Office Expenses A/c – Salary

Dr. Cr.
Date Particulars BB/CB/J Amt.(Rs.) Date Particulars BB/CB/ Amt.
Folio J Folio (Rs.)
To Bank(Paid 12000.00 By Bal 12000.00
Salary of
Assistant)
Total 12000.00 12000.00
15. Office Expenses A/c – Auditor Fees

Dr. Cr.
Date Particulars BB/CB/J Amt.(Rs.) Date Particulars BB/CB/ Amt.(Rs.)
Folio J Folio
To Bank(Auditor 2000.00 By Bal 2000.00
Fees)
Total 2000.00 2000.00
63

16. Grant received from NABARD(Produce Fund) A/c – Furniture & Office Expenses
Dr. Cr.
By Bal 50000.00 By Bank A/c(Grant 50000.00
received from
NABARD (Produce
Fund) for Furniture
& Office Expenses)
Total 50000.00 50000.00
17. Expenditure out of grant received from NABARD(Produce Fund) A/c – Furniture &
Office Expenses
Dr. Cr.
To Bank 20000.00
A/c(Furniture
Purchase)
To Bank 6000.00 By Bal 26000.00
A/c(Electricity
bills)
Total 26000.00 Total 26000.00
18. Depreciation on assets A/c

Dr. Cr.
Date Particulars BB/CB/ Amt. Date Particulars BB/CB/J Amt.
J Folio (Rs.) Folio (Rs.)
Provision for 2000.00
depreciation A/c -
Furniture
Provision for 4000.00 By Bal 6000.00
depreciation A/c –
Agri equipments
Total 6000.00 Total 6000.00

64

19. Grant received from NABARD A/c – Revolving Fund
Dr. Cr.
To Bal 50000.00 By Bank 50000.00

A/c(Grant
received from
NABARD(Produce
Fund) for
Revolving Fund)
Total 50000.00 Total 50000.00
20. SBI CC Limit A/c

Dr. Cr.
Date Particulars BB/CB/ Amt. (Rs.) Date Particulars BB/CB/ Amt.(Rs.)
J Folio J Folio
To Bank 400000.00 By Input 50000.00
repayment Procurement A/c
- Seeds
By Input 21000.00
Procurement A/c
- Seeds
By Input 30000.00
Procurement A/c
- Fertilizer
By Input 31000.00
Procurement A/c
- Fertilizer
By Input 3000.00
Procurement A/c
- Pesticide
By Input 1550.00
Procurement A/c
- Pesticide
By Produce 456000.00
procurement A/c
– Food grain
By asset 4000.00
acquired out of
Govt.
grant(Margin
money)
To Bal 202550.00 By interest on 6000.00
loans
Total 602550.00 Total 602550.00
65

Grant received from NABARD(Produce Fund) A/c – Salary of CEO
Dr. Cr.
Date Particulars BB/CB/ Amt. (Rs.) Date Particulars BB/ Amt. (Rs.)
J Folio CB/ J
Folio
By Bal 120000.00 By Bank(Grant 120000.00
received from
NABARD(Produ
ce Fund) for
Salary of CEO)
Total 120000.00 Total 120000.00
21. Expenditure out of grant received from NABARD(Produce Fund) A/c – Salary of CEO
Dr. Cr.
J Folio J Folio
To Bank(Exp. out 108000.00 By Bal 108000.00
of grant received
from
NABARD(Produce
Fund) for Salary
of CEO)
Total 108000.00 Total 108000.00
22. Share Capital A/c members/farmers

Dr. Cr.
Date Particulars BB/CB/ Amt. (Rs.) Date Particulars BB/CB/ Amt.(Rs.)
J Folio J Folio
To Bal 100000.00 By Cash A/c 100000.00
Total 100000.00 Total 100000.00
23. Provision for depreciation A/c - Furniture

Dr. Cr.
To Bal 2000.00 By depreciation 2000.00
A/c
Total 2000.00 Total 2000.00
66

24. Provision for depreciation A/c – Agri equipments
Dr. Cr.
J Folio J Folio
To Bal 4000.00 By depreciation 4000.00
A/c
Total 4000.00 Total 4000.00
25. Proposed dividend on Equity A/c

Dr. Cr.
Date Particulars BB/CB/J Amt.(Rs.) Date Particulars BB/CB/J Amt.
Folio Folio (Rs.)
To Bal c/d 2000.00 By dividend A/c 2000.00
Total 2000.00 Total 2000.00
26. Dividend A/c

Dr. Cr.
Date Particulars BB/CB/ Amt. Date Particulars BB/CB/ Amt.(Rs.)
J Folio (Rs.) J Folio
To proposed 2000.00 By Bal 2000.00
dividend A/c
Total 2000.00 Total 2000.00
27. Asset acquired out of Govt. grant A/c

Dr. Cr.
Date Particulars BB/CB/ Amt. (Rs.) Date Particulars BB/CB/ Amt. (Rs.)
J Folio J Folio
To Capital grant 36000.00
(in kind) from
Govt.
To borrowings 4000.00 By Bal c/d 40000.00
from SBI CC limit
Total 40000.00 Total 40000.00
28. Capital grant (in kind) from Govt. A/c

Dr. Cr.
J Folio J Folio
To Bal c/d 36000.00 By asset 36000.00
acquired out
of govt grant
Total 36000.00 Total 36000.00
67

29. Interest on Loan A/c
Dr. Cr.
Folio J Folio
from SBI CC
limit
Total 6000.00 Total 6000.00
30. Carriage inward A/c inputs

Dr. Cr.
Folio J Folio
To cash A/c 500.00 By Bal 500.00
(Note: Date & Bank Book/Cash Book/Journal Folio No. has been left blank for sake of
convenience for case exercise, however the same may be mentioned by the FPO invariably,
while writing books of account)
68

Input – (Purchase/Sale/Stock) Register
Name of Input: Seeds Year 2016-17
Bill No., Qty Rate Amount GST Total Cash Date Name of Qty Rate Amount GST Total Cash Member Closing Rate Amoun
Date & (Rs.) (Rs.) (Rs.) Amount Book/ & Bill member (Rs.) (Rs.) (Rs.) Amount Book Progress Stock (Rs.) t
Name of (Rs.) Bank No. farmer (Rs.) / Folio Qty. (Rs.)
Supplier Book of Bank
Folio FPO Book
No. Folio
No.
(17)
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (18) (19)
=(2-10)
500 100 50000 0 50000 A 200 100 20000 0 20000 300 Kg 100 30000
Kg Kg
- - - - - B 200 100 20000 0 20000 100 Kg 100 10000
Kg
- - - - - C 100 100 10000 0 10000 0 - 0

Kg
200 105 21000 0 21000 C 100 105 10500 0 10500 100 Kg 105 10500
Kg Kg
Name of Input: Fertilizer Year 2016-17

Bill No., Qty Rate Amount GST Total Cash Date Name of Qty Rate Amount GST Total Cash Member Closing Rate Amount
Date & (Rs.) (Rs.) (Rs.) Amount Book/ & Bill member (Rs.) (Rs.) (Rs.) Amount Book/ Progress Stock (Rs.) (Rs.)
Name of (Rs.) Bank No. farmer (Rs.) Bank Folio Qty.
Supplier Book of Book
Folio FPO Folio
No. No.
(17)
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (18) (19)
=(2-10)
100 300 30000 0 30000 A 50 300 15000 0 15000 50 Bag 300 15000
Bag Bag
- - - - - B 50 300 15000 0 15000 0 - 0
Bag
100 310 31000 0 31000 C 50 310 15500 0 15500 50 Bag 310 15500
Bag Bag
69

Name of Input: Pesticide Year 2016-17
Bill No., Qty Rate Amount GST Total Cash Date Name of Qty Rate Amount GST Total Cash Member Closing Rate Amount
Date & Amount Book & Bill member Amount Book Progress Stock
Name of (Rs.) (Rs.) (Rs.) / No. farmer (Rs.) (Rs.) (Rs.) / Folio Qty. (Rs.) (Rs.)
Supplier (Rs.) of (Rs.)
Bank FPO Bank
Book Book
Folio Folio
No. No.
(17)
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (18) (19)
=(2-10)
10 300 3000 0 3000 A 3 300 900 0 900 7 Ltr 300 2100
Ltr Ltr
- - - - - B 3 300 900 0 900 4 Ltr 300 1200
Ltr
- - - - - C 4 300 1200 0 1200 0 - 0
Ltr
5 310 1550 0 1550 5 Ltr 310 1550
Ltr
70

Produce – (Purchase/Sale/Stock) Register
Name of Produce: Food Grains Year 2016-17
Sale of Produce Stock
Bill Name Qty Rate Total Cash Member Date Buyer’s Qty Rate Amount GST Total Cash Rate Amount
No. of Amount Book/ Progress Name Amount Book/ Qty
& Farmer (Rs.) Register (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
Date (Rs.) Bank Folio (Rs.) Bank
Book Book
Folio Folio
No. No.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (17) (18)
A 8000 19 152000 7000 21 147000 0 147000

Kg Kg
B 8000 19 21 0
152000 7000 147000 147000
Kg Kg
C 8000 19 21 0
152000 7000 147000 147000
Kg Kg
Total 24000 19 456000.00 21000 21 441000.00 0 441000.00 3000 19 57000.00

Kg Kg Kg
(Note: Bill No., Date, Name of Supplier, Bank Book/Cash Book Folio No. & Member Progress Folio No. have been left blank for sake of
convenience for case exercise, however the same may be mentioned by the FPO invariably, while writing the registers)
71

UK Farmer Producer Company Ltd.
Trial Balance as on 31.03.2017
Ledger
Account Ledger Account Head Debit(Rs.) Credit(Rs.)
Number
Input Procurement A/c - Seeds 71000
Input Procurement A/c - Fertilizer 61000
Input Procurement A/c - Pesticide 4550
Carriage Inward A/c - Inputs 500
Input Sale/Distribution A/c - Seeds 60500
Input Sale/Distribution A/c - Fertilizer 45500
Input Sale/Distribution A/c – Pesticide 3000
Produce Procurement A/c -Food grain 456000
Cleaning & Packaging Expenses A/c 300
Produce Sale(Wholesale) A/c - Food grains 441000
Expenditure from grant received from
NABARD(Produce Fund) A/c – Registration 40000
charges
40000
A/c – Registration charges
Office Expenses A/c - Rent 6000
Office Expenses A/c – Salary 12000
Office Expenses A/c – Auditor Fees 2000
50000
A/c – Furniture & Office Expenses
Expenditure out of grant received from
NABARD(Produce Fund) A/c – Furniture - 26000
Office Expenses
Depreciation on assets A/c 6000
Grant received from NABARD A/c – Revolving
50000
Fund
SBI CC Limit A/c 202550
120000
A/c – Salary of CEO
72

Ledger
Account Ledger Account Head Debit(Rs.) Credit(Rs.)
Number
Expenditure out of grant received from
108000
NABARD(Produce Fund) A/c – Salary of CEO
Share Capital A/c members/farmers 100000
Provision for depreciation A/c - Furniture 2000
Provision for depreciation A/c – Agri equipments 4000
Proposed dividend on Equity A/c 2000
Dividend A/c 2000
Asset acquired out of Govt. grant A/c 40000
Capital grant (in kind) A/c from Govt. A/c 36000
Interest on Loan A/c 6000
Cash A/c 1200
Bank A/c 314000
Total 1156550 1156550
At the end of the year, as per Input and Produce registers, FPO had stock as under:
Input (Purchase/Sale/Stock) Register
Seed 100 Kg Rs. 10500.00
Fertilizer 50 Bags Rs. 15500.00
Pesticide 5 Ltr Rs. 1550.00
Produce (Purchase/Sale/Stock) Register

Food grain 3000 Kg Rs. 57000.00
73

Trading and Profit & Loss Account for the year ended on 31.03.2017
(Amount in Rs.)
Particulars 2016-17 2015-16 Particulars 2016-17 2015-16
Opening Stock of By sales of
- Inputs 0.00 - Inputs 109000.00

- Produce 0.00 - Produce 441000.00
To purchase of By closing stock of
- Inputs 136550.00 - Inputs 27550.00
- Produce 456000.00 - Produce 57000.00
To Carriage inward 500.00
To wages 0.00
Gross Profit carried
41500.00
down
Sub Total 634550.00 Sub Total 634550.00
To Salary 12000.00 By gross profit b/d 41500.00
To rent, electricity, taxes
6000.00
etc.
By Other operating
To Audit Fee 2000.00
income
To other
300.00 By interest earned
expenses(cleaning)
To Depreciation on
6000.00
assets
To Carriage outward 0.00
To interest on
6000.00
borrowings
To Net Profit c/d 9200.00
Sub Total 41500.00 Sub Total 41500.00
To proposed dividend 2000.00 Net profit b/d 9200.00
To General Reserves 0.00
To other (specific)
0.00
reserve
To balance of profit tr.
7200.00
to B/S
Total 9200.00 Total 9200.00
74

Balance Sheet as on 31.03.2017
(Amount in Rs.)
Liabilities & Capital As on As on Assets As on
As on
31.03.2017 31.03.2016 31.03.2017
31.03.2016
Share Capital Fixed Assets
Authorized (……… Shares of Furniture acquired
Rs. 1000.00 Each) – Rs. out of grant
…………. received from
Subscribed & Paid-up (100 100000.00 NABARD
Shares of Rs. 1000.00 Each) Cost – Rs.
20000.00 18000.00
Less: Depreciation
till date – Rs.
2000.00
Reserve & Surplus 0.00 Other assets
General reserve 0.00 Cost – Rs.
40000.00
Less : 36000.00
Depreciation till
date– Rs. 4000.00
Other reserves 0.00 Investments 0.00
Balance of P&L A/c 7200.00
Grant & Donations 0.00 Current Assets 0.00
received
(i)From NABARD
Furniture/Office expenses 44000.00 Loans & Advances 0.00
Rs. 50000.00
Less : Utilized(Rs.
6000.00)
Revolving Fund 50000.00 Closing stock of 27550.00
Registration charges inputs
Rs. 40000.00 Closing stock of 57000.00
Less: Utilized(Rs. 0.00 produce
40000.00)
Salary of CEO Cash & Bank
Rs. 120000.00 balances
Less: Utilized(Rs. 12000.00
108000.00)
(ii)From State Govt. Cash in hand 1200.00
Capital Grant(in Kind) 36000.00 Bank Balance 314000.00
Secured Loans 0.00
Term Loan 0.00
Cash Credit 202550.00
Bank overdraft 0.00
Current Liabilities & 0.00
Provisions
Sundry Creditors 0.00
Proposed dividend 2000.00
Others 0.00
Total 453750.00 Total 453750.00
(Note: This being first year of operations, previous year figures are not there)
75

Handbook For FPOs Accounting by Uttarakhand

Uploaded by

Copyright:

Available Formats

Handbook For FPOs Accounting by Uttarakhand

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Handbook For FPOs Accounting by Uttarakhand

Uploaded by

Copyright:

Available Formats

Handbook on Maintenance of Accounts

& Preparation of Financial Statements

Efforts of GoI and NABARD in formation of FPOs

FARMER PRODUCER ORGANISATION:

2.2. Aim/Objective of FPO

2.3. Essential Features of a FPO

The essential features of a FPO are:

 It is formed by a group of producers for farm activities.

 It is a registered body and a legal entity.

 Producers are shareholders in the organisation.

 It deals with business activities related to the primary produce/product.

 It works for the benefit of the member producers.

 A part of the profit is shared amongst the producers.

2.4. Promotion and Support for FPOs

¾ Any experienced person/NGO/Community Based Organisation

¾ Corporates, Banks, Financial Institutions, Development Agencies

¾ Government Departments, KVKs, Commodity Boards, Agri Universities/Research

¾ Cooperative Societies, Large Producer Companies, Producer Associations or Federations

2.4.1. Role of PO Promoting Institution(POPI)

The broad responsibilities of a POPI include:

¾ Diagnostic and feasibility studies, including value chain analysis

¾ Mobilization of producers and registration/incorporation of FPO & facilitating framing

¾ Capacity building of FPO management/producers and organizing exposure visits

¾ Business planning & Resource mobilization

¾ Developing robust systems and procedures in FPO and MIS development

¾ Facilitating business decisions/Operations, audit and compliances

¾ Technical handholding and other incubation services for sustainability

1) Cooperative Societies Act/ Autonomous or Mutually Aided Cooperative Societies Act

4) Section 25 Company of Indian Companies Act, 1956.

5) Societies registered under Society Registration Act, 1860

6) Public Trusts registered under Indian Trusts Act, 1882

2.5. Support available for promotion of FPO

Credit Linkage Support

2.6. Important activities of a FPO

1) Procurement & distribution of inputs

2) Disseminating market information to members

3) Dissemination of technology and innovations to its members

4) Facilitating finance for inputs procurement

5) Aggregation and storage of produce

6) Primary processing like drying, cleaning and grading

7) Brand building, Packaging, Labeling and Standardization

9) Marketing of produce aggregated, to institutional buyers

10) Participation in commodity exchanges

VARIOUS STAGES IN FORMATION OF A FPO

1) Current issues leading to low income to producers

2) Types of small scale producers in the target area, volume of production,

4) Willingness of producers to invest and adopt new technology, if identified, to increase

5) Challenges in the market chain and market environment

6) Vulnerability of the market to shocks, trends and seasonality

7) Previous experience of collective action (of any kind) in the community

8) Key commodities, processed products or semi-finished goods demanded by major

9) Support from Government Departments, NGOs, specialist support agencies and

Stages in formation of FPO

¾ Constitution of Board of Directors – as per provisions of the Act/by-laws

¾ Preparation of Legal Documents

3.1. Registration of a FPO

Estimated cost for incorporation of a producer company

Particulars Item of expenditure Amount

Digital signature Fees 2600

It is formed by a group of producers for farm activities.

It is a registered body and a legal entity.

Producers are shareholders in the organisation.

It deals with business activities related to the primary produce/product.

It works for the benefit of the member producers.

A part of the profit is shared amongst the producers.