CORPORATION

AL F. BERBANO
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. (Section 1, Corporation Code of the Philippines)
Characteristics of Corporation
1. Separate legal entity - artificial being.
2. Created by operation of law.
3. Right of succession.
4. Powers, attributes, properties authorized by law.
5. Ownership divided into shares.
6. Board of directors.
Advantages of Corporation
1. The Corporation enjoys continuous existence because of its
powers.
2. The Corporation has the ability to obtain a strong credit line
because of continuity of existence.
3. Large scale business undertakings are made possible because
many individuals can invest their funds in the enterprise.
Advantages of Corporation
4. The liability of its investors or shareholders is limited to the
extent of their investment in the Corporation.
5. The transfer of shares can be effected without the need for
prior consent of other shareholders.
6. Its smooth operation is guaranteed because of centralized
management.
Disadvantages of Corporation
1. It is not easy to organize because of complicated legal requirements
and high costs in its organization.
2. The limited liability of its shareholders may weaken its credit capacity.
3. It is subject to rigid governmental control.
4. It is subject to more taxes.
5. Its centralized management restricts a more active participation by
shareholders in the conduct of corporate affairs.
Components of Corporation
1. Incorporators
2. Corporators
3. Stockholders or shareholders
4. Members
5. Promoters
6. Subscribers
7. Underwriters
Organizing a Corporation

1. Promotion
2. Incorporation
3. Commencement of the business
Share Capital (Capital Stock)

It is the amount fixed by the corporate charter to

be subscribed and paid in by the shareholders of
a corporation.
Classes of Share Capital

1. Ordinary shares (Common stock) - entitles the

holder to an equal or pro-rata division of
profits without any preference or advantage
over any class of shares.
Classes of Share Capital

2. Preference shares (Preferred stock) - entitles

the holder to enjoy priority as to distribution of
dividends* and distribution of assets upon
corporate liquidation.
*Dividends are corporate profits distributed to its shareholders.
Share capital may be issued a:

1. Par value
2. No - par value with stated value
3. No - par, no stated value
Definition:

1. Par value - nominal or face value stated on the face of the

share capital certificate and in the articles of
incorporation.
2. Stated value - nominal value stated in articles of
incorporation but not on the face of the stock certificate.
Preference Share may be classified as follows:
1. Cumulative
2. Non cumulative
3. Participating
4. Non - participating
5. Convertible
6. Redeemable
Authorized Share Capital

The maximum number of shares that a corporation may

issue.

It is determined by multiplying the authorized shares by the

par or stated value of the share capital.
Subscribed Share Capital

Share capital sold on a subscription basis that have not yet

been paid in full and for which the related stock certificates
have not been issued.
Issued Share Capital

Share capital paid for in full and for which the related stock
certificates is already issued.
Issued Share Capital

Share capital paid for in full and for which the related stock
certificates is already issued.
Corporation Code says:

25% of the Authorized share capital should have been

subscribed and atleast 25% of the subscribed share capital
should have been paid up.
Shareholders’ Equity Section

Paid in capital

Share capital XX

Subscribed share capital XX XX

Less: Subscription receivable XX

Share dividend distributable XX XX

Additional paid-in capital

Share premium XX

Paid in capital from …... XX XX

Total Contributed Capital XX

Retained earnings XX

Total XX

Less: Treasury shares XX

TOTAL SHAREHOLDERS’ EQUITY XX

 THANK YOU!

SOURCE: ACCOUNTING FOR PARTNERSHIP and CORPORATION

BAYSA/LUPISAN