TOPIC NAME

Introduction to Corporation
DATE

CUES NOTES

 Artificial being created by law.

Corporation
- It is born into reality by way of law (not biological birth)
through its registration with the Securities and
Exchange Commission (SEC).
Register—SEC
- A corporation is created by registering with the SEC or by
way of laws enacted by Congress.

 Having the right of succession and the powers, attributes

Rights and Powers and properties expressly authorized by law or incident to its
existence.
- A corporation has rights and powers just like a natural human
being but limited only to what the law provides like the right to
own properties, right to file a case, etc.

 “Limited Liability” –shareholders may take part in the profits through

Take Profit, but not
dividends and stock appreciation, but are not personally liable for the
liable for debts.
company’s debts.

 Separate and distinct from its owners.

Corporation is - A corporation becomes is a separate being from that of its
separate from its owners, called shareholders. A corporation will perform its
shareholders. actions and its business through its officers, employees, and
agents since it cannot act on its own.
- As an accountant, it is an additional task to keep the
accounting of the shareholders' equity proper and accurate,
aside from the normal business transactions like selling,
paying, purchasing, etc.

 Can be stock corporation or non-stock corporation.

Stock Corporation - A stock corporation is a corporation where its capital is

divided into shares of stock that owners can hold. The owner
that holds the majority of the stocks controls the corporation.
Non-Stock - A non-stock corporation is a corporation where its capital is
considered as a contribution by its owners, also called
Corporation
members. Members have equal rights in controlling the
corporation.

Most business-related corporations are stock corporations while most charity,

educational, religious, and advocacy-related corporations are non-stock
corporations.

Shareholder’s Equity
 Primarily composed of Share capital and Retained earnings.

Some corporations have Share premium, Other comprehensive income, and

Reserves.

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Capital

1. Authorized
Capital  Capital authorized by SEC
 Authorized—limitation of capital you’re going to hold
 SEC—this agency authorized corporations to exists and limits corporation’s capital to
prevent bad corporation

2. Subscribed
Corporation  Contract pa, wala pa nabayran
 You’re interested to be an owner yor
 The services/products are beneficial. Thus, people will be more interested to become a
shareholder.
 Example: There is a 5 million capital. This will be divided into shares so that each share will
have proof of ownership. Ownership—one should have an at least 1 share.
5 million / 10 (PHP) = 500,000 shares
 Ownership will be varied depending on the percentage or number of shares you own.
 Subscription contracts- needed to be permitted as a shareholder.
 One will know that people are interested to that company when they already paid and have
the document/ certificate. If this will happen, the share will become paid-up or issued.

3. Retained
Earnings  Earning accumulated over the years.
 Profit of the company that are accumulated for the past accounting periods.
 Year 1= 1 million (profit), Year 2= 500K (profit) ; 1,500,000 (Retained Earnings)
 Magkadako na magkadako. Until such time na edivide nani sa mga shareholders through
dividends.

Financial Reports
(not certain)

Closing Entries

Non-corpo

Income and expense summary should be closed as capital

Corpo

Debit—Income and expense summary

Credit—Retained Earnings

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SUMMARY (Brief summary of notes highlighting main ideas in your own words)

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