ACCOUNTING FOR CORPORATION Retained Earnings – accumulated profit/losses which

reflects the amount of capital accumulated and

Corporation – an artificial being created by operations of
law having the rights of succession, and the powers, retained thru profitable activites
attributes, and properties expressly authorized by law and
incident to its existence
o registered to Securities and Exchange Commission
(SEC)
o rights and powers are limited only on the law
o separate legal entity
o owners are referred as shareholder
o it can be a stock or non-stock corporation
» stock corporation – capital is divided into
shares of stocks that owners can hold. major
stockholder has the controlling power
» non-stock corporation – capital is considered
as contribution of members which have equal
rights in controlling

ORGANIZATION OF A CORPORATION SHARE CAPITAL (Capital Stock)

Provisions of the corporation code: » Preference share capital (Preferred stock)
1. formed by at least 5 but not more than 15 persons » Ordinary share capital

at legal age and majority are living in the » Subscribed share capital
» Subscription receivable (contra-equity)
Philippines
» Share dividends distributable (stock dividends payable)
2. articles of incorporation are authorized by » Capital liquidated (contra-equity)
Securities and Exchange Commission (sec) » Share premium (additional paid-in capital)
3. the authorized capital stock, which is the RETAINED EARNINGS
OTHER COMPONENTS OF EQUITY*
maximum no. of share that a corporation can
TREASURY SHARES (Treasury Stock)
issue. any excess share issued is illegal. to issue
share in excess to the original authorized capital
TRANSACTIONS OF CORPORATION
stock must be first amend its articles of
» Authorization, subscription, and issuance of shares
incorporation
» acquisition and reissuance of treasury shares
4. to amend, a majority vote of the board + vote of
» retirement of shares
shareholders representing at least 2/3 of the
» donated capital
outstanding share capital
» distribution to owners (dividends)
5. At least 25% authorized capitalization must be
subscribed and at least 25% of the total ACCOUNTING FOR SHARE CAPITAL
subscription must be paid upon subscription. The Terms:
paid-up capital cannot be less than PHP 5000 o AUTHORIZED SHARE CAPITAL – maximum
number of shares that will be divided and the par value
SHAREHOLDER’S EQUITY
for each share
Shareholder’s equity is composed of share capital and ASC = NO. OF SHARES X PAR VALUE
retained earnings. o UNISSUED SHARE CAPITAL – portion of authorized
o other corporation have share premium (excess share capital that is not yet issued
amount that shareholder pay on the share capital) o ISSUED SHARE CAPITAL – portion of authorized
Share Capital – contributed or paid-in capital which share capital that is sold and paid in full
reflects the amount of resources received from o SUBSCRIPTION – agreement that person promises to
put money, property, or past services into the
shareholders, donation, or other share capital
corporation in exchange of stock
transactions
o SUBCRIPTION RECEIVABLE – unpaid portion of the memorandum method journal entry method
Memo entry – The authorized Unissued share capital Pxx
subscription price. It is a deduction from the related
capitalization is PHP 1,000,000 Authorized share capital Pxx
subscribed share capital divided into 10,000 shares with par To record authorized capitalization
o SUBSCRIBED SHARE CAPITAL – portion of value per share of PHP 100
Subscription
authorized share capital that is subscribed but not yet
memorandum method journal entry method
fully paid Cash Pxx Cash Pxx
o OUTSTANDING SHARE CAPITAL – issued shares in Subscription receivable Pxx Subscription receivable Pxx
Subscribed share capital Pxx Subscribed share capital Pxx
the hands of shareholders To record subscription To record subscription
OSC = ISSUED SHARES – TREASURY SHARES Collection of subscription receivable and Issuance of Shares
o TREASURY SHARES – shares that is owned by the memorandum method journal entry method
Cash Pxx Cash Pxx
corporation but not retired
Subscription receivable Pxx Subscription receivable Pxx
o SHARE CAPITAL – portion of authorized share To record collected subscription To record collected subscription
capital that is already issued receivable receivable

o SHARE CERTIFICATE – document that evidence Subscribed share capital Pxx Subscribed share capital Pxx
ownership of share Share Capital Pxx Unissued share capital Pxx
To record issued shares To record issued shares
o PAR VALUE – minimum amount that the subscriber
Cash Subscriptions
should pay for each stock memorandum method journal entry method
o SHARE PREMIUM – excess amount of par value paid Cash Pxx Cash Pxx
Share capital Pxx Unissued share capital Pxx
by the subscriber due to many reasons To record subscriptions To record subscription
NOTE!
Subscribers cannot get share of stock more that the authorized
capital S H A R E C A P I TA L
memorandum method journal entry method
• A stock corporation that has no par value – a subscriber
Share capital pxx Authorized share capital pxx
can put money, property, or past services into Subscription share capital xx Unissued share capital (xx)
Subscription receivable (xx) Issued share capital xx
corporation equal to its desired shares of stock
TOTAL SHARE CAPITAL PXXX Subscription share capital xx
Forms of Payment in Exchange for Shares of Stock Subscription receivable (xx)
» CASH – the number of shares subscribed is equal TOTAL SHARE CAPITAL
PXXX
to the par value of the share
» PROPERTY – the number of shares subscribed
ISSUANCE OF SHARE CAPITAL ON CASH BASIS
will be paid-up by the fair value of the property
with par value
» SERVICES – the number of shares subscribed will Cash Pxx
be paid-up by the fair value of the services Issued Share Capital (Ordinary or Preferred) Pxx
Issued Share Premium (applicable when there’s excess) xx
All excess of the form of payment will be considered as
To record issuance of share capital
share premium without par value but with stated value
• A subscriber will only receive Share Certificate once (amount is based on stated value)
the subscription contract is fully paid Cash Pxx
Issued Share Capital (Ordinary or Preferred) Pxx
• For non-stock corporation – no share premium Issued Share Premium (applicable when there’s excess) xx
• For non-stock corporation – forms of payment will be To record issuance of share capital
accepted by the corporation and the fair values of the without par value and stated value
(amount is based on the given)
assets will be credited to member’s capital
Cash Pxx
• Promissory note and other future services is prohibited Issued Share Capital (Ordinary or Preferred) Pxx
by the Corporation Code in the issuance of shares Issued Share Premium (applicable when there’s excess) xx
To record issuance of share capital
An entity accounts share capital using:
• Memorandum Method
ISSUANCE OF SHARE CAPITAL ON NON-CASH BASIS
• only made for authorized capitalization
with par value
• subsequent issuance of shares are credited to share
Asset/Service Expense Pxx
capital account Issued Share Capital (Ordinary or Preferred) Pxx
• Journal Entry Method Issued Share Premium (applicable when there’s excess) xx
To record issuance of share capital
• recorded by crediting “authorized share capital”
without par value but with stated value
TRANSACTIONS
(amount is based on stated value)
Authorized Capitalization
Asset/Service Expense Pxx
 Issued Share Capital (Ordinary or Preferred) Pxx • Dividend declaration should be based on the total
Issued Share Premium (applicable when there’s excess) xx
subscription of shareholder and not merely on the
To record issuance of share capital
without par value and stated value paid shares
(amount is based on the given) • Subscribers are considered shareholder from the
Asset/Service Expense Pxx time the subscription is accepted not from the
Issued Share Capital (Ordinary or Preferred) Pxx
Issued Share Premium (applicable when there’s excess) xx
time stock certificate is issued
To record issuance of share capital
Retained Earnings Pxx Dividends go thru the following process:
Dividends Payable Pxx
1) Date of Declaration
To record dividends payable
- BOD can declare issue of dividends
NOTE! Proceeds for the issuance is recorded at an amount - includes the details about the dividend rate, the
equal to the following prioritization: date of payment, and the date of record.
1. Fair value of the non-cash received may be property, - declared dividends becomes obligation of the
other assets, and service rendered corporation
2. Fair value of the share capital issued 2 ) Date of Record

3. Par value or stated value of the capital share issued - contains list of shareholders entitled to dividends
- NO ENTRY RECORD
SUBSCRIPTION SHARES 3) Date of Payment
The corporation sells its shares directly to investors on - date when dividends are distributed to the
subscription basis. shareholders
Dividends Payable Pxx - corporation settles its liability
Cash Pxx
- can be a form of cash, property, inventory, or
To record paid dividends
share
The subscription contract is given as legally binding
contract that provides the no. of shares subscribed, the
subscription price, terms of payment, and other conditions.
ACCOUNTING FOR DIVIDENDS
Retained Earnings – component of shareholder’s equity
2 BASIC TYPES OF SHARES
arising from retention of assets generated from profitable
• ORDINARY SHARES – basic ownership class of share,
activities
has voting rights, and controls and manages the
profit/losses = retained earnings
corporation
CLOSING ENTRY FOR RETAINED EARNINGS
Profit Revenue/Sales Pxx • PREFERENCE SHARES – gives advantage over
Income and Expense Summary Pxx ordinary shareholders because it is entitled to
Income and Expense Summary Pxx
dividends. Receives fixed dividends based on the stock
Expenses Pxx
Income and Expense Summary Pxx FOR DIVIDENDS, PREFERRED SHARES CAN BE
Retained Earnings Pxx CUMULATIVE, PARTICIPATING OR BOTH
Loss/ Revenue/Sales Pxx
o Cumulative Preferred Share – past dividend not
deficit Income and Expense Summary Pxx
Income and Expense Summary Pxx declared will be accumulated and will be paid to
Expenses Pxx
preferred shareholder
Retained Earnings Pxx
Income and Expense Summary Pxx
o Participating Preferred Share – ordinary share also
receives rate of dividends of preferred shares and
DIVIDENDS – from the retained earnings the remaining balance will be shared based on
- issued, fully paid, and subscribed shares shared capital balance
- can be cash, property, or additional stock
NOTES:
NOTE!
• Corporations can declare dividends only to the
extent of the Retained earnings balance.
 Feb 12 Cash PHP 100,000
Ordinary Share Capital PHP 100,000
To record share capital

Jul 10 Cash PHP 630,000

Ordinary Share Capital PHP 630,000
To record share capital

Nov 5 Cash PHP 1,050,000

Ordinary Share Capital PHP 1,050,000
To record share capital
Journal Entry for shares without par value and stated value
Feb 12 Cash PHP 100,000
Ordinary Share Capital PHP 10,000
Share Premium – Ordinary shares 90,000
To record share capital

Jul 10 Cash PHP 630,000

Ordinary Share Capital PHP 50,000
Share Premium – Ordinary shares 580,000
To record share capital

Nov 5 Cash PHP 1,050,000

Ordinary Share Capital PHP 75,000
Share Premium – Ordinary shares 975,000
To record share capital

Share Capital on Non-Cash Basis

Villarama Corporation’s articles authorized the issuance of 20,000 of
6% preference shares at PHP 50 par value. The authorized issuance of
ordinary shares is 50.000 with stated value of PHP 10. The following
are the transactions:
APR 1 – Issued 2,500 ordinary shares for land. The asking price for
land was PHP 90,000; and the fair market value was at PHP85,000
Apr 1 Land PHP 85,000
Ordinary Share Capital PHP 25,000
Share Premium – Ordinary shares 60,000
To record share capital
AUG 1 – Issued 1,000 ordinary shares to lawyer for billing PHP 50,000
pertaining to service rendered in helping the company organized
Aug 1 Organization Expense PHP 50,000
Ordinary Share Capital PHP 10,000
SAMPLE PROBLEMS Share Premium – Ordinary shares 40,000
To record share capital
Share Capital on Cash Basis
Roa Corporation’s articles authorized the issuance of 100,000 ordinary
shares. Roa sold the following:
Feb 12 sold 1,000 shares for PHP 100,000
Jul 10 sold 5,000 shares for PHP 630,000
Nov 5 sold 7,500 shares for PHP 1,050,000
Journal Entry for shares with par value of PHP 100
Feb 12 Cash PHP 100,000
Ordinary Share Capital PHP 100,000
To record share capital

Jul 10 Cash PHP 630,000

Ordinary Share Capital PHP 500,000
Share Premium – Ordinary shares 130,000
To record share capital

Nov 5 Cash PHP 1,050,000

Ordinary Share Capital PHP 750,000
Share Premium – Ordinary shares 300,000
To record share capital
Journal Entry for shares without par value but with stated value of
PHP 10
 Subscribed preference share capital PHP 1,200,000
Share Premium – Preference shares 36,000
To record subscription
b) Received 30% of subscription price from all subscribers
Cash PHP 370,800
Subscription receivable PHP 370,800
To record collection of subscription
c) Received 20% of subscription price from all subscribers
Cash PHP 274,200
Subscription receivable PHP 274,200
To record collection of subscription
RECORD ISSUANCE OF SHARES (issuance of stock certificate)
Subscribed preference share capital PHP 1,200,000
Preference shares Capital PHP 1,200,000
To record issuance of shares

Retained Earnings
Santiago Corporation board of directors declared a PHP750,000 cash
dividend on September 1, 2021 payable on October 1, 2021 to the
shareholders of record on September 15, 2021
Date of Declaration
Sept 1
Retained Earnings PHP 750,000
Dividend Payable PHP 750,000
To record dividend payable
Date of Record
No entry
Date of Payment
Oct 1
Dividend Payable PHP 750,000
Cash PHP 750,000
To record dividend payable

Subscription
Antonio Bakery has 25,000 authorized share capital of shares of 9%
cumulative preference share at PHP100 par value and ordinary shares
at PHP30par value. The following are the transactions
a) Received subscription to 12,000 preference share at PHP103 per
share with down payment of 50% of subscription price
Subscription price – 12,000 shares x PHP 103 = PHP 1,236,000
Downpayment – PHP 1,236,000 x 50% = PHP 618 ,000

Cash PHP 618,000

Subscription receivable 618,000