FINANCIAL STATEMENTS OF PARTNERSHIP AND
CORPORATION – BUSINESS ACCOUNTING
PARTNERSHIP
Definition (Article 1767, Civil Code of the
Philippines)
 By the contract of partnership, two or
more persons, bind themselves to
contribute money, property or
industry to a common fund with the
intention of dividing the profits
among themselves. Two or more
persons may also form a partnership
for the exercise of a profession
Characteristics of a Partnership
MUTUAL CONTRIBUTION
 There cannot be a partnership
without contribution of money,
property or industry.
DIVISION OF PROFITS OR LOSSES
 The essence of partnership is
that each partner must share in
profits or losses of the business.
LIMITED LIFE
 It has a limited life. It may be
dissolved by the admission,
death, insolvency, incapacity,
withdrawal of a partner or
expiration of the term.
UNLIMITED LIABILITY
 All partners (except limited
partner) are personally liable for
all debts incurred by the
partnership
MUTUAL AGENCY
 Any partner can bind the other
partners to a contract if he is
acting within his authority
CO-OWNERSHIP OF CONTRIBUTED
ASSETS
 If one partner contributes an
asset to the business, all partners
jointly own it in a special sense.
INCOME TAXES
 Partnerships, except general
professional partnerships are
subject to tax at a rate of 20%
under two conditions (Otherwise
25%).
PARTNER’S EQUITY ACCOUNTS
 Each partner has a capital
account and withdrawal account.
KINDS OF PARTNERS
GENERAL PARTNER
 One who is liable to the extent of
his personal property
LIMITED PARTNER
 One who is liable ONLY to the
extent of his capital contribution
CAPITALIST PARTNER
 One who contributes money or
property to the business
MANAGING PARTNER
 One whom the partners has
appointed as manager of the
partnership
FINANCIAL STATEMENTS OF PARTNERSHIP AND
CORPORATION – BUSINESS ACCOUNTING
INDUSTRIAL PARTNER
 One who contributes his
knowledge or service to the
business
LIQUIDATING PARTNER
 One who is designated to wind up
or settle the affairs of the
partnership after the dissolution
SECRET PARTNER
 One who takes active part in the
business but is not known to be a
partner by outside parties
DORMANT PARTNER
 One who does not take active
part in the business and not
known as a partner
NOMINAL PARTNER/PARTNER BY
ESTOPPEL
 One who is actually not a partner
but who represents himself as
one
SILENT PARTNER
 One who does not take active
part in the business though
maybe known as a partner
ARTICLES OF PARTNERSHIP
 A partnership may be constituted
orally or in writing (Consensual –
mere consent)
 The following are the essential
provisions that may be contained
in the articles of partnership:
 Partnership name, nature,
purpose and location
 Names, citizenship and residence
of partners
 Date of formation and duration of
the business
 Capital contribution of the partner
 Rights and duties of the partners
ARTICLES OF PARTNERSHIP
 The method of sharing profit or
loss
 The drawings or salaries to be
allowed to partners
 Provision for arbitration of
disputes, dissolution and
liquidation
CORPORATION
Definition (Section 2, Corporation Code
of the Philippines)
 A 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
ATTRIBUTES OF A CORPORATION
ARTIFICIAL BEING
 Separate and distinct from its
individual shareholders
CREATED BY OPERATION OF LAW
 It cannot come into existence by
mere agreement. It require
special authority/grant from the
state (Corporation code of the
Philippines)
FINANCIAL STATEMENTS OF PARTNERSHIP AND
CORPORATION – BUSINESS ACCOUNTING
RIGHT OF SUCCESSION
 It has the capacity of continued
existence. The death, withdrawal,
insolvency or on capacity of the
shareholders will not dissolve the
corporation
IT HAS THE POWERS, ATTRIBUTES
AND PROPERTIES EXPRESSLY
AUTHORIZED BY LAW OR INCIDENT
TO ITS EXISTENSE
STOCK VS. NON-STOCK
CORPORATION
STOCK CORPORATION
Are those which have capital stock
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. All other corporations are nonstock
corporations.
NON-STOCK CORPORATION
 Is one where no part of its income
is distributable as dividends to its
members, trustees or officers.
Any profit that a nonstock
corporation may obtain as an
incident to its operation shall,
whenever necessary or proper,
be used for the furtherance of the
purpose/s for which the
corporation was organized
 It may e formed or organized for
charitable, religious, educational,
professional, cultural,
recreational., fraternal, literary,
scientific, social, civil service or
similar purpose
ARTICLES OF INCORPORATION
 Section 14 of the Corporation
code of the Philippines provides
that all corporations organized
under this code shall file with the
SEC articles of incorporation
containing the following matters:
 Name of the corporation
 Specific purpose for which the
corporation is formed
 Principal place of business which
must be within the Philippines
 Term of existence
 Names, nationalities and
residence of incorporators
 The number of directors/trustees
(5-15 members) and their
nationalities and residences
ARTICLES OF INCORPORATION
 If it be a STOCK CORPORATION
 Amount of authorized share
capital in pesos
 Number of share in to which it is
divided
 In case of par value shares
 Par value of each share
 names, nationalities of the
original subscribers
 the amount subscribed and paid
by each subscriber
 In case of no par value
 the articles need only state such
facts, and number of shares into
which
 said share capital is divided\
FINANCIAL STATEMENTS OF PARTNERSHIP AND
CORPORATION – BUSINESS ACCOUNTING
ARTICLES OF INCORPORATION
 If it be a NON-STOCK
CORPORATION
 The amount of its capital, the
names, nationalities and
residences of the contributors
and the amount indicated
 Amount of authorized share
capital in pesos
 Number of share in to which it is
divided
stockholder who can only be a
natural person, trust or estate.
 The OPC allows a single person
(citizen or foreign) to form a
corporation without the need for a
board of directors or
shareholders. With an OPC, the
company owner is the director,
sole shareholder, and president.
 An OPC’s company name will
have the suffix “OPC” either
below or at the end of its
corporate name.

BY-LAWS
 These are the rules of action
adopted by the corporation for its
internal government and for the
government of its officers and
members.
 The by-laws shall be adopted
within one month from the
issuance of article of
incorporation by the SEC. failure
to file a code of by-laws shall
render the corporation liable for
the revocation of its registration STATEMENT OF FINANCIAL
PERFORMANCE (INCOME
ONE PERSON CORPORATION (OPC) STATEMENT)

 Republic Act 11232, otherwise  A partnership’s income statement

known as the Revised
Corporation Code of the
Philippines was introduced in
February 2019 and with it is the
One Person Corporation.
 One Person Corporation may be
formed in the Philippines whereby
OPC is composed of a single
is prepared in the same way as
that for any business. The
division of net income may or
may not be shown on the income
statement
FINANCIAL STATEMENTS OF PARTNERSHIP AND
CORPORATION – BUSINESS ACCOUNTING
STATEMENT OF PARTNER’S EQUITY
 This reports the change in
partners’ capital account resulting
from business operations,
investments, and withdrawals. It
is similar to the statement of
owner’s equity for a sole
proprietorship.
COMPUTATION OF NET INCOME
 In the partnership agreement, the
contract may specify a fixed ratio to be
used to divide the profits or losses. For
example, AA, BB, and CC decide to
use a ratio of 3:2:1, respectively.
 To use this ratio, convert the ratio
into a fraction and multiply it by
the net income or loss of the
period.
AA 3/6 x P36,000.00 = P18,000.00
BB 2/6 x P36,000.00 = P12,000.00
CC 1/6 x P36,000.00 = P 6,000.00
Net income during the year is
P36,000.00
 JOURNAL ENTRY
Income Summary P36,000.00
AA, Capital P18,000.00
BB, Capital P12,000.00
CC, Capital P6,000.00
STATEMENT OF FINANCIAL
POSITION (BALANCE SHEET)
 The owners’ equity section of the
balance sheet is called the
Partners’ Equity section
CORPORATION FINANCIAL
STATEMENTS
STATEMENT OF FINANCIAL
PERFORMANCE (INCOME
STATEMENT)
 Measures the operating
performance of the corporation by
matching its accomplishments
(revenue from customers, which
is usually called sales) and its
efforts (cost of goods sold and
expenses). MATCHING
PRINCIPLE
 Revenues - inflows of assets
either from the sale of goods or
the performance of services
 Expenses - outflows or other
uses of assets to produce
revenues over expenses
 Net income (sometimes referred
to as earnings or profit) is the
FINANCIAL STATEMENTS OF PARTNERSHIP AND
CORPORATION – BUSINESS ACCOUNTING
excess of revenues over
expenses, including tax expense
STATEMENT OF FINANCIAL
POSITION
(BALANCE SHEET)
 Reports the financial position of a
business at a specific point in
time
 Equation: Assets = Liabilities +
Owners’ Equity

STATEMENT OF RETAINED
EARNINGS
 Is a financial statement that
outlines the changes in retained
earnings for a company over a
specified period.
 Retained earnings are profits
held by a company in reserve in
order to invest in future projects
rather than distribute as
dividends to shareholders.
Differences:
 Sole proprietorship – Statement
of Changes in Owner’s Equity
 Partnership – Statement of
Partner’s Equity
 Corporation – Statement of
Retained Earnings

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