CORPORATIONIt is an artificial being created by operation of law having the rights of succession and the powers, attributes, and properties expressly authorized by law incident to tits existence

CHARACTERISTICS OF A CORPORATIONSeparate legal entityCreated by operation of lawRight of successionPowers, attributes, properties authorized by lawOwnership divided into sharesBoard of directors

ADVANTAGES OF A CORPORATIONThe power of succession enables the corporation to enjoy a continuous existence.The corporate existence enables to it obtain a strong credit lineLarge business undertakings are made possible because many individuals invest their funds in the enterprise.Limited liability of investorsTransfer of shares is effected without the consent of the othr shareholdersIts smooth operation is guaranteed due to centralized management

DISADVANTAGES OF A CORPORATIONDifficult to organize due to complicated legal requirements and high costs in its organization.Limited liability of shareholders may weaken credit capacity.Subject to rigid governmental controlSubject to more taxesCentralized management restricts a more active participation in the conduct of corporate affairs.

CLASSES OF CORPORATIONSAs to Membership HoldingsStock corporationNon-stock corporationAs to PurposePrivate corporationQuasi-public corporationAs to Compliance of LawDe jure corporationDe facto corporation

As to Law of CreationDomestic corporationForeign corporationAs to MembershipOpen corporationClosely held corporation

COMPONENTS OF A CORPORATION

IncorporatorsCorporators/ShareholdersMembersPromotersSubscribersUnderwriters

ORGANIZING A CORPORATIONPromotionIncorporationDraft the articles of incorporation and by-laws nd have them notarized by a notary publicFile the documents with SEC.Pay the required feesSEC issues the certificate of incorporationCommencement of the Business

ARTICLES OF INCORPORATIONName of the corporationThe purpose or purposes of the corporationThe place of the principal officeThe term of existenceNames of the directorsAuthorized share capitalAmounts of subscription to the authorized sharesTotal amount on thee subscription

BY LAWSDate, place and manner of calling the annual shareholders meetingThe manner of conducting meetingsThe circumstances which may permit the calling of special meetings with shareholdersManner of voting and use of proxiesDirectors term of officeAuthority and duties of directorsAuthority and responsibilities of officersManner of selecting officersProcedure for amending the articles of incorporationProcedure for amending the by laws

CORPORATE RECORDSBooks of accountsMinutes of all meetingsMinutes of all meetings of shareholdersStock and transfer bookShareholders journalShareholders ledgerSubscribers ledgers

CLASSES OF SHARE CAPITAL

Share capital ordinaryShare capital preference

Both may be issued as:Par value share capitalNo-par but with stated value share capitalNo par, no stated value share capital

Par Value ShareP1,000

Par Value ShareP1,000

Par Value Share

P1,000

Par Value Share

P1,000

Par Value Share

P1,000

SHARE CAPITAL - PREFERENCE Issued with a par value and a dividend rate.Have priority as to distribution of dividends or assets incase of liquidation.

CLASSES OF SHARE CAPITAL-PREFERNCECumulativeNon-cumulativeParticipatingNon participatingConvertibleRedeemable

SHARE CAPITAL -ORDINARYRepresents residual ownership equity.They carry the greater risk.

TWO METHODS OF RECORDING SHARE CAPITAL TRANSACTIONS:MEMORANDUM ENTRY METHODJOURNAL ENTRY METHOD

FIRST TRANSACTION: AUTHORIZATION FROM SEC

EXERCISESSTARBRIGHT CORPORATION

Starbright Corporation is authorized to issue 50,000 shares at P100 par value.Memorandum Entry methodJournal Entry methodThe corporation is authorized to issue 50,000 shares at P100 par valueUnissued shareCapital 5,000,000 Authorized share capital 5,000,000

WHEN INVESTORS SUBSCRIBE TO SHARE CAPITAL AND HAS NOT FULLY PAID FOR IT YET, FOLLOWING ENTRY SHALL BE PREPARED FOR BOTH METHODS:

Cash (paid portion)xxxSubscription receivable xxx (unpaid portion) Subscribed share capitalxxx

STOCK CERTIFICATES ARE NOT YET ISSUED UNTIL THEY ARE FULLY PAID

On July 15 five incorporators subscribed to 12,500 shares at par and paid 25% of the subscriptionMEMORANDUMJOURNAL ENTRY METHODSubscriptionReceivable-937,500Cash312,500 Subscribed share-capital 1,250,000SubscriptionReceivable937,500Cash312,500 Subscribed share -capital 1,250,000

August 1 M. Elcee subscribed to 10,000 shares at parMEMORANDUMJOURNAL ENTRY METHODSubscriptionReceivable1,000,000 Subscribed share capital 1,000,000SubscriptionReceivable1,000,000 Subscribed share capital 1,000,000

When investors make a full payment for the subscription, stock certificates are issued to them immediately

Aug. 2 Issued 200 shares for P20,000 cashMEMORANDUMJOURNAL ENTRY METHODCash20,000 Share capital-20,000Cash20,000 Unissued Share capital-20,000

Collected the subscription of Ms. Elcee.MEMORANDUMJOURNAL ENTRY METHODCash1,000,000 Subscription receivable 1,000,000Subscribed shareCapital-1,000,000 Share capital 1,000,000

Cash 1,000,000 Subscription receivable- 1,000,000Subscribed shareCapital 1,000,000 Unissued Share capital 1,000,000

PAYMENTS IN THE FORM OF NON-CASH ASSETS SHALL BE RECORDED USING FAIR MARKET VALUE

Received a piece of land from Ms. Mariebic in exchange for 5,000 shares. Fair market value of the land was P500,000.MEMORANDUMJOURNAL ENTRY METHODLand 500.000 Share capital500,000 Land 500.000 Unissued Share capital500,000

Issued 50 shares to Ms. Jina for promotional services rendered during the formation of the corporation.MEMORANDUMJOURNAL ENTR,Y METHODOrganization Cost 5,000 Share capital-5,000Organization cost 5,000 Unissued Share capital 5,000

Subscriptions for 1,000 shares were received from Ms. Akino . Received 20% downpayment, balance in four equal monthly installments starting Nov. 1.Cash20,000SubscriptionReceivable80,000 Subscribed share Capital100,000

Cash20,000SubscriptionReceivable80,000 Subscribed share Capital100,000

Collected half of the balance of the incorporators subscription .Cash468,750 Subscription receivable 468,750

Cash468,750 Subscription receivable 468,750

Collected the first installment on the September 15 subscripions

Cash20,000SubscriptionReceivable20,000

Cash20,000SubscriptionReceivable20,000

Collected the other half of the incorporators subscriptions and issued the corresponding stock certificatesCash468,750 Subscription receivable 468,750Subscribed shareCapital-1,250,000 Share capital 1,250,000Cash468,750 Subscription receivable 468,750Subscribed shareCapital-1,250,000 Share capital 1,250,000

Collected the second installment on the Sept. 15 subscription

Cash20,000 Subscription receivable20,000

Cash20,000 Subscription receivable20,000

FRANKIE CORPORATION

Frankie Corporation was authorized to issue 50,000 shares at P100 par value.Unissued share capital 5,000,000 Authorized share capital 5,000,000

Cash312,500SubscriptionReceivable937,500 Subscribed share capital 1,250,000 The incorporatorsSubsribed 2,500 Shares and paid 25%.

No. of sharesTotal amount25%Agatha2,500P250,000P62,500Prescilla2,500P250,000P62,500Kaye2,500P250,000P62,500Airel2,500P250,000P62,500Jhun2,500P250,000P62,500Total12,500P1,250,000P312,500

When shares are issued in excess of par value, the amount in excess is called Share Premium

Organization Cost4,000 Cash4,000

Cash 240,000Share capital200,000Share premium 40,000

PrescillaP250,000P62,500P187,500Cash 187,500 Subscription Receivable187,500

Subscribed shareCapital250,000 Share capital250,000Cash 187,500 Subscription Receivable187,500

Subscribed shareCapital250,000 Share capital250,000

Total amountPayment25%BalanceAgathaP250,000P62,500P187,500Truck480,000 Subscription receivable187,500 Share capital200,000 Share premium 92,500

Subscribed shareCapital250,000 Share capital 250,000

Truck480,000 Subscription receivable187,500 Share capital200,000 Share premium 92,500

Subscribed shareCapital250,000 Unissued Share capital 250,000

Subscription receivable187,500Subscribed sharecapital150,000Share premium 37,500

Organization cost 10,000 Share capital10,000Organization cost 10,000 Unissued Share capital10,000

Subscription receivable 180,000 SubscribedShare capital150,000 Share premium 30,000Subscription receivable 180,000 SubscribedShare capital150,000 Share premium 30,000

KayeP250,000P62,500P187,500MerchandiseInventory 187,500 Subscription Receivable 187,500

Subscribed shareCapital 250,000Share capital 250,000MerchandiseInventory 187,500 Subscription Receivable 187,500

Subscribed shareCapital 250,000 Unissued share capital 250,000

Cash 90,000 Subscription Receivable 90,000Cash 90,000 Subscription Receivable 90,000

Cash 220,000 Share capital 200,000 Share premium 20,000Cash 220,000 Unissued Share capital 200,000 Share premium 20,000

Cash 90,000 Subscription Receivable90,000

Subscribed shareCapital 150,000 Share capital 150,000Cash 90,000 Subscription Receivable90,000

Subscribed shareCapital 150,000 Unissued Share capital 150,000

Land350,000 Share capital 300,000 Share premium 50,000Land350,000 Share capital 300,000 Share premium 50,000

Cash375,000 Subscription receivable 375,000Subscribed shareCapital500,000 Share capital500,000

Total amountPayment25%BalanceAmielP250,000P62,500P187,500JhunP250,000P62,500187,500TotalP500,000P125,000P375,000

CAVITE CORPORATION2009June 1The corporation is authorized to issue 400,000 shares of 9% preference shares with P40 par value and 500,000 ordinary shares with par value of P30.

Aug. 5 Subscription receivable-ordinary10,080,000Cash 2,520,000Subscribed share capital-ordinary9,000,000Share premium-ordinary 3,600,000Received subscription for 300,000shares @ P42 receiving 20% down payment

August 7Land210,000Buildings 250,000Equipment 50,000Merchandise inventory 110,000Mortgage payable 41,000Accounts payable 11,000Interest payable 550Share capital ordinary 495,000Share premium ordinary 72,450 Issued 16,500 shares in exchange for the business of Andrew..

Cash 810,000 Subscriptions receivable preference 4,590,000Subscribed share capital preference4,800,000 Share premium preference 600,000Received subscription for 120,000 shares @ P45.

Sept. 1Cash 5,040,000 Subscription receivable ordinary 5,040,000Received the amount due on this date from ordinary subscribers

Oct. 1 Cash2,295,000 Subscription receivable- preference2,295,000Received the amount due this datefrom preference shareholders

Oct. 6 Cash 489,600 Subscription receivable- ordinary 1,142,400Subscribed share capital-ordinary 1,440,000Share premium-ordinary192,000

Nov. 1 Cash26,400 Share capital preference24,000 Share premium preference 2,400

Dec. 1Cash7,335,000 Subscription receivable-ordinary 5,040,000 Subscription receivable-preference 2,295,000 Amounts due on this date were collected from the preferred and ordinary subscribers.

Subscribed share capital ordinary9,000,000 Share capital ordinary 9,000,000Issued ordinary shares of stocks to shareholders

Subscribed share capital preference4,800,000Share capital preference4,800,000Issued shares of stocks to preferenceShareholders.

Cash350,000Subscription receivable-preference 1,050,000Subscribed share capital preference 1,400,000Subscriptions were received for 35,000 Preference shares at par with a 25% down payment

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