Chapter 4 Articles of co- partnership

- The writtern agreement between or

Forms of Business Organization among partners.
Articles of co-partnership contains:
1. Business
 Name of partnership
- It is an organization that utilizes resources  Names of partners
and information, supplying the wants and  Place of business
needs of the customers through goods or  Partnership effectivity date
services, in exchange for money or giving  Nature of business
back a different kind of goods or services.  Investments of each partner and the
corresponding capital credit
- economic unit that sell goods and services
with the prime objective of generating profit.  Rights, power, and the duties of the
partners
 Accounting period
 Profit and loss sharing
Types of Business According to  Compensation for services offered by
Ownership partners
 Treatment
1. Sole Proprietorship
 Dissolution procedure
- that is owned by only one individual for the
Two Main Types of Partnership
practices of trade or profession
1. General Partnership
-it is the simplest and least costly form of
ownership among other forms of business. - wherein each member has unlimited liability

- in this business, it is quiet risky since the 2. Limited Partnership

owner assumes unlimited liability and in most
- where the creditors cannot go after the partners’
cases even in his or her personal assets are personal asstes.
on the line if the business cannot pay the
creditors.
- it is common to small business entities like 3. Corporation
grocery store, repair shop and beauty
- it is a business required to have five to
parlor.
fifteen incorporators.
- the owners have limited liability and limited
2. Partnership involvement from the operations.

- it is owned by two or more individuals - unlimited commercial life.

pooling their resources.
Incorporators
Partner
- Refer to those who originally formed
- they are normally involved in the the corporation
management and operation of the
business.
Section 2 of the Corporation Code of the
Profit of the business
Philippines
- It is divided among the partners as
per the partners’ agreement.

1|Page FABM
 - Defines corporation as “ an - Provide details about the name of
artificial being created by the cooperative….
operation of law, having the right
of succession and the power,
attributes and properties TYPES OF COOPERATIVES
expressly authorized by law or
incident to its existence” 1. Credit cooperative
Board of directors 2. consumer cooperative
- They are elected by the owners 3. producers cooperative
themselves. They will take control of the
4. marketing cooperative
corporation’s activities.
5. service cooperative
Profit Corporation
6. multi-purpose cooperative
- Issues shares of stocks to owners or
shareholders who are holding a 7. advocacy cooperative
stock certificate
8. agrarian reform cooperative
Non- profit Corporation
9. cooperative bank
- Does not issue shares of stocks. Its
owners are called members. 10. dairy cooperative

The articles of Incorporation And etc.....

- Detail the powers and limitations

bestowed by the government.
Types of Business According
By-laws to Activities
- Contain provisions for internal 1. Services Business
administration of the corporation.
- focus on providing intangible products,
such as offering professional skills,
4. Cooperative proposal, and expertise.

- it is a business that is owned by a group of Example:

individuals who also serve as benefactors to Accounting firms, law firms, schools,
the business endeavour. medical clinic, bank, hair salons and
- It is usually requires at least fifteen (15) spas, and repair shop
members to function. 2. Merchandising Business
Board of Directors and Officers - it is commonly known as the “buy and
- They are elected to manage the sell” business.
business operation. - the products are sold as is at an amount
By-laws higher than the purchase price.

- Contain rules and regulations Examples:

governing the operation of Grocery stores, hardware, department
cooperative stores, and drug stores.
Articles of Cooperation

2|Page FABM
 Basic Assumptions

- these are important to an

understanding of the manner in which
3. Manufacturing Business
data are presented.
- wherein materials are bought to create
1. Economic Entity Assumption
a new product.
- it assumes that all of the business
-business operation that involves
transactions are separated from the business
purchasing and converting raw materials
owner’s personal transaction
into finished product.
- any personal transaction of its owner should
Examples:
not be recorded in the company’s accounting
Food factories, garment factories and car book, and vice versa, unless the owner’s
manufacturing companies. personal transaction involves investing or
withdrawing resources from the business.
- Accounting records of the business must
Chapter 5 not include the personal assets or liabilities
of the owner.
ACCOUNTING CONCEPTS
2. Accrual Basis Assumption
AND PRINCIPLES
- it requires that all business transactions and
other events are recognized in the
accounting records when they occur, rather
Accounting
than when the cash or equivalent is received
- called the language of business. or paid.
- it communicates the financial
- it is assumed that revenue is recorded in the
condition and performance of a
period it is earned, regardless of the time the
business to interested users for
cash is received or collected.
decision-making purposes.
- it adheres to the revenue recognition,
matching, and cost principles.
Generally Accepted Accounting
Principles (GAAP) 3. Going Concern Assumption
- it is a widely accepted set of rules, - it is assumed to remain in existence for an
concepts and principles that govern indeterminate period of time.
the application of the accounting
procedure. - On this, the current relevance of the
- it guide preparers of financial historical cost principle is dependent.
statements in recording and reporting - this assumes that a company will continue
financial information regarding a to exist long enough to carry out its
business enterprises, ….. objectives and commitments and will not
- liquidate in the foreseeable future.
-assts are recorded at their original
acquisition costs and not based on their
UNDERLYING ACCOUNTING market values.
ASSUMPTIONS

3|Page FABM
- Assets are assumed to be used for an - it is the most objective and verifiable basis
indefinite period of time and not intended to upon which to account for assets and
sold immediately. liabilities of a business enterprise.
-It allows the company to defer some of its Cost
prepaid expenses until future accounting
periods. - more definite and determinable than other
valuable method.
4. Monetary Unit Assumption
2. Full Disclosure Principle
- The peso is assumed to remain relatively
stable over the years in terms of purchasing - the accountant should include sufficient
power. information to permit the stakeholder to
make an informed judgement about the
- It disregards any inflation in the economy financial condition of the enterprise.
- it assumes that only transactions that can - Information should be disclosed within the
be expressed in terms of money are statement or in the notes to the statement.
recorded.
3. Matching Principle
-Nonfinancial or nonmonetary information
that cannot be measured in terms of money - it requires that expenses be matched with
are not recorded in the accounting books. revenues.

5. Time-Period Assumption - It means that in a given accounting period,

the revenue recorded should have an
- the life of an economic entity can be divided equivalent expense recorded, in order to
into artificial time periods for the purpose of show the true profit of the business.
providing periodic reports on the economic
activities of the entity. - The use of accrual procedures assists the
accountant in allocating revenues and
- It means that financial statements are expenses properly among the fiscal periods
prepared at equal time intervals. that compose the life of a business
enterprise.
- it requires a business to complete the whole
accounting process of a business over a 4. Revenue Recognition Principle
specific operating time period. It may be
monthly, quarterly, and annually. - Revenues are recognized as soon as
goods have been sold (delivered to the
customers) or a service has been rendered,
regardless of when the money is actually
Basic Accounting Principles. received.
1. Cost Principle - It is recognized when the earning process
is virtually complete and an exchange
- the amount shown in financial statement
transaction has occurred.
are referred to as historical cost amounts.
5. Materiality Principle
- All assets acquires should be valued and
recorder based on the actual cash equivalent - business transactions that may be affect the
or original cost of acquisition, not the decision of a user of financial information are
prevailing market valued or future value. considered important or material, and thus,
Acquisition cost must be reported properly.

4|Page FABM
-an accountant might be allowed to violate present condition and future outlook
another accounting principle, if an amount is so that informed decision can be
insignificant. made in a timely manner.
- Professional judgement is needed to Reliable Information
decide whether an amount is insignificant or
immaterial. - verifiable and objective.

6. Conservatism Principle Consistent Information

- states that given two options in the - prepared using the same methods
valuation of business transactions, the each accounting period.
amount recorded should be the lower rather - Consistency allows meaningful
than the higher value. comparison to be made between
different accounting periods and
- It helps the accountant break a tie while between and among different
remaining unbiased and objective. companies.
- It is modifying constraint that allows the
accountant to violate another accounting
principle if there are alternatives to be
selected.
-it leads accountants to anticipate or disclose
losses, but it does not allow a similar action
for gains.
- losses and costs are recorded and gains
are recorded when they are realized.
6. Objectivity Principle
- it requires business transactions to have
some form of impartial supporting evidence
of documentation.
- it entails that bookkeeping and financial
recording be performed with independence,
that is free of bias and prejudice.

OTHER CHARACTERISTICS OF
ACCOUNTING INFORMATION
- reliable and verifiable.
- The consistency and comparability of
the accounting information reported
are also expected from the
accountants.
Relevant information

- helps a decision maker understand a

company’s past performance,

5|Page FABM