STATEMENT OF AFFAIRS

When a company is insolvent, creditors would want to Know the relative position of
their claims and / or estimated amount that they can collect on the their claims.

Insolvency

In the Philippines, insolvency is governed by the provision of the Civil Code and
the insolvency Law ( Act No. 1956, as amended.

Insolvency Defined

the condition of a man whose assets, if all made available, would not be sufficient to
discharge his liabilities.

“ It is inability or lack of means to pay one's debt, or the condition of as person who
is unable to pay his debts as they fall due.

Statement of Realization and Liquidation

When a financially distress entity undergoes rehabilitation or liquidation, the

trustee, assigner or receiver renders periodic report on the results of operations or
progress made by preparing a statement of realization and liquidation.
The statement of realization and liquidation is a special report summarizing
results of operations and progress made in the liquidating process.

The different section are as follow:

Assets

Assets to be realized Assets realiazed

Assets acquired Assets not trealized

Liabilities
Liabilities liuidated Liabilities to be liquidated
Liabilities not liquidated Liabilities assumed

Revenue and Expense

Supplementary charges Supplementary credits

Ex. Jomar Tan was appointed as assignee of PQA Corp. Effective December 1, 2017,
As of date, the Statement of Financial Position of the company is as follow

PQA
Statement of Financial Position
December 1, 2017

Assets Liabilities and Stockholders Equity

Cash Ph 15,000 Accounts payable Php 80,000
Marketable securities 45,000 Loans payable 70,000
Account receivable 60,000 Deferred revenue 12,500
Merchandise intv. ( Cost) 55,000 Capital stock 105, 500
Furniture 30,000 Deficit ( 75,000)
Allo. for depreciation ( 12,000) Total Php 193,000
Total Ph 193,000

The “posting” to the different sections are as follow:

a) beginning balance per given balance she

Noncash Transaction

b) Purchse of merchandise on account.............................. Php 5,500

c) Sales of merchandise on account ................................ 22,000

Cash Receipts

d) Cash sales ...........................................................................18,000

e) Collections on acounts receivable ...................................... 40,000
f) Interest collected on marketable securities .......................... 2,300
g) Sales of marketable secrities fro cash .................................49,000

Cash Disbursements

h) Payments of assignee's expense ................... Php 6,500

i) Payments of accounts payable ...................... 35,000
j) Cash purchase ............................................. 12,000
k) Assets not realized and liabilities not liquidated
l) Net gain or loss

As of December 31,2017. it is estimated that Php 3,500 of the accounts receivable

will not be connected. Salaries and wages of Php 1,250 have not yet been paid.
Interest of Php 900 has accrued on the loan payable. Cost of goods sold in December
amount to Php 43,000. Deprecistion of furniture for December is Php 250. Of the
deffered revenue, Php 500.00 tobe transferred to rental income for the month

The remaining assets to be realized and liabilities to be liquidated as of the end of

July are arrived as follow;

Assets
Account receivable:
Balance, December 1 Php 60,000
Sales on account in December 22,000
Collections on accounts in December ( 40,000)
Uncollectible accounts ( 3,500)
Balance , December 31 Php 38,500
==========

Merchandise Inventory

Balance, December 1 Php 55,000

Purchases on account in December 5,500
Cash purchase in December 12,000
Cost of goods sold, December ( 43,000 )
Balance Php 29,500

Furniture

Balance, December 1 ( 30,000- 12,000) Php 18,000

Depreciation charge for december ( 2,50)
Php 17,750

Liabilities

Accounts Payable
Balance, December 1 Php 80,000
Purchase on account in December 5,500
Payments of accounts payable, Dec. ( 35,000)
Balance, December 31 Php 50,500
Accrued expense ( salaries and interest) Php 2,150
Loan Payable Php 70,000

Deffered Revenue:
Balance, December 1 Php 12,500
Less: portion realized in December 500
Balance December 31 Php 12,000
========

Corporation
“An artificial being created by operation of law, having the right of succession and
the powers, attributes and properties expressly authorized by or incident to its
existence”

a. it is an artificial being
b. it is created by operation of law
c. It has right of succession
d. Its powers are exprssly auhtorized by law

Person Composing the Corporation

1. Incorporators Under
2. Corporators
3. Shareholders
4 Members
5. Subscribers
6. Promoters
7.Underwriter
8. Board of Directors ( BOD)
9. Corporate Officers

Kinds of Corporation

1. As to Membership
a. Stock Corporation
b. Non- Stock Corporation

2. As to Purpose

a. Public Corporation
b. Private Corporation
c. Quasi- Public Corporation

3.As to relationship

a. Parent or Holding Corporation

b. Subsidiary Corporation

5. As to Extent of Membership
a. Close Corporation
b. Open corporation

6. As to its Existence
a. De Jure Corporation
b. De Facto Corporatio
 Classes of Share Capital

1. Ordinary Share
2. Preference Share
3. Par Value Share
4. No Par Value share
5. Voting Share
6. Non- Voting Share
7. Treasury Share
8. Convertible Share
9. Delinquent Share
10. Founder's Share
11. Promotion Share
12. Redeemable Share

Accounting For Share Capital

The two major components of the equity

1. Share capital
This the amount of resources received byu a corporation as aresult of
investment by shareholders, donations or other share capital transactions.
2. Retained earnings
_ Is the amount of capital accumulated and retained through the profitable
operations of the business

Corporate Accounting Equation

1. As distinguished from a sole proprietor, the accounting equation of the

newly created corporation.
ASSETE = LIABILITIES + SHAREHOLDERS EQUITY

2. The above presentation is only applicable to a private corporation created

for business purposes.