NATURE OF SHAREHOLDERS’ EQUITY

● It is the residual interest of owners in the net assets of a corporation.

And shareholders equity kasi yan ang natitirang interest ng mga shareholders assets ng
corporation after deducting all liability. Therefore shareholders equity is measured as the
excess of total assets over total liabilities. Remember the measurement of shareholders
equity is the difference between the assets and liabilities.
● It is measured as the excess of assets over liabilities.
● ASSETS = LIABILITIES + SHAREHOLDERS’ EQUITY
The basic accounting equation
● SHAREHOLDERS’ EQUITY = ASSETS - LIABILITIES

DIFFERENT COMPONENTS OF SHAREHOLDERS’ EQUITY

● Contributed Capital/ paid in capital
● Retained earnings
● Other comprehensive income
● Treasury shares

CONTRIBUTED CAPITAL
There are 3 components of contributed capital and these are;
● Share capital
● Subscribed share capital
● Share premium

NATURE OF SHARE CAPITAL

● The portion of the pain-in capital representing the total part or stated value of the shares
issued.
TO REMEMBER:
1. Share capital represents share issued.
Pag sinabing share issued yung mag shares ay nasa kamay na ng mga
shareholders. Pag sinabi nating mga shares we mean share certificate, kasi ang
shares intangible items yan di nakikita, kaya ni represent nalang siya ng isang
certificate which is your share certificate. Ang share certificate yan ang nag
papatunan na may ownership ang isang shareholder sa isang corporation.
nakasulat doon ang pangalan ng corporation at kung gaano karaming shares
ang hawak ng shareholder na yun.
2. Total part or states value
Ang share kasi ay pwedeng maging par value or no par value shares. Ano ang
pagkakaiba ng PAR sa stated? Pag sinabing PAR VALUE naka lagay yan sa
share certificate makikita kung magkano talaga ang value ng isang shares. Ang
STATED VALUE naman hindi yan makikita sa share certificate makikita yan sa
articles of incorporation.
 ● Classes of share capital
○ Ordinary share capital
○ Preference share capital
NOTE: ANG ISANG CORPORATION AY HINDI PWEDENG MAG ISSUE NG
PREFERENCE SHARE KUNG WALANG ORDINARY SHARES. THEREFORE
KAPAG ISANG KLASE LANG NG SHARE ANG INI ISSUE NG CORPORATION
MEANING ORDINARY SHARE CAPITAL LANG YUN.

ACCOUNTING FOR SHARE CAPITAL

MEMORANDUM METHOD JOURNAL ENTRY METHOD

Authorization for issuance of NO ENTRY Unissued share xx

share capital capital

Authorized share xx
capital

Issuance of share capital Asset xx xx ASSET xx

(meaning binigay mo na yung share (it can either be cash or non-cash (it can either be cash or
certificate kay shareholder) asset account) non-cash asset account)

Share capital xx Unissued share xx

(NOTE: DAPAT NAKA MEASURE capital
AT PAR OR STATED VALUE)

Share premium xx Share premium

(NOTE: ANY AMOUNT AND EXCESS OF PAR OR
EXCESS OF PAR OR STATED STATED VALUE WILL BE
VALUE WILL BE CREDITED TO CREDITED TO THE
THE SHARE PREMIUM SHARE PREMIUM
ACCOUNT) ACCOUNT)

Subscription of share capital Asset xx Asset xx

(for the down payment kung (for the down payment
meron. kung mag down payment kung meron. kung mag
or kung may binayad kaagad ang down payment or kung
subscriber in the date of may binayad kaagad ang
subscription ide debit kaagad ang subscriber in the date of
asset na natanggap sa asset subscription ide debit
account, cash or non cash kaagad ang asset na
account) natanggap sa asset
account, cash or non cash
account)

Subscription receivable xx Subscription xx

(For the unpaid balance) receivable
(For the unpaid balance)
 Subscribed share capital xx Subscribed share xx
capital

Share premium xx Share premium xx

Nirerecognized ang share Nirerecognized ang share
premium on the date of premium on the date of
subscription subscription

Issuance of subscribed share Cash xx Cash xx

capital upon full payment

Subscription receivable xx Subscription xx

receivable

Subscribed share capital xx Subscribed share xx

capital

Share capital xx Unissued share xx

capital

TRIVIA:
● Hindi pwede basta basta mag issue ng share capital ang corporation, it must be
authorized by SEC. hanggat hindi ino authorized ng SEC na mag issue ng shares ang
isang corporation ay bawal mag issue yan ng shares.

NATURE OF SUBSCRIBED SHARE CAPITAL

● The portion of the authorized share capital that has been subscribed but not yet fully
paid.
Ang pagkakaiba ni share capital at ni subscribe share capital is that ang share capital
naka issue na yan sa shareholder ang subscribe share capital hindi pa yan ini issue sa
shareholder. Bakit hindi pa ini issue kasi hindi pa siya fully paid. Hindi pwedeng mag
issue ng share certificate hanggat hindi pa fully paid. GENERAL RULE: SHARE SHALL
ISSUED ONLY WHEN FULLY PAID
● These are still unissued shares.
Ang mga subscribe shares hindi pa ito ini issue sa mga shareholders’ these are still
unissued shares.

NATURE OF SHARE PREMIUM

(Premium meaning additional amount)
● The portion of the paid-in capital representing the excess over the par or stated value.
 Any amount of the excess of the par or stated value will be credited to what we call a
share premium account.
● SOURCES OF SHARE PREMIUM;
○ Excess over par or stated value
○ Reissuance of treasury shares at more than cost
○ Donated capital
○ Issuance of share warrants
○ Declaration and issuance of small share dividends
○ Quasi-reorganization and recapitalization