Mgmt-121 Corporation PDF

Mgmt-121 Corporation Instructor: Grace L. Molleno Department of Business Management  Objectives Determine what is a Corporation Identify the characteristics of a Corporation Enumerate what constitutes Shareholder’s Equity Differentiate the types of stocks Fam...

Mgmt-121 Corporation Instructor: Grace L. Molleno Department of Business Management  Objectives Determine what is a Corporation Identify the characteristics of a Corporation Enumerate what constitutes Shareholder’s Equity Differentiate the types of stocks Familiarize the Code of Incorporation  Corporation Introduction Is a form of business that is a separate legal entity from its owners of not more than 15 and shall have perpetual existence unless its articles of incorporation provides otherwise. Stockhol ders The people and/or organizations who own a corporation Articles of are a set of formal documents filed with a Incorporation government body to legally document the creation of a corporation One Person A corporation with a single stockholder Corporation Reference: Principles of Financial Accounting by Christine  Characteristics A corporation may Corporations are Limited liability to The corporation can be owned by one ongoing. stockholders—the own property, enter into stockholder or by Stockholders can buy owners can only lose contracts, borrow millions. and sell their shares what they invested in money, conduct Stockholders receive of stock the business. business, earn profit, shares of stock as without interrupting Their other assets pay taxes, and make receipts for their the operation of the cannot be taken to investments similar to investments in the company. satisfy the obligations the way individuals can. business. of the company they invest in. Stockholder’s Equity Retained Stocks earnings Value that the owners have in the business Value the owners have in the because they have corporation because the business contributed their has been operating – doing what own personal assets it was set up to do - and as a result it has generated a profit that the owners share  Types of Stocks Preferred Common stock Stock Also known as ordinary shares which gives owners Usually doesn't give owners the right to vote at voting rights, but it does give shareholder meetings and them priority over common receive dividends. stockholders when it comes to dividends and bankruptcy. Preferred stock is issued at a fixed par value, similar to a bond.  Steps to Incorporation 1. Name 2. Articles 3. BOD 4. Bylaws Choose a name for your Draft articles of Choose an initial board of Create corporate bylaws corporation incorporation directors  Steps to Incorporation 5. Meeting 6. Issue Stocks 7. Register 8. Official Call a meeting (provide Issue stock certificates to Complete registration with the Receipt Have a registered sales Securities and Exchange minutes of the meeting) for individuals or businesses invoice or official receipt Commission (SEC), the Bureau of the initial board of directors who will become printed Internal Revenue (BIR), and your and elect corporate officers: stockholders local municipality to secure the treasurer, secretary, etc. Articles of Incorporation, Certificate of Registration (COR), and a Business Permit. Revised Code of Incorporation Code of Repulblic Act No. 11232 Incorporation An act providing for the Revised Corporation Code of the Philippines Classes of Corporation a. Stock 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 b. Non-stock is one where no part of its income is distributable as dividends to its members, trustees, or Corporators and officers. Incorporators a. Incorporators are those stockholders or members mentioned in the articles of incorporation as originally forming and composing the corporation and who are signatories thereof b. Corporators are those who compose a corporation, whether as stockholders or shareholders in a stock corporation or as members in a nonstock corporation. Revised Code of Incorporation Shares in stock No share may be deprived of voting rights except those classified and issued as “preferred” or “redeemable” shares, unless otherwise provided in this Code: Provided, That there shall always be a class or series of shares with complete voting rights. Holders of nonvoting shares Holders of nonvoting shares shall nevertheless be entitled to vote on the following matters: a. Amendment of the articles of incorporation; b. Adoption and amendment of bylaws; c. Sale, lease, exchange, mortgage, pledge, or other disposition of all or substantially all of the corporate property; d. Incurring, creating, or increasing bonded indebtedness; e. Increase or decrease of authorized capital stock; f. Merger or consolidation of the corporation with another corporation or other corporations; g. Investment of corporate funds in another corporation or business in accordance with this Code; and h. Dissolution of the corporation. Methods for accounting Share Capital Illustration: Jan 1 Haliment Company was authorized to issue share capital of 10M divided into 100,000 shares with par value of PhP 100. Journal Entry Method Memorandum Method A journal entry is made to record A memorandum entry is made authorization by debiting unissued share to record authorization to issue capital and crediting authorized share shares Date Particulars Dr Cr capital Jan. 1 The company was authorized to issue Date Particulars Dr Cr share capital of P10,000 divided into Jan. 1 Unissued Share Capital 10,00 100,000 shares of stock with a par Authorized Share 0 10,00 value of P100 per share. Capital 0 Methods for accounting Share Capital Illustration: Jan 2 Received subscription to 30,000 at PhP 101 per par value. Journal Entry Method Dat Particulars Dr Cr e Jan. Subscription receivable (30k x 3,030,0 2 101) 00 3,000,00 Subscribed Share Capital (30k 0 x 100) 30,000 Share Premium (Balancing Figure) Memorandum Method To record receipt more than par Dat value. Particulars Dr Cr e Jan. Subscription receivable (30k x 3,030,0 2 101) 00 3,000,00 Subscribed Share Capital (30k 0 x 100) 30,000 Share Premium (Balancing Figure) To record receipt more than par value. Methods for accounting Share Capital Illustration: Jan 3 Collected 25% of the subscription. Journal Entry Method Dat Particulars Dr Cr e Jan. Cash (25% x 3,030,000) 757,500 3 Subscription receivable (30k x 757,500 101) To record partial collection of subscription Memorandum Method Dat Particulars Dr Cr e Jan. Cash (25% x 3,030,000) 757,500 3 Subscription receivable (30k x 757,500 101) To record partial collection of subscription Methods for accounting Share Capital Illustration: March 3 Issued the certificates for the 20,000 shares which are fully paid Journal Entry Method Dat Particulars Dr Cr e Mar. Subscribed Share capital 2,000,0 3 Unissued Share Capital (20k x 00 2,000,00 100) 0 To record issuance of share certificates Memorandum Method Dat Particulars Dr Cr e Mar. Subscribed Share Capital 2,000,0 3 Share Capital (20k x 100) 00 2,000,00 To record issuance of share 0 certificates Methods for accounting Share Capital Illustration: Apr 1 Received a cash subscription for 4,000 shares at par. Journal Entry Method Dat Particulars Dr Cr e Apr. Cash (4k x 100) 400,000 1 Unissued Share Capital 400,000 To record receipt of cash subscription Memorandum Method Dat Particulars Dr Cr e Apr. Cash (4k x 100) 400,000 1 Share Capital 400,000 To record receipt of cash subscription  Financial Statement Statement of Financial Position Presentation Shareholders’ Equity As of April 1, 2020 Journal Entry Method Memorandum Method Authorized Share Capital 10,000,000 Share Capital 2,400,000 Less: Unissued Share 7,600,000 Subscribed Share 1,000,000 Capital 2,400,000 Capital (757,000) Issued Share Capital 1,000,000 Subscription Receivable 30,000 Subscribed Share Capital (757,500) Share Premium 2,672,500 Subscription Receivable 30,000 Total Shareholders’ Share Premium 2,672,500 Equity Total Shareholders’ Equity Share Capital under Memorandum Method = Issued Share Capital under Journal Entry Method Whether Memorandum Method or Journal Entry Method is used, the same amount of Total Shareholders’ Equity will be reported on the Statement Receivable For other authors, Subscription of Financialwhen Position collected within one year is presented as part of the Current Assets Section of the Statement of Financial Position Thank You!