You are on page 1of 8

STUDY OF THE CURRENT SYSTEM

REVIEW OF THE ACCOUNTING SYSTEMS OF PBDMPCI

Buklod Diwa Multi-purpose Cooperative is currently following a simple accounting

system to take care of recording of transactions on a day to day basis. However due to the

increase of its members, the cooperative demands for a system in which it will improve

the registration of the members, application of loans, as well as the monitoring and the

update of loans. The research group plans to establish an electronic accounting system to

simplify the recording tasks of the cooperative which focuses on the aging of accounts

receivable; computation of dues, interests, outstanding loan balances; registration and

loan approval procedures. Through this the PBDMPC is planning to undertake the task of

strengthening the cooperatives from within. Given the fact that several cooperatives have

the weakness in control of its credit policies and monitoring procedures among the

accounts of its members, the proposed system aims to uplift these difficulties. In order to

launch this proposed system, the research group decided to review its current system.

This report addresses the entire issue of the operations in the cooperative. This report is

divided into two distinct parts. The first pertains to the existing system being followed,

where they need to be strengthened. The second part deals with accounting formats and

systems that could be introduced in the cooperatives.

In order to understand the type of transactions undertaken by the cooperatives currently,

an interview was conducted at the principal office of PBDMPC with the manager as the

representative of the cooperative. The basic objective is to generate vivid information

about the transactions of the cooperative.


Overview

The major transaction of PBDMPC is divided into two categories - those transactions

involving member interface and those involving interface with others. The researchers

will provide a flow chart that is composed of transactions how a person is admitted and

what a member is bound to have from the time she is admitted in the cooperative.

The member enters the cooperative by submitting an application and membership

agreement form to PMBMPC subject for assessment and appropriate recommendation of

a Director. The form is forwarded to the manager accompanied by P500.00 for an initial

paid up share and P110.00 as membership fee. Upon the acceptance of the application by

the Board and upon receipt of the amount paid by the member, PBDMPC Treasurer will

issue a receipt. In case of rejection of the application, the amount is returned to the

applicant. The amount of one hundred fifty (150.00) or more is pledged by the member to

form part of the members capital share build-up. The member is entitled to participate for

capital build-up scheme as approved by the BOD or the General Assembly. The member

is obliged to pay the contribution religiously to the programs and other financial

obligations duly approved by the BOD or General Assembly.

A full pledged member and a member in good standing can borrow an amount equivalent

to three times her paid up capital or the amount recommended by the Credit Committee

and approved by the Board at a reasonably low rate of interest. Loans are payable daily,
weekly, bi-monthly or monthly for the periods of one month or three months as the case

may be, depending on the amount of loan granted. Delinquent loan accounts are subject

to surcharges/penalties at the rate of three (4.5%) per month.

Renewal of loan may be made upon full payment of the current loan.

Lending policies are subject to changes due to exigencies and conditions of the PBDMPC

and upon approval of the Board or the General Assembly as the case maybe. Loans are

covered by loan redemption insurance with the Cooperative Insurance System of the

Philippines (CISP).

Loan Applications

The member accomplishes two copies of loan application to the Credit Committee

together with the passbook at least one week before the date of the loan.

Upon the receipt of the application and supporting documents, the Credit Committee is

now ready to conduct loan counseling and background investigation with the prospective

borrower. It is the manager's duty to conduct a preliminary appraisal of collaterals being

offered by the borrower.

The said application will be evaluated based on credit policies and results of background

investigation. Decision should be made within 3 days after the receipt. However, in case

of an emergency loan, immediate action is required. If the application is a rejection, the

loan application should be returned to the member with corresponding explanations. The
actions of the Credit Committee should be noted down on Loan Register Book. A notice

of approval should be sent to the borrower through the manager.

The application is then forwarded to the BOD for final approval.

The researchers find the loan procedure ambiguous especially the 3day policy regarding

the decision making of the committee. The manner of decision making is unsystematic.

Apparently, the procedure consumes a lot of time because the approval is being finalized

by the BOD. There is no proper delegation of authority regarding the approval of loans.

The cooperative needs to specify who is responsible for the approval of emergency loans

since it requires immediate response to the borrower.

Timing of Loan Interest

Prepaid Collection System – interests, and other charges are already deducted on the

principal loan; full amount should be paid when the loan becomes due.

Add On Collection System – interests and other charges are added to the principal loan.

The borrower receives less than the full amount but she shall pay the added interests and

charges in full amount when the loan comes due.

Amortize Collection System – interests and other charges are added to the cost of the loan

and divided into equal installment.


Loan Collateral and Acquisition

The appraised value of the pledged item shall be at least 50% more than the amount of

her loan.

Disbursement and Collection of Loans

The Treasurer is responsible for recording and issuing checks for the

disbursement of loan after the approval of the BOD.

A collector is assigned to go house to house to gather dues from the borrowers; others

would prefer to have their payment directly at the office. The day to day collections are

summed up and recorded by the clerk/book keeper in the books. After a certain amount

has been reached, the Treasurer will deposit the accumulated collection in the bank.

Types of Loans

Type of Loan Description Interest Charged and

Other Charges

a. Productive Loan - A type of loan provided as continued support 2% per month;

for the expansion of livelihood activities. It is P. 25 service fee

granted as an additional capital for the

member’s productive activities.


b. Providential - a type of loan that support immediate needs

Loan such as tuition fees, payment of bills, food 2% per month;

allowance, etc. P. 25 service fee


c. Emergency Loan - Emergency needs which are usually beyond

our control.

d. Appliance Loan - provided to those who wish to have their

own appliances. An interest will be charged 2% per month;

plus handling fee; paid by the borrower on P. 50 handling fee

equal monthly installments not exceeding to

one year.

Savings and Time Deposits

The cooperative can accept deposits from the members and non members such as

savings and time deposits. This will be used by the cooperative as an additional capital in

order to provide services to its members. A Certificate of Time Deposit shall be issued to

time depositors. Interests on both deposits are not clearly stated, but time deposits will be

based on the prevailing interest rates or higher than those of existing banks.

Recording and Transactions


Whenever there is a receipt from a member, the basic entry is made in the cash book. A

copy of the receipt is issued to the member and a corresponding entry is made in the

member passbook. All these entries pertaining to the member transactions are also

entered in the subsidiary ledger. As far as receipts from members are concerned,

there are no vouchers issued. But, the cash receipt acts as a good mechanism of capturing

all member transactions. The cash book is well designed and accounts are being

summarized by the book keeper, hence there is no problem in finalizing the accounts.

However, a problem exists on the manner of computing and recording of the outstanding

loan balances of the members. The researchers found out that there is no concrete form of

the aging of accounts receivable although the manager informed that the cooperative is

using the aging system to determine delinquent accounts. The balances are computed

manually which holdups the collections and determination of delinquent accounts. The

subsidiary ledger which presents the payments, balances, interest paid, dues and collateral

needs a supporting document or form that will prove the amounts embedded therein. It is

recommended that an additional form should be provided by the cooperative instead of

recording balances directly on the subsidiary ledger, since it is difficult to trace the

amounts without it. Another is an automated system of recording of collections and

balances. The manual operation of the organization delays the collections. The proposed

system will offer timely, precise and accurate computation of the outstanding loan

balances.

You might also like