FUNDAMENTALS OF ACCOUNTANCY BUSINESS AND MANAGEMENT

Shaira Mae Obliga

BSA – 4th YEAR

1. Define corporation. What are the essential attributes of corporations?

A corporation is an entity recognized by law as possessing an existence separate and distinct from its
owners; that is, it is a separate legal entity. The essential attributes of corporation are: a. A corporation
is an artificial being with a personality separate and apart from its individual shareholders or members.
b. It is created by operation of law. c. It enjoys the right of succession. d. It has the powers, attributes
and properties expressly authorized by law or incident to its existence.

2. Identify five advantages of a corporation. Identify four disadvantages of a corporation.

Advantages:
The corporation has the legal capacity to act as a legal entity.
2. Shareholders have limited liability.
3. It has continuity of existence.
4. Shares of stock can be transferred without the consent of the other shareholders.
5. Its management is centralized in the board of directors.

Disadvantages:
A corporation is relatively complicated in formation and management.
2. There is a greater degree of government control and supervision.
3. It requires a relatively high cost of formation and operation.
4. It is subject to heavier taxation than other forms of business organizations.
5. Minority shareholders are subservient to the wishes of the majority.

3. Differentiate a stock from non stock corporation.

Stock corporation are corporations which have share capital divided into shares and are authorized to
distribute to the holders of such shares dividends or allotments of the surplus profits on the basis of the
shares held. While non stock corporation is one where no part of its income is distributable as dividends
to its members, trustees, or officers.

4. Identify the components of a corporation and briefly described each.

FUNDAMENTALS OF ACCOUNTANCY BUSINESS AND MANAGEMENT

• Corporators - corporators are entitled to enjoy all the benefits and rights which belong to any other
member of the corporation as such.
• Incorporators - are those stockholders or members mentioned in the Articles of Incorporation as
originally forming and composing the corporation, and who are signatories thereof.
• Shareholders - person, company, or institution that owns at least one share of a company's stock,
known as equity. Because shareholders essentially own the company, they reap the benefits of a
business's success.
• Member - member is a person who subscribed the memorandum of the company.
• Subscriber - is the name for someone who was a shareholder at the time of the company's
incorporation.
• Promoter - the one who decides an idea for setting up a particular business at a given place and carries
out a range of formalities required for the setting up of a business. A promoter may perhaps be an
individual, a firm, and an association of persons or a company.
• Underwriters - underwriters administer the public issuance and distribution of securities—in the form
of common or preferred stock—from a corporation or other issuing body in the equity markets. Perhaps
the most prominent role of an equity underwriter is in the IPO process.
• Independent director - acts as a guide, coach, and mentor to the Company. The role includes
improving corporate credibility and governance standards by working as a watchdog and help in
managing risk.

5. Identify the kinds of corporation as to nationality and purpose.

Stock Corporation – a corporation with capital stock divided into shares and authorized to distribute to
the holders of such shares, dividends or allotments the profits of the business based on equity of shares
 Domestic Corporation (organized under Philippine laws)
 100% Filipino-owned
 60% Filipino-owned and 40% Foreign-owned
 40.01% to 100% Foreign-owned (subject to certain provisions under Foreign Investments Act)
 Foreign Corporation (organized under the laws of the corporation’s country of origin)
 Branch Office
 Representative Office
 Regional Area Headquarters (RHQ)
 Regional Operating Headquarters (ROHQ)
FUNDAMENTALS OF ACCOUNTANCY BUSINESS AND MANAGEMENT

Non-Stock Corporation – a corporation that neither generates profit nor issues shares of stock to its
members, and could have any of the following purposes:
 Charitable;
 Religious;
 Educational;
 Cultural;
 Civic service; and
 Other similar purposes, such as chambers or combinations trade, industry or agriculture

6. Differentiate a public from a private corporation.

There is a difference between public and private corporations. A private corporation is defined as a
smaller corporation where there is a limited number of shareholders that stock gets issued to, and the
stock isn't offered to the public. On the other hand, a public corporation has been authorized to sell
their stock to the public.
In a private corporation, the stocks are only held internally and won't be publicly traded. The founders,
group of investors, or management are usually the owners. The shareholders are often very involved in
the business and act as the directors and officers of the company. While in a public corporation, the
shares are traded through a stock exchange on the open market. The companies that have a large
amount of revenue and a bigger number of shareholders are often able to afford what it costs to go
public and be in compliance with the multiple regulations that are imposed on companies that are public
by securities laws and other types of governmental regulations.

7. What are the steps involved in the creation of a corporation?

1. Promotion
2. Incorporation
3. Formal organization and commencement of business operations.

8. What is an article of incorporation?

Articles of incorporation is a set of formal documents filed with a government body to legally document
the creation of a corporation. Section 14 provides that all corporations organized under this Code shall
file with the Securities and Exchange Commission articles of incorporation in any of the official languages
FUNDAMENTALS OF ACCOUNTANCY BUSINESS AND MANAGEMENT

duly signed and acknowledged by all of the incorporators, containing substantially the following matters
except as otherwise prescribed by this Code or special law.

9. What are some rights of a shareholder?

Common shareholders possess the right to share in the company's profitability and gains from its stock
price appreciation. Shareholders may also share in a company's profits by receiving cash or stock
payments from the company—called dividends. The most important rights that all common
shareholders possess include:
 The right to share in the company's profitability, income, and assets
 A degree of control and influence over company management selection
 Preemptive rights to newly issued shares.
 General meeting voting rights

10. Distinguish par value stock from no par value stock.

A par value for a stock is its per-share value assigned by the company that issues it and is often set at a
very low amount such as one cent. A no-par stock is issued without any designated minimum value.
Neither form has any relevance for the stock's actual value in the markets.