Auditing and EthicsQuestion 5701 of 212
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8. CA I, who is in charge of audit of NAND Co-operative Society, wants to ensure that the society has contributed for charitable purposes within the limits prescribed. How much is the society allowed to contribute for charitable purposes ?

Options

Acontribute an amount not exceeding 10% of the net profits remaining after the compulsory transfer to the reserve fund.
Bcontribute an amount at the appropriate rate as per class of the society.
Ccontribute an amount not exceeding 20% of the net profits remaining after the compulsory transfer to the reserve fund.
Dcontribute annually at prescribed percentage of the profits as approved by the General body of the society.
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Correct Answer

✅ Option A — contribute an amount not exceeding 10% of the net profits remaining after the compulsory transfer to the reserve fund.

All Options:

  • Acontribute an amount not exceeding 10% of the net profits remaining after the compulsory transfer to the reserve fund. ✓
  • Bcontribute an amount at the appropriate rate as per class of the society.
  • Ccontribute an amount not exceeding 20% of the net profits remaining after the compulsory transfer to the reserve fund.
  • Dcontribute annually at prescribed percentage of the profits as approved by the General body of the society.

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Detailed Solution & Explanation

To determine the correct answer, we need to understand the rules governing the charitable contributions of a co-operative society.
The co-operative societies are governed by the Co-operative Societies Act, which prescribes the limits for charitable contributions.
As per the Act, a co-operative society is allowed to contribute to charitable purposes, but this contribution is subject to a certain limit.
The limit for charitable contributions is linked to the net profits of the society after making the compulsory transfer to the reserve fund.
The correct limit is that the society can contribute an amount not exceeding 10% of the net profits remaining after the compulsory transfer to the reserve fund.
This means that after setting aside the required amount for the reserve fund, the society can donate up to 10% of the remaining net profits for charitable purposes.
Therefore, the correct option is the one that states this specific limit of 10% of the net profits remaining after the compulsory transfer to the reserve fund.
Hence, **Option A** is the correct answer.

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