Share Capital and Treasury Shares

17 Questions

What is the minimum amount of paid-in capital that must remain in the corporation for the protection of corporate creditors?

Legal capital

What is the term for the portion of paid-in capital representing amounts paid by shareholders in excess of par value?

Share premium

What type of share gives its owners certain advantages over ordinary shareholders?

Preference share

What represents the interest or right of a shareholder in a corporation and is evidenced by a certificate of stock?

Share of stock

What is the capital contributed by shareholders from the sale of shares of stock?

Legal capital

What type of shares must be issued when only one class of share is issued?

Ordinary share

What is the maximum number of shares a corporation can issue as specified in the Article of Incorporation?

Maximum No. of Shares

What is the amount of shares that have been sold and paid for in full, including treasury shares?

Issued Share Capital

What is the portion of the authorized share capital that has been subscribed but not yet fully paid?

Subscribed Share Capital

What is the total amount of shares that can be issued by the corporation, given a par value of Php 5.00?

Php 30,000,000,000.00

When are issued shares debited?

When they are retired, redeemed or cancelled

What is the total amount of shares that have been sold and paid for in full, given a par value of Php 5.00?

Php 15,000,000,000.00

What is the result of subtracting Treasury Share Capital from Issued Share Capital?

Outstanding Share Capital

What type of shares are acquired by the corporation but not retired, awaiting re-issuance?

Treasury Shares

What is the Par Value of the Preferred Shares?

Php 5.00

What is Subscriptions Receivable classified as?

Shareholder's equity account

What is the total number of authorized ordinary shares?

600,000,000

Study Notes

Authorized Share Capital: the maximum number of shares a corporation can issue, specified in the Article of Incorporation.
Authorized Share Capital = Maximum Authorized Shares * Par Value per share.
Example: Authorized Share Capital = Php 30,000,000,000.00 (Maximum No. of Shares: Ordinary 3,790,000,000, Preferred 2,210,000,000, Par Value: Php 5.00).

Refers to shares that have been sold and paid for in full.
Includes treasury shares.
Share capital is credited for the total par value of fully collected subscriptions.
Share capital is debited when issued shares are retired, redeemed, or cancelled by the corporation.
Example: Issued Share Capital = Php 15,000,000,000.00 (Maximum No. of Shares: Ordinary 1,895,000,000, Preferred 1,105,000,000, Par Value: Php 5.00).

The portion of authorized share capital that has been subscribed but not yet fully paid.
Example: Subscribed Share Capital = Php 5,000,000,000.00 (Maximum No. of Shares: Ordinary 600,000,000, Preferred 400,000,000, Par Value: Php 5.00).

Legal Capital

The portion of contributed capital that must remain in the corporation for the protection of corporate creditors.
In par value shares, Legal Capital (LC) = the aggregate par value of all issued and subscribed shares.
In no-par value shares, LC = total consideration received by the corporation for the issuance of its shares.

The portion of paid-in capital representing amounts paid by shareholders in excess of par value.

Types of Shares

Ordinary Share: represents the basic ownership class of the corporation, residual equity.
Preference Share: gives its owners certain advantages over ordinary shareholders, special benefits include priority to receive dividends and assets in liquidation.

Issued shares which are in the hands of the shareholders.
OSC = Issued Share Capital (Issued Shares) - Treasury Share Capital (Treasury Shares).
Example: Outstanding Share Capital = Php 14,895,000,000.00.

Treasury Stock

Issued shares acquired by the corporation but not retired and are therefore awaiting to be re-issued at a later date.

Subscription of Shares

Subscriptions Receivable is a shareholder's equity account.

Test your knowledge of share capital, outstanding shares, issued shares, treasury shares, and more. Learn about the different types of shares and how they affect a company's capital. Take this quiz to understand the concepts of share capital and treasury shares.

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