Acctg 2.1-Partnership: Accounting 2 - Partnership and Corporation Accounting
Acctg 2.1-Partnership: Accounting 2 - Partnership and Corporation Accounting
Acctg 2.1-Partnership: Accounting 2 - Partnership and Corporation Accounting
Partnership is defined as “two or more persons binding themselves to contribute money, property or
industry to a common fund with the intention of dividing profits among themselves.”
CHARACTERISTICS OF A PARTNERSHIP
1. Ease of Formation
Partnership with less than P3, 000.00 capitals only need to register their name with Department of
Trade and Industry DTI.
Partnership with more than P3, 000.00 capitals must register with Securities and Exchange
Commission (SEC) and the contract must appear in a public instrument.
Advantages Disadvantages
ELEMENTS OF PARTNERSHIP
1. Consensual- it is perfected by mere consent, that is, upon the express or implied agreement
of two or more persons.
2. Bilateral- it is entered into by two or more persons and the rights and obligations arising
there from are always reciprocal.
3. Onerous- each of the parties aspires to procure for himself a benefit through the giving of
something. The partners contribute money, property, or industry to a common fund.
4. Commutative- Undertaking of each of the partner is considered as the equivalent of that
of the others.
2. The parties must have legal capacity to enter into the contract
5. The purpose or primary purpose must be to obtain profits and to divide the same among
the parties.
1. Unemancipated Minors
2. Insane or demented persons
3. Deaf-mutes who do not know how to write
4. Persons who are suffering from civil interdiction
1. The contract is void and the partnership never existed in the eyes of the law
2. The profits shall be confiscated in favour of the government
3. The instruments or tools and proceeds of the crime shall also be forfeited in favour of the
government
4. The contributions of the partners shall not be confiscated unless they fall under no. 3
CLASSIFICATIONS OF PARTNERSHIP
A. According to Object:
1. Universal Partnership of all present property- All contributions become part of the partnership fund.
2. Universal Partnership of all profits- All that the partners may acquire by their industry or work
during the existence of the partnership and the use of whatever the partners contributed at the time
of the institution of the contract belong to the partnership.
B. According to Liability:
1. General Partnership- All partners are liable to the extent of their separate
properties.
2. Limited Partnership- The limited partners are liable only to the extent of their
personal contributions. In a limited partnership, the law states that there shall be at
least one general partner.
C. According to Duration:
2. Partnership at will- One in which no term is specified and is not formed for any
particular undertaking.
D. According to Purpose:
1. De Jure Partnership- One which has complied with all the legal requirements for
its establishment.
2. De Facto Partnership- One which has failed to comply with all the legal
requirements for its establishment.
KINDS OF PARTNERS
1.) General Partner- One who is liable to the extent of his separate property after all the assets of
the partnership is exhausted.
2.) Limited Partner- One who is liable only to the extent of his capital contribution.
3.) Capitalist Partner- one who contributes money or property to the common fund of the
partnership.
4.) Industrial Partner- One who contributes his knowledge or personal service to the partnership.
5.) Managing Partner- One whom the partners has appointed as manager of the partnership
6.) Liquidating Partner-one who is designated to wind up or settle the affairs of the partnership
after dissolution.
7.) Dormant Partner- One who does not take active part in the business of the partnership and is
not known as a partner.
8.) Silent Partner- One who does not take active part in the business of the partnership though
may be known as a partner.
9.) Secret Partner- One who takes active part in the business but is not known to be a partner by
outside parties.
10.) Nominal Partner or Partner by Estoppel- One who is actually not a partner but who
represents himself as one.
REFERENCES:
Ballada Susan & Ballada, Win. (2014). Partnership & Corporation Accounting. Manila ,
Philippines: Made Easy Books.
De Leon, Hector S. (2014). The Law on Partnerships and Private Corporations. Manila,
Philippines: Rex Book Store
Harina, Ricardo M.. (2014). College Accounting 2. Mandaluyong City: National Book Store
Macapilit, Cecilia. (2014). Partnership & Corporation Accounting and their legal bases. Manila,
Philippines: Rex Book Store Inc.
Soriano, Fidelito R. (2013). Notes in Business Law.Manila, Philippines, GIC Enterprises, Inc.
“LIFE IS THE MOST DIFFICULT EXAM. MANY PEOPLE FAIL BECAUSE THEY
TRY TO COPY OTHERS, NOT REALIZING THAT EVERYONE HAS A DIFFERENT
QUESTION PAPER.
A Partnership has two or more capital accounts and therefore should also have two or more drawing
accounts. The partners may also have loans to or loan from the partnership which should be clearly
identified.
A partner may lend money to the partnership. In this case, a debtor-creditor relationship exists. The
loan payable by the partnership to the partner, the loan should be recorded separately because in case of
liquidation, a partner’s loan takes priority over partner’s equity or capital.
A partner may also borrow cash or buy on account from the partnership. It is shown as receivable
if the intention of the partner is to pay it later and not a charge against his share in the income of the
partnership business.
On November 1, Leonora and Teresa decided to form a partnership with P 45, 600 and P 78, 950 cash
respectively:
2016
When non-cash assets are invested, they should be recorded at its fair value or appraised
value. Fair Market Value is the amount, which the seller will receive for selling non-cash
assets at the present time and its present condition
On December 1, TAMA and GUTCHI formed a partnership, with TAMA investing P 17, 200 cash
and P 32,000 worth of Furniture which was bought 1 year ago and valued now as P 19, 300 and Gutchi
investing 25% cash of Tama’s total invested capital.
2016
On October 1, TAMARA invested cash in the partnership amounting to P 20,000 while REMATA
joined the partnership with his services as a managing partner with an agreement of 10% share in
the income
2016
Investments made by
Tamara
In the case of Remata’s admission as a partner, since He will contribute services to the partnership, NO
JOURNAL ENTRY will be prepared but a MEMORANDUM ENTRY only.
Memorandum Entry:
2016
Investments made by
Bugsy with outstanding balance
In this case, one of the expected partners is already engaged in business prior to the formation of
the partnership. In this case, the partner may transfer his/her assets and liabilities (net assets) to the
partnership at agreed values or at fair market values if there are no agreed values. The partnership
may either: 1) Use the books of the sole proprietor, or 2) Open new set of books
When individual set of books are kept by each partner or by any one of the partners, entries are
made on the separate books of the partners for adjustments to the recorded values. The adjustments
are made through the Capital Account.
The Capital Account is credited for increases in the value of the net assets and is debited for
decreases in the value of the net assets.
On September 30: CURA and CHARI formed a partnership wherein CURA will contribute cash
while CHARI will transfer its assets and liabilities in the business.
ASSETS
Current Assets:
Current Liabilities
Owner’s Equity
Adjustments:
4. Prepaid Insurance of P 21, 200 and Unearned Rent of P 6,700 are to be recognized.
Step 1: Adjust the books of the sole proprietor Chari to agreed values.
Page 1
2016
The Balance of Chari after all the adjustments are made is P 346,875
CHARI, CAPITAL
Page 1
2016
After all the necessary entries have been made, the partnership can now prepare the adjusted
beginning balances of the firm:
SEPTEMBER 1, 2016
ASSETS
Current Assets:
Current Liabilities
Partner’s Equity
When all the prospective partners are already in the business, they may decide to transfer their assets
and liabilities to the partnership at agreed values upon at fair market values.
OCTOBER 1, 2016
ASSETS
Current Assets:
Current Liabilities
Owner’s Equity
OCTOBER 1, 2016
ASSETS
Current Assets:
Current Liabilities
Owner’s Equity
Page 1
2016
After preparing all the adjustments of Both Sole Proprietors, the next step is to prepare the combined
adjusted Statement of Financial Position of both sole proprietors to form a Partnership.
particular, but just to let us feel we are supported and cared about.”
ASSETS
Cash P 1.050,000
Accounts Receivable P 260,000
Allowance for Bad Debts (25,000) 235,000
Merchandise Inventory 840,700
Furniture and Fixtures P 550,000
Accumulated Depreciation (90,000) 460,000
Required:
PROBLEM 2:
ASSETS
Cash P 2, 628,750
1.) The allowance for Bad Debts should be valued at 45% of the Accounts Receivable
2.) Additional cash investments made by KAH amounting to P 120, 300 were not recorded.
3.) The amount of Notes Receivable recognized was not correct, it should be valued only
at P88, 990
7.) A new partner named SOO-KUH-NAH-KOO will invest 30% of the adjusted capital of
ARES-TADO KAH.
8.) After the admission of KOO as a new partner, the business will be named “ SOO-KAH
GENERAL MERCHANDISE
Required:
In the Distribution of partnership profits and losses, the following factors should be considered:
The distribution of division of profits and losses may be expressed in several ways as follows:
1.) By percentage
2.) By fraction
3.) By decimal
4.) By ratio
1. As to Capitalist Partners
a.2) if only division of profits is agreed upon, the division of losses will be the
same as the agreement on the division of profits
2. As to Industrial Partners
a.2) in the absence of an agreement, the industrial partner shall receive a just and
equitable share of the profits and the capitalist partners shall receive profit in
accordance with their capital contributions
a.2) in the absence of an agreement, the industrial partner in his/her character shall
have no share in the losses.
1.) Equally
ILLUSTRATIVE PROBLEM:
The following ledger accounts are taken from the books of TOMMY and MIHO Partnership for the year
2016.
TOMMY, CAPITAL
October 1 P 55,000
MIHO, CAPITAL
November 1 P 125,800
INCOME SUMMARY
December 31 P 150,000
2016
2016
2016
2016
2016
2016
Tommy Miho
2016
Tommy, Capital
12 3,572,000 297,667
Miho, Capital
12 4,480,000 373,333
Case 8: Each partner is allowed 15% interest on ending capital and the remaining income is divided
20% and 80% respectively
2016
Computations:
15% x P 454,100
P 68,115 P 119,865
Case 9: Miho is allowed salaries of P 120,000 and the remaining profit divided in the ratio of 4:6
2016
Computations:
Remainder ( 4:6)
Case 10: Assume same agreement as in case no. 9, but instead of net income of P 150,000, the
partnership incurred a net loss of P 40,000.
2016
Computations:
Remainder ( 4:6)
EXERCISES
PROBLEM 1:
The Capital Accounts of CHOKS and LATTE at the end of the year 2016 are as follows:
CHOKS CAPITAL
LATTE CAPITAL
INCOME SUMMARY
PROBLEM 2:
In the month of January, 2016, Zuma, Galema and Valentina formed a partnership with respective capital balances:
Zuma, Capital
a.) Zuma invested Cash in the business amounting to 25% of its personal cash of P 800,000, Equipment valued
at P 75,000 4 years ago and subjected to a depreciation of P 10% per year.
b.) Zuma decided to withdraw from his personal account 2 days after the operation amounting to P 8,200 to be
used by him in watching several movies.
Galema, Capital
a.) .Snakers, the friend of Galema decided to lend Galema a money amounting to P 125,000. When Galema
received the borrowed capital, she then gave her mother 37% of which, her 2 siblings 23% of which and the
balance she invested in the business.
b.) Galema made an additional investment in a form of furniture and fixtures amounted to a fair market value
of P 55,000, its historical value is P 73,000.
Valentina, Capital
a.) Valentina made an investment amounting to 35% of the total adjusted capital of Zuma and Galema
After the formation of the partnership, the partners decided that they will base the distribution of net income in a
ratio of 5:4:3 after Valentina will be given P 25,000 monthly salary being the managing partner of the company.
Additional Information was given by the partners: Net income for January is P 88, 300, for February is P 55, 200,
for March, the partnership generated ja net loss of P 65,000 and for April, a net income of P 53,800.
The Dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing
to be associated in the carrying on as distinguished from the winding up of the business.
ARTICLE 1829
On Dissolution, the partnership is not terminated, but continues until the winding up of the partnership
affairs is completed.
For accounting purposes, the change in the relationship of the partners brought about by the following:
2.) Withdrawal or retirement of a partner by sale of equity or interest to the remaining partners
A new partner may be admitted into a partnership by purchase of Interest from one or more of the original
(old partners)
ADMISSION BY PURCHASE
With the consent of all the partners, a new partner may be admitted in an existing partnership by purchasing
a capital equity interest directly from one or more of the old partners.
The only entry required on the partnership books is the recording of the transfer of capital from the capital
account of the selling partner to that of the buying partner. The pro-form entry is:
The purchase price of the interest sold to the new partner may be:
The new partner may pay more than or less than the book value of the interest sold by the old
partner resulting in a gain or loss in the transaction. The gain or loss is a personal gain or loss of
the selling partner and not of the partnership. Therefore, no gain or loss is recognized in the
partnership books.
Sample Problem: Kolokoy and Butchokoy are partners with capital balances of P 200,000
and P 320,000 respectively on May, 2017. They share profits and losses equally. Bachoy is a
new partner
Case 1: Purchase at book value from one partner only. Bachoy purchases 2/5 interest from
Kolokoy by paying P 80,000.
2017
Case 2: Purchase at book value from more than one partner. Bachoy purchases 2/5 interest
from the Old Partners by paying P 208,000.
2017
Case 3: Purchase at less than book value. Bachoy purchases 2/5 interest from the Old Partners
by paying P 190,000.
2017
The 190,000 paid by Bachoy to Kolokoy and Butchokoy should not be reflected in the
partnership books because the said amount was paid directly to the partners. The difference
of 18,000 is a personal loss of the selling (old) partners.
Case 4: Purchase at more than book value. Bachoy pays P 200,000 for a 1/3 interest from the
Old Partners.
2017
The 200,000 payment made by Bachoy to Kolokoy and Butchokoy should not be reflected in
the partnership books. The P 26,666 excess payment is a personal gain of Kolokoy and
Butchokoy.
The interest of the retiring partner may be acquired by the remaining partners. The partnership
recognizes only the transfer of capital interest from the retiring partner to the acquiring partner or
partners.
Example: the following are the ending capital balances of the three partners for the month of June
2017
Dong sold his interest to Ding and Dhing Dhing for P30, 000 on June 15; the interest being divided
equally by the remaining partners.
2017
The loss of 2,000 is a personal loss of Dong since the sale of interest to Ding and Dhing Dhing
is a personal transaction among the partners.
With the consent of the remaining partners, the retiring partner may sell his interest to an outsider.
The partner recognizes only the transfer of capital interest from the retiring partner to the new
partner. Any gain or loss from the sale is a personal gain or loss of the retiring partner.
2017
The gain of P 18,000 is a personal gain of Dong since the sale of the interest to an outsider is
a personal transaction between the buying partner and Dong.
ARTICLE 1831: On application by or for a partner, the court shall decree Dissolution whenever:
1.) A partner has been declared insane in any judicial proceeding or is shown to be of unsound
mind
2.) A partner becomes in any other way incapable of performing his part of the partnership contract
3.) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the
business.
ADMISSION BY INVESTMENT
A person may be admitted into a partnership by investing cash or other assets in the business. The assets
are invested into the partnership and not given to the individual partners.
Definition of terms:
Total Contributed Capital- it is the sum of the capital balances of the old partners and the actual
investment of the new partner
Total Agreed Capital- it is the total capital of the partnership after considering the capital credits given to
each of the partners. Under the bonus method, total agreed capital is equal to the total contributed
capital.
Illustration: Alena and Amihan are partners with capital balances of P 400,000 and P 200,000 respectively.
They share profits in the ratio of 3:1. The partners agreed to admit Danaya as a member of the firm.
Case 1: Total Agreed Capital is stated. Assume that Danaya invested P 250,000 for a one fourth interest
in the business. The assets of the partnership and that the total agreed capital is P 850,000.
Illustration: Alena and Amihan are partners with capital balances of P 400,000 and P 200,000 respectively.
They share profits in the ratio of 3:1. The partners agreed to admit Danaya as a member of the firm.
Case 1: Total Agreed Capital is stated. Assume that Danaya invested P 240,000 for a one third interest
in the business. Total agreed capital is P 840,000.
Case 2: Total Agreed Capital is not expressly stated. Assume that Danaya invested P 300,000 for a 50%
interest in the business.
PROBLEMS
PROBLEM 1: CHIKEE and CHINEE are partners with capital balances of P 250,000 and P 310,000
respectively on May, 2017. They share profits and losses equally. CHINKEE is a new partner
2. Chinee will leave the partnership and will sell its interest to Chinkee for P 240,000
4. Chinkee will purchase 2/3 interest from both partners for P 400,000
5. Chinkee will purchase 3/ 4 from Chikee for P 200,000, and ¼ from Chinee for P 65,000
Required:
PROBLEM 2: During the month of April, 2017, EYEY, BEEBEE, and SYSY formed a partnership
with respective capital balances:
After filing all the requirements to become a legal business, they operated during the month of May, 2017
with a Net Income of P 78,340 which is to be distributed in the ratio of 4:2:2.
But few months after the profitable operation, changes did come into the business. BeeBee needed to go
to abroad to pursue her further studies, but she has to make one major decision that is to withdraw from the
partnership and sell it either to a new partner or to the remaining partners… It took 3 days for her to decide
and she finally decided to sell the whole interest to DeeDee for P 150,000, a special friend of her. When
EyEy heard about this sad news, knowing that she and BeeBee were much closed. She also decided to
withdraw from the partnership and sell the interest to SYSY and DeeDee for P 310,000 to be received and
pay by them in equal share.
1. Prepare for the Journal Entry to record the sale of interest of BeeBee to DeeDee
2. Prepare for the Journal Entry to record the sale of interest of EyEy to SySy and DeeDee
JOURNAL ENTRY:
4. Compute for the Personal Gain or loss of EyEy to SySy and DeeDee
PROBLEM 3: Partners Yong and Pal have capital account balances of P 30,000 and P 20,000
respectively and they share profits and losses in a 3:1 ratio.
1. Christine invested P 30,000 for a ¼ interest in the firm, the total partnership capital after
the admission will be P 80,000.
“As long as you have God, you’re always bigger than your problems, better than your past
and stronger than your pain”
“IN LIFE, YOU CAN BUY ANYTHING BUT NOT LOVE, YOU CAN FAKE YOUR SMILE BUT NOT
YOUR HAPPINESS. YOU CAN LIE TO OTHERS BUT NOT TO YOURSELF, AND YOU CAN ALWAYS
CHANGE YOUR MIND, BUT NEVER YOUR HEART.
A Partnership is liquidated when its business operations are completely terminated or ended. The
partnership assets are sold, the partnership creditors are paid, and the remaining assets, if any are
distributed to the partners as a return of their investments.
Partnership dissolution with liquidation may be caused by any of the following factors:
1. The accomplishment of the purpose for which the partnership was organized
Marshalling of assets involves the order of creditor’s rights against the partnership’s assets and the
personal assets of the individual partners. The order in which claims against the partnership’s assets will
be marshalled is as follows:
2. Partner’s claims other than capital and profits such as loans payable and accrued interest payable
3. Partners claim to capital or profits, to the extent of credit balances in capital accounts.
Right of offset involves a deficit in a partner’s capital (debit balance in the capital account of a partner)
against the loan payable to that partner. The loan payable to a partner has a higher priority in liquidation
than a partner’s capital balance but a lower priority than liabilities to outside creditors.
This is a process whereby the distribution of cash to the partners is done only after all the non cash assets
have been realized. The total amount of gain or loss on realization is known, and all liabilities have been
paid.
STATEMENT OF LIQUIDATION
The Statement of Liquidation is a statement prepared to summarize the liquidation process. It is the basis
of the journal entries made to record liquidation. This statement presents in working paper form the effect
of the liquidation o the Statement of Financial Position. It shows the conversion of assets into cash, the
allocation of gain or loss on realization, and the distribution of cash to creditors and partners.
DECEMBER 1, 2017
TOTAL ASSETS P228, 000 TOTAL LIABILITIES AND PARTNER’S EQ.P 228,000
EXERCISE 1:
TOTAL ASSETS P434, 000 TOTAL LIABILITIES AND PARTNER’S EQ.P 434,000
Required:
EXERCISE 2:
The following are the balances of CEE-TREE ENTERPRISE for the beginning of the month March 2017
Additional Information:
REQUIRED:
1. Prepare a Statement of Financial Position as of March 31, 2017 using the following items (Cash,
Other Assets, Liabilities, Chiki, Loan, Chiko, Loan, Chiki, Capital, Chiko, Capital and
Chika, Capital)
2. Prepare a Statement of Liquidation for the month ended March 31, 2017
LOOK FOR SOMETHING POSITIVE IN EACH DAY, EVEN IF SOME DAYS YOU HAVE TO LOOK A
LITTLE HARDER. LET THE CHALLENGES MAKES YOU STRONG.”
Corporation is an artificial being created by operation of law, having the right of succession and the
powers, attributes and properties expressly authorized by law or incident to its existence
CHARACTERISTICS OF A CORPORATION
1. Separate Legal Entity- Artificial Being- A Corporation is an artificial being with a personality that is
separate from that of its individual owners. Thus, it may, under its corporate name, take, hold, or convey
property to the extent allowed by law, enter into contracts and sue or be sued.
2. Created by operation of law- A Corporation is generally created by operation of law. The mere
agreement of the parties cannot give rise to a corporation.
3. Right of Succession- A Corporation has the right of succession, irrespective with the causes of
dissolution; a corporation can continue its existence up to the period of time stated in the articles of
incorporation but not to exceed fifty years.
4. Power, attributes, properties authorized by law- Being a mere creation of law, a corporation can only
exercise powers provided by law and those powers which are incidental to its existence.
5. Ownership divided into shares- Shareholders have their respective shares in a corporation.
6. Board of Directors- Board of Directors elected by the shareholders. The board of directors is the
governing body or decision making body of the corporation. The Corporation Law provides that the number
of directors be not less than five but not more than fifteen.
ADVANTAGES OF A CORPORATION
1. Greater amount of capital- it is easy for a corporation to raise and assemble capital from the combined
investments of many shareholders.
2. Limited Liability- Creditors of a corporation have a claim against the assets of the corporation but not
against the personal property of its owners. A shareholder never loses beyond the amount of his investment.
3. Transferability of shares of stock- A shareholder can transfer and dispose shares of stock at will without
the consent of other shareholders or of the corporation itself.
5. Legal Unit- The Corporation has a legal capacity to act as a legal unit.
7. Standard Creation- Creation, organization, management and dissolution of corporations are governed
under one general incorporation law.
TYPES OF A CORPORATION
1. Public Corporations- Those formed for political or governmental purposes such as municipalities and
cities.
2. Private Corporations- A corporation that is organized for private purposes ( e.g Coca-Cola, San Miguel
Corporation.
3. Stock Corporations- A corporation in which the capital is divided into shares of stock and is authorized
to distribute corporate earnings to holders on the basis of shares held. The owners of stock corporations are
called shareholders.
4. Non- Stock Corporations- A corporation in which capital comes from fees paid by individuals
composing it. The owners of a non- stock corporation are called members.
5. Quasi- Public Corporations- Those engaged in rendering public services such as bus, electric, water,
and telephone companies.
6. Government owned or Controlled Corporations- those which are organized by the government or
those in which the government is a majority stockholder.
8. Foreign Corporations- Those corporations formed, organized or existing under any laws other than
those of the Philippines.
11. Open Corporation- Corporation whose ownership is widely held by many investors, usually a private
stock corporation.
12. Close Corporation or Family Corporation- Is one, which is limited to selected individuals or
members of the family.
COMPONENTS OF A CORPORATION
1. Incorporators- They are the persons who originally formed the corporation and whose names appear in
the Articles of Incorporation.
2. Corporators- They are the persons who compose the corporation whether as shareholders or members.
ORGANIZING A CORPORATION
1. Promotion- Includes the selection of a place where in the business is to be legally located, determination
of capital structure, choosing the methods of raising funds, drafting the constitution and bylaws etc.
2. Incorporation- The process of formalizing the organization of the corporation. This stage includes:
a.) Drafting of the articles of incorporation which must be duly executed and acknowledged before a notary
public.
b.) Filing of the articles of incorporation with the Securities and Exchange Commission (SEC) together
with the statement showing that at least 25% of the total authorized share capital (also known as authorized
capital stock) has been subscribed and that at least 25% of the total subscriptions have been paid.
c.) After the required fees have been paid and upon approval of the articles of incorporation, the SEC issues
a certificate of incorporation, the date of which being considered as the date of registration or incorporation.
3. Commencement of the business- The business should start its operations within two years from the date
of incorporation. Failure to do so will automatically dissolve the corporation without the need for a hearing.
ARTICLES OF INCORPORATION
The Articles of incorporation contains the rights and restrictions conferred by the government upon the
corporation. The following information is usually included in the articles of incorporation.
1. The name of the corporation The Articles of incorporation contains the rights and restrictions conferred
2. by the government upon the corporation. The following information is usually included in the articles of
incorporation.
6. The names of the directors who will serve until their successors are duly elected and qualified in
accordance with the by laws
7. The authorized share capital (authorized capital stock), the classes of share capital (stocks) to be issued
and the number of shares in terms of each class indicating the par value per share , if there is any.
8. The amount of subscriptions to the share capital (capital stock), the names of the subscribers and the
number of shares subscribed by each
9. The total amount paid on the subscriptions to the share capital (capital stock) and the amount paid by
each subscriber on his subscription.
BY- LAWS
1. The date, place and manner of calling the annual shareholders meeting
3. The circumstances which may permit the calling of special meetings of the shareholders
REFERENCES:
Ballada Susan & Ballada, Win. (2011). Partnership & Corporation Accounting. Manila ,
Philippines: Made Easy Books.
Baysa Gloria & Lupisan Ma. Concepcion. (2014). Accounting for Partnership and Corporation.
Manila, Philippines: Millenium Books, Inc,
Harina, Ricardo M.. (2011). College Accounting 2. Mandaluyong City: National Book Store
Macapilit, Cecilia. (2011). Partnership & Corporation Accounting and their legal bases. Manila,
Philippines: Rex Book Store Inc.
“THE MOST USEFUL ASSET OF A PERSON IS NOT A HEAD FULL OF KNOWLEDGE BUT A HEART
FULL OF LOVE, WITH EARS OPEN TO LISTEN, AND HANDS WILLING TO HELP.
1. Par Value Shares- on in which a specific amount is fixed in the articles on incorporation and appearing
on the certificates of stock
2. No Par Value Shares- one without any value appearing on the face of the certificate of stock. A no par
value share may have a stated value which may be fixed in the articles of incorporation
3. The Minimum Stated Value of a no par value is five pesos (P 5.00) per share
6. Ordinary Shares- these shares entitle the holder to an equal pro rata division of profits without any
preference
7. Preference Shares- these shares entitle the holder to certain advantages or benefits over the holders of
ordinary shares
8. Treasury Shares- a stock has been issued by the corporation as fully paid and later reacquired but not
retired.
At the time of incorporation at least twenty five (25%) percent of the authorized capital stock ( share capital)
as stated in the articles of incorporation must be subscribed and at least 25% of the total subscription must
be paid upon subscription.
In no case, shall the paid in capital be less than five thousand pesos (P 5,000).
These requirements are mandatory. The Securities and Exchange Commission shall not accept the articles
of incorporation of any stock corporation unless accompanied by a sworn statement of the Treasurer elected
by the subscribers showing that the minimum subscription and paid in capital requirements have been
complied with.
The Ultimate control of the corporation rests with the Shareholders. They are the owners of the
Corporation. The shareholders elect the top governing body of the corporation, the members of the board
of directors. The Board of Directors is responsible for the formulation of the overall policies of the
corporation and for the exercise of corporate powers. The board also elects a Chairman of the Board
The election of the professional management team or the administrative officers is entrusted to the board.
This team nay include the President, Executive Vice- President, Vice Presidents in charge of Sales,
Manufacturing, Accounting, Finance, Administration and other key areas; Secretary, Treasurer,
Controller. These officers implement the policies of the board of directors and actively manage the day to
day affairs of the corporation.
Annually, a corporation holds the shareholder’s meeting during which the shareholders elect their directors
and make other decisions.
Section 25 of the Corporation Code of the Philippines, states that the President of a Corporation must be a
director of the Corporation, but he cannot act as a President and Secretary or as a President and Treasurer
at the same time.
The Corporate Secretary must be a resident and a citizen of the Philippines. He need not be a Director
unless required by he Corporate by Laws.
The Corporate Treasurer is the proper officer entrusted with the authority to receive and keep the money
of the corporation and to disburse them as may be authorized.
SHAREHOLDER’S EQUITY
Shareholder’s Equity
Share Capital
Ordinary Shares-P 5 par, 30,000 shares authorized, 20,000 shares issued and
Outstanding 100,000
REFERENCES:
Ballada Susan & Ballada, Win. (2016). Partnership & Corporation Accounting. Manila ,
Philippines: Made Easy Books.
Baysa Gloria & Lupisan Ma. Concepcion. (2015). Accounting for Partnership and Corporation.
Manila, Philippines: Millenium Books, Inc