Page |1

CORPORATIONS-AS DEFINED IN THE CORPORATION CODE OF THE PHIL. HAS THE FF ATTRIBUTES:

1. AN ARTIFICIAL BEING - WITH A PERSONALITY SEPARATE AND APART FROM ITS INDIVIDUAL
SHAREHOLDERS OR MEMBERS. IT
2. CREATED BY OPERATION OF LAW- (NOT BY MERE AGREEMENT OF THE PARTIES LIKE IN THE
THE CASE OF PARTNERSHIPS) IT IS ALSO CALLED A JURIDICAL PERSON.
-COMPOSED OF 5 OR MORE PERSONS NOT EXCEEDING 15.

3. HAS THE RIGHT OF SUCCESSION- HAS THE CAPACITY OF CONTINED EXISTENCE , SUBJECT TO
THE PERIOD STATED IN THE ARTICLES OF INCORPORATION.
IT CAN EXIST FOR A PERIOD NOT EXCEEDING 50 YRS FROM DATE OF INCORP.
AND MAY BE EXTENDED FOR PERIODS NOT EXCEEDING 50 YRS SUBJECT TO AMEND-
MENTS OF THE ART. (ACC. TO SEC 11). PROVIDED THAT NO EXTENSIONS SHALL
BE MADE EARLIER THAN 5 YRS BEFORE THE ORIGINAL EXPIRY DATE.
4. HAS THE POWERS, ATTRIBUTES AND PROPERTIES EXPRESSLY AUTHORIZED BY LAW OR
INCIDENT TO ITS EXISTENCE.

A CORP CAN NOT ENTER INTO A CONTRACT OF PARTNERSHIP ONLY IN A JOINT VENTURE.

ULTRA VIRES –CONTRACT BEYOND ITS POWERS (ILLEGAL AND VOID)

INTRA VIRES- WITHIN LEGITIMATE POWERS
ILLEGAL ACTS- CONTRARY TO LAW, MORALS, GOOD CUSTOMS,PUBLIC ORDER,POLICY,

ADVANTAGES:

1. LEGAL CAPACITY TO ACT AS A LEGAL ENTITY

2. SHAREHOLDERS HAVE LIMITED LIABILITY
3. CONTINUITY OF EXISTENCE
4. SHARES OF STOCKS CAN BE TRANSFERRED W/O CONSENT OF THE OTHER SHAREHOLDERS
5. MGMT CENTRALIZED TO THE BOARD OF DIRECTORS
6. SHAREHOLDERS ARE NOT GENERAL AGENTS OF BUSINESS
7. GREATER ABILITY TO ACQUIRE FUND

DISADVANTAGES:

1. COMPLICATED IN FORMATION AND MGMT.

2. GREATER DEGREE OF GOVT. CONTROL
3. HIGH COST OF FORMULATION AND OPERATION
4. HIGHER TAXATION
5. MIN. SHAREHOLDER SUBSERVIENT TO THE WISHES OF THE MAJORITY
6. MGMT &CONTROL SEPARATE FROM OWNERSHIP

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 Page |2

7. TRANSFERABILITY OF SHARES PERMITTING INCOMPATIBLE AND CONFLICTING ELEMENTS IN

ONE VENTURE.

MAJOR CLASSES OF CORPORATIONS:

1. STOCK CORP.- SHARE CAPITAL DIVIDED INTO SHARES AND ARE AUTHORIZED TO DISTRIBUTE TO
THE HOLDERS OF SUCH SHARES DIVIDENDS OR ALLOTMENTS OF THE SURPLUS PROFIT ON THE
BASIS OF SHARES HELD.
2. NON-STOCK CORP.- NO PART OF INCOME IS DISTRIBUTED OR DIVIDENDS TO ITS MEMBERS,
TRUSTESS OR OFFICERS.

OTHER CLASSES OF CORPORATION

1. NO. OF PERSONS
a. CORPORATION AGREGATE- 1 CORPORATOR
b. CORPORATION SOLE OR SPECIAL FORM –ASSOCIATED WITH THE CLERGY

2. NATIONALITY
a. DOMESTIC –ORGANIZED UNDER PHIL LAWS
b. FOREIGN – ORGANIZED UNDER FOREIGN LAWS

3. ACCDG. TO PURPOSE
a. PUBLIC CORP- ORGANIZED FOR THE CORP.
b. PRIVATE – ORGANIZED FOR PRIVATE AIM

4. CHARITABLE PURPOSE OR NOT

a. ECCLESIASTICAL –RELIGIOUS PUPOSES
b. ELEEMOSYNARY – FOR PUBLIC CHARITY
c. CIVIL-FOR BUSINESS OR PROFIT

5. LEGAL RIGHT TO CORPORATE EXISTENCE

a. DE JURE- EXISTING IN FACT AND IN LAW

b. DE FACTO –EXISTING IN FACT BUT NOT IN LAW

6.DEGREE OF PUBLIC PARTICIPATION AS TO OWNERSHIP

a. CLOSED CORP.-LIMITED TO SELECTED PERSONS OR MEMBERS, USUALLY OF A FAMILY

NOT EXCEEDING 20 PERSONS.
b. OPEN CORP.- SHARES ARE AVAILABLE FOR SUBSCRIPTION OR PURCHASE BY ANY PERSON
c. PUBLICLY-HELD CORP- WITH CLASS OF EQUITY SHARES LISTED ON AN EXCHANGE OR WITH
ASSETS IN EXCESS OF 50M AND HAVING 200 OR MORE HOLDERS OR AT LEAST 200
HOLDING AT LEAST 100 SHARES OF A CLASS OF ITS EQUITY SECURITIES

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 Page |3

7.ACCORDING TO RELATION TO ANOTHER PERSON-

A. PARENT OR HOLDING CORP. –RELATED TO ANOTHER CORP. WITH THE POWER TO EITHER
DIRECTLY OR INDIRECTLY ELECT THE MAJORITY OF THE DIRECTORS OF THE SUBDIDIARIES.
B. SUBSIDIARY CORP- CONTROLLED BY ANOTHER CORP. KNOWN AS APARENT CORP.

8. GOVERNMENT OWNED AND CONTROLLED CORPORATIONS – CORPORATIONS CONTROLLED

BY THE GOVT. CREATED FOR SPECIFIC PUBLIC PURPOSES ( GSIS,SSS,PAG-IBIG, LBP,DBP)

STEPS IN THE CREATION OF A CORP.-

1. PROMOTION- BRINGING TOGETHER INCORPORATORS OR PERSONS INTERESTED IN THE

BUSINESS

2. INCORPORATION-PAPERWORKS

3. FORMAL ORGANIZATION AND COMMENCEMENT –ADOPTION OF BY-LAWS AND THE

ELECTION OF THE BOARD OF DIRECTORS AND ADMINISTRATIVE OFFICERS
-AND OTHER NECESSARY STEPSTO ENABLE THE CORP TO TRANSACT LEGITIMATE
BUSINESS FOR WHICH IT WAS CREATED

CORPORATION CODE OF THE PHILS. –THE GENERAL LAW THAT GOVERNS THE CREATION OF
PRIVATE CORP. IN THE PHILIPPINES.
WHILE GOCC’S ARE GOVERNED BY SPECIAL LAWS

SEC. 14 PROVIDES THAT ALL CORP ORGANIZED UNDER THIS CODE SHALL FILE
THE ARTICLES OF INCORPORATION WHICH SPECIFIES VITAL DETAILS ABOUT THE CORP.

-NAME OF THE CORP

-PURPOSE
-PLACE OF BUS.
-TERM OF EXISTENCE –NOT EXCEEDING 50 YRS BUT CAN BE EXTENDED PROVIDED THAT THE EXTENSION
SHOULD BE FILED 5 YEARS BEFORE THE EXPIRATION OF ITS TERM.
-NAMES, NATIONALITIES AND RESIDENCE OF INCORPORATORS
-NO. OF DIRECTORS OR TRUSTEES NOT LESS THAN 5 NOR MORE THAN 15
-NAMES OF ACTING DIRECTORS UNTIL DULY ELECTED
-STOCK OR NON-STOCK CORP.
-AMOUNT OF SHARE CAPITAL, PAR VALUE AND THE NO. OF SHARES INTO WHICH IT IS DIVIDED
IF NO PAR VALUE SHARE, STATE ONLY THE NO. OF SHARES

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 Page |4

AUTHORIZED SHARE CAPITAL (AUTHORIZED CAPITAL STOCK)-

-MAXIMUM NO. OF SHARES AS STATED IN THE ARTICLES OF INCORPORATION
MULTIPLIED
BY THE PAR VALUE

-AMOUNT OF SHARE CAPITAL ACTUALLY SUBSCRIBED OR THE NO. OF NO PAR SHARES SUBSCRIBED,
INCLUDING NAMES AND RESIDENCES OF THE SUBSCRIBER.
MANDATORY REQUIREMENTS ON SUBSCRIPTIONS

SUBSCRIBED CAPITAL STOCK

AT THE TIME OF INCORPORATION – AT LEAST 25% OF THE AUTHORIZED CAPITAL STOCK OR SHARED
CAPITAL AS STATED IN THE ART. OF CORP. MUST BE SUBSCRIBED

PAID-IN CAPITAL
UPON SUBSCRIPTION- AT LEAST 25% OF THE TOTAL SUBSCRIPTION MUST BE PAID
-THE BALANCE PAYABLE ON DATES FIXED IN THE CONTRACT OF SUBCRIPTION W/O
ANY CALL OR IF W/O DATE UPON CALL OF THE BOARD OF DIRECTORS.
-PAID IN CAPITAL SHALL NOT BE LESS THAN P 5,000.00 (CORP. CODE OF THE PHIL .
SEC 13)

AFTER FILING OF THE ARTICLES OF INCORPORATION, THE CORP . COMMENCES TO HAVE JUDICIAL
PERSONALITY AND LEGAL EXISTENCE ONLY UPON THE ISSUANCE OF THE CERTIFICATE OF
INCORPORATION BY THE SEC.

THE CORP. SHOULD FORMALLY ORGANIZE AND COMMENCE OPERATIONS WITHIN 2 YEARS FROM THE
DATE OF ITS INCORPORATION.

BY-LAWS –RULES OF ACTION ADOPTED BY THE CORPORATION FOR ITS INTERNAL GOVERNMENT AND
FOR THE GOVERNMENT OF ITS OFFICERS, SHAREHOLDERS OR MEMBERS.
- IT SHALL BE ADOPTED WITHIN ONE MONTH FROM THE ISSUANCE OF THE CERTIFICATE OF
INCOPORATION BY THE SECURITY AND EXCHANGE COMMISSION.
- FAILURE TO DO SO WILL REVOKE ITS REGISTRATION.

CONTENTS OF THE BY-LAWS

1. MEETINGS OF SHAREHOLDERS AND DIRECTORS-- TIME, PLACE, MANNER OF CALLING, RULES.
SHAREHOLDERS MEETING SHOULD BE IN THE PRINCIPAL PLACE OF BUSINESS.
2. BOARD OF DIRECTORS- NO., QUALIFICATIONS, DUTIES, POWERS AND LENGTH OF OFFICE.
HE MUST BE A REGISTERED OWNER OF AT LEAST 1 SHARE OF STOCK, AND MAJORITY SHOULD
BE RESIDENTS OF THE PHILIPPINES.

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 Page |5

3. CORPORATE OFFICERS- APPOINTMENT, DUTIES, POWERS, COMPENSATION AND LENGTH OF

OFFICE. PRESIDENT IS USUALLY THE CHAIRMAN OF THE BOARD.
4. SHARE CERTIFICATES- MANNER OF ISSUANCE
5. METHOD OF AMENDING THE BY-LAWS
6. OTHERS- RULES GOVERNING THE ACTS OF OFFICERS AND DIRECTORS

COMPONENTS OF A CORP.-

1.CORPORATORS-THOSE WHO COMPOSE A CORPORATION . INCORPORATORS, SHAREHOLDERS OR

MEMBERS.
2.INCORPORATORS- SHAREHOLDERS OR MEMBERS MENTIONED IN THE ARTICLES OF INCORPORATION,
ORIGINALLY FORMING THE ARTICLES OF INCORPORATION.

3.SHAREHOLDERS-STOCKHOLDERS IN A STOCK CORP.

-RIGHT TO BE ISSUED A CERTIFICATE OF STOCK OR EVIDENCE SHOWING OWNERSHIP
AND TRANSFER SUCH SHARES.
-RIGHT TO ATTEND AND VOTE IN PERSON OR BY PROXY IN SHAREHOLDERS MEETINGS
-RIGHT TO ELECT AND REMOVE DIRECTORS
-RIGHT TO ADOPT, AMEND AND REPEAL LAWS.

4. MEMBERS- CORPORATORS OF A NON-STOCK CORP.

5.SUBSCRIBERS- PERSONS WHO HAVE AGREDD TO TAKE AND PAY FOR ORIGINAL AND UNISSUED
SHARESOF A CORP FORMED OR TO BE FORMED.
6.PROMOTERS-PERSONS WHO BRING ABOUT THE FORMATION AND ORGANIZATION OF THE CORP.
7.UNDERWRITERS-INVESTMENT BANKERS
8.INDEPENDENT DIRECTOR- NO OTHER BUS. RELATIONSHIPS THAT COULD INTERFERE WITH HIS
INDEPENDENT JUDGEMENTNIN CARRYING HIS RESPONSIBILITIES AS DIRECTOR

CORPORATE ORGANIZATIONAL STRUCTURE

-ULTIMATE CONTROL REST ON THE SHAREHOLDERS (OWNERS).THEY ELECT THE TOP GOVERNING BODY
OF THE CORP, OR THE MEMBERS OF THE BOARD OF DIRECTORS

(THE CORP. ANNUALY HOLD A SHAREHOLDERS MEETING WHEREIN THE BOARD OF DIRECTORS ARE
ELECTED.)

MEMBERS OF THE BOARD OF DIRECTORS –RESPONSIBLE FOR THE FORMULATION OF THE

OVER-ALL POLICIES FOR THE CORP AND FOR THE EXERCISE OF CORP. POWERS.
-THEY ELECT AMONG THEMSELVES THE CHAIRMAN OF THE BOARD
-THEY ELECT THE OFFICERS OF THE CORP

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 Page |6

ADM. OFFICERS OF THE CORP.- IMPLEMENT THE POLICIES OF THE BOARD OF DIRECTORS AND ACTIVELY
MANAGE THE DAY TO DAY ACTIVITIES OF THE CORP.
- THEY HIRE THE EMPLOYEES OF THE CORP

PRESIDENT – HE SHOULD ALSO BE A BOARD DIRECTOR, USUALLY HE IS ALSO THE CHAIRMAN OF THE
BOARD.

CORP. SECRETARY- MAINTAINS AND KEEPS THE RECORDS OF THE CORP REGARDING ALL ITS AFFAIRS

CORPORATE TREASURER- ENTRUSTED TO RECEIVE AND KEEP THE MONEY OF THE CORP.

CORPORATE BOOKS AND RECORDS.

1. MINUTES BOOKS –CONTAINS THE MINUTES OF THE MEETINGS

2. STOCK AND TRANSFER BOOK- RECORD OF NAMES OF SHAREHOLDERS AND ALL STOCK TRANS.
3. BOOKS OF ACCOUNTS –RECORD OF ALL BUSINESS TRANSACTIONS. NORMALLY THE JOURNAL
AND LEDGER
4. SUBSCRIPTION BOOK- BOOK OF PRINTED BLANK SUBSCRIPTION
5. SHAREHOLDERS LEDGER – DETAILS THE NO OF SHARES ISSUED TO EACH SHAREHOLDER
6. SUBCRIBERS LEDGER- SUBSIDIARY LEDGER FOR THE SUBSCRIOTION RECEIVABLE ACCT
- REPORTS THE INDIVIDUAL SUBSCRIPTION OF THE SUBSCRIBERS
7. STOCK CERTIFICATE BOOK- BOOK OF PRINTED BLANK CERTIFICATE OF STOCKS

ORGANIZATION COST- COST INCURRED IN FORMING OR ORGANIZING THE CORP. (EXPENSED

IMMEDIATELY EXCEPT FOR SHARE ISSUANCE COST)
1. LEGAL FEES
2. INCORPORATION FEES
3. SHARE ISSUANCE COST

“TRUST FUND DOCTRINE”- RESOURCES ENTRUSTED TO THE CORP. BECOME THE ACCOUNTABILITY OF
THE FIRM

THE OWNER’S EQUITY SECTION IS CALLED

SHAREHOLDERS EQUITY – RESIDUAL INTEREST OF THE OWNERS IN THE NET ASSETS OF A CORP.
MEASURED BY THE EXCESS OF ASSETS OVER LIABILITIES
.

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 Page |7

COMPONENTS:

1. CONTRIBUTED CAPITAL- OR PAID –IN CAPITAL REPRESENTS THE AMOUNT INVESTED BY THE
OWNERS.

A. SHARE CAPITAL –CONTRIBUTIONS EQUAL TO THE PAR OR STATED VALUE OF THE SHARES
PURCHASED BY OWNERS, OR TOTAL CONTRIBUTIONS BY OWNERS, IN
CASE OF NO PAR, NO STATED VALUE SHARE CAPITAL.

B. SHARE PREMIUM (ADDITIONAL PAID IN CAPITAL- CONTRIBUTIONS IN EXCESS OF PAR OR

STATED VALUE OF THE SHARE CAP.

2. LEGAL CAPITAL- PORTION OF PAID IN CAPITAL WHICH MUST REMAIN IN THE CORP. FOR THE
PROTECTION OF CREDITORS

WITH PAR VALUE SHARES –FIXED PER SHARE AMOUNT (PRINTED AT THE BACK OF CERT.)

A. SHARE CAPITAL –CONTRIBUTIONS EQUAL TO THE PAR VALUE OF ALL SHARES ISSUED
B. SUBSCRIBED SHARE CAPITAL(SUBSCRIBED CAPITAL STOCK) –
-SHARES NOT YET PAID IN FULL
-
WITH NO PAR VALUE SHARES-NO AMOUNT PRINTED ON STOCK CERT. (STATED VALUE)

A. SHARE CAPITAL –CONTRIBUTIONS EQUAL TO THE TOTAL CONSIDERATION RECEIVED

B. SUBSCRIBED SHARE CAPITAL(SUBSCRIBED CAPITAL STOCK) –
-SHARES NOT YET PAID IN FULL
C. SHARE PREMIUM- EXCESS OVER STATED VALUE,

SHARE DIVIDENDS DECLARED BUT NOT YET ISSUED (SHARE DIVIDENDS DISTRIBUTABLE) FORM PART
OF LEGAL CAPITAL – SOON WILL FORM PART OF SHARE CAPITAL

CLASSES OF SHARES

1. PAR VALUE SHARES- SPECIFIC AMOUNT IS FIXED IN THE ARTICLES OF INCORPORATION AND
APPEARING IN THE CERTIFICATE OF STOCK. IT IS THE MINIMUM ISSUE PRICE.

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 Page |8

2. NO PAR VALUE SHARES-WITHOUT ANY VALUE APPEARING ON THE FACE OF THE CERTIFICATE
OF STOCK. IT MAY HAVE A STATED FIXED VALUE IN THE ART. OF INCORP. ISSUE PRICE MAY
VARY FROM TIME TO TIME W/C DEPENDS ON THE BOOK VALUE OF THE CORP. SHARES.
- MINIMUM STATED VALUE IS P 5.00 PER SHARE. THESE ARE DEEMED FULLY PAID
- NOT TO BE ISSUED BY BANKS, TRUST CO., INSURANCE CO., PUBLIC UTILITIES, BLDG. AND
LOAN ASSOC.

3. ORDINARY SHARES – ENTITLE THE HOLDER TO AN EQUAL PRO-RATA DIVISION OF PROFITS

W/O ANY PREFERENCE (COMMON STOCKS). HAS CONTROL OVER THE CORP.
a. VOTING SHARES – WITH A RIGHT TO VOTE
b. RIGHT TO SHARE IN PROFITS AND LOSSES
c. RIGHT TO SHARE IN CORP ASSETS UPON LIQUIDATION
d. WITH PRE-EMPTIVE RIGHT –TO SHARE IN ANY NEW ISSUES OF SHARE CAPITAL OF THE SAME
CLASS

4. PREFERENCE SHARES –ENTITLE THE HOLDER TO CERTAIN ADVANTAGES OR BENEFITS OVER

THE HOLDERS OF ORDINARY SHARES (PREFERRED STOCKS).
-DIVIDENDS EXPRESSES AS % OF THE PAR VALUE
-NON-VOTING SHARES

CLASSES OF PREFERENCE SHARES:

A. CUMULATIVE – ENTITLED TO DIVIDENDS PRIOR AND CURRENT PERIODS

B. NON-CUMULATIVE-ENTITLED TO CURRENT DIVIDENDS ONLY

C. PARTICIPATING-PROVIDE ADDITIONAL DIVIDENDS PROPORTIONATE TO ORDINARY

SHAREHOLDERS

D. NON-PARTICIPATING-NOT ENTITLED TO ADDITIONAL DIVIDENDS PROPORTIONATE TO

ORDINARY SHARE HOLDERS.

E. CONVERTIBLE- OPTION TO EXCHANGE THE SAME TO ORDINARY SHARES

F. CALLABLE- GIVES THE ISSUING CORP. THE RIGHT , BUT NOT THE OBLIGATION, TO
REACQUIRE OR RETIRE THE SHARE AT A FIXED DETERMINABLE CALL PRICE.

G. REDEEMABLE PREFERENCE SHARE- MUST BE RETIRED OR REACQUIRED BY THE ISSUING

CORP, EITHER AT THE OPTION OF THE SHAREHOLDER ,AT A CERTAIN DATE.
(FINANCIAL LIABILITY OF THE CORP.)

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 Page |9

FINANCIAL INSTRUMENT- ANY CONTRACT THAT GIVES RISE TO

A. FINANCIAL ASSET OF ONE ENTITY

B. FINANCIAL LIABILITY OR EQUITY INSTRUMENT OF ANOTHER ENITITY

EQUITY INSTRUMENT –CONTRACT THAT EVIDENCES A RESIDUAL INTEREST IN THE ASSETS OF

AN ENTITY AFTER DEDUCTING ALL OF ITS LIABILITIES

-CONTRACT WHEREIN THE ENTITY DELIVERS A FIXED NO. OF ITS OWN

EQUITY INSTRUMENTS IN EXCHANGE FOR A FIXED AMOUNT OF CASH OR
ANOTHER FINANCIAL ASSET.
EX. PRE-EMPTIVE RIGHT OF ORDINARY SHARES.

FINANCIAL LIABILITY- FINANCIAL INSTRUMENT THAT GIVES THE HOLDER THE RIGHT TO PUT
IT BACK TO THE ISSUER FOR CASH OR ANOTHER FINANCIAL ASSET( A PUTTABLE INSTRUMENT)
AT A FIXED DETERMINABLE AMOUNT, AT A FIXED DETERMINABLE DATE.
EX. REDEEMABLE PREFERENCE SHARE.

SHARE CERTIFICATE – INSTRUMENT OR DOCUMENT THAT EVIDENCES THE OWNERSHIP OF

THE SHARES

AUTHORIZED SHARES- MAXIMUM NO. OF SHARES THAT THE CORP MAY ISSUE
(AUTHORIZED SHARE CAPITAL)

ISSUED SHARES –REPRESENTS THE NO OF SHARES (FULLY PAID FOR) THAT THE CORP HAS
ISSUED TO ITS SHAREHOLDERS AS OF A SPECIFIC DATE.
(SHARE CAPITAL ACCOUNT)

OUTSTANDING SHARES- SHARES OF STOCKS THAT HAVE BEEN ISSUED AND STILL ARE IN THE
HANDS OF THE SHAREHOLDERS AS OF ASPECIFIC DATE.
-ISSUED SHARES MINUS THE TREASURY SHARES.

TREASURY SHARES- SHARES THAT HAVE BEEN ISSUED TO SHAREHOLDERS AND HAVE BEEN
REACQUIRED, BUT NOT RETIRED, BY THE CORPORATION, EITHER BY
PURCHASE OR DONATION.

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 P a g e | 10

SUBSCRIBED SHARES- SHARES OF STOCK THAT WILL BE ISSUED UPON COMPLETION OF AN

INSTALLMENT PURCHASE CONTRACT WITH AN INVESTOR.
-IF NOT DELINQUENT , IT SHALL HAVE ALL THE RIGHTS OF A SHAREHOLDER
INCLUDING DIVIDENDS.
(SUBSCRIBED SHARE CAPITAL)

SUBSCRIPTION- CONTRACT W/C PROVIDES THAT THE SUBSCRIBER WILL BUY A CERTAIN NO.
OF SHARES AT AN AGREED PRICE WITH THE PAYMENT SPREAD OVER A
SPECIFIED PERIOD OF TIME

ACCOUNTING FOR SHARE CAPITAL (AUTHORIZED CAPITAL STOCK)

1. MEMORANDUM METHOD – NO ENTRY TO RECORD THE AUTHORIZED SHARE CAPITAL.

AUTHORIZED TO ISSUE SHARE CAPITAL OF 4M DIVIDED INTO 40,000 SHARE @ PAR V P 100

- WHEN SHARE CAPITAL IS ISSUED, IT IS CREDITED TO SHARE CAPITAL.

2. JOURNAL ENTRY METHOD-

A. UNISSUED SHARE CAPITAL

AUTHORIZED SHARE CAPITAL

WHEN SHARE CAPITAL IS ISSUED , IT IS CREDITED TO UNISSUED SHARE CAPITAL

PAR VALUE OR STATED VALUE FOR NO PAR VALUE SHARES SHOULD NOT BE LESS THAN P 5.00

1. SHARES ISSUED FOR CASH

CASH (# OF SHARES @MARKET V OR @PAR V)

SHARE CAPITAL-ORDINARY (# OF SHARES @PAR V)
SHARE PREMIUM-ORDINARY ( # OF SHARE @ (MARKET V-PAR V))

OR IF CONSIDERATION IS LESS THAN PAR OR STATED VALUE – DR. DISCOUNT ON SHARE CAP.

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 P a g e | 11

2. SHARES ISSUED FOR CONSIDERATION OTHER THAN CASH (BASED ON ORDER OF

PRIORITY)

A. FAIR VALUE OF THE PROPERTY OR SERVICES RECEIVED

-DETERMINED BY THE INCORPORATORS AND APPROVED BY THE SEC

B. FAIR VALUE OF THE SHARE CAPITAL ISSUED

C. PAR VALUE OF SHARES ISSUED

LAND /SERVICES (FV OF PROPERTY OR SERVICE)

SHARECAPITAL –ORDINARY SHARE (# OF SHARES @ PAR V)
SHARE PREMIUM –ORDINARY SHARE ( FAIR VALUE – SHARES @ PAR V)

OR IF CONSIDERATION IS LESS THAN PAR OR STATED VALUE – DR. DISCOUNT ON SHARE CAP.

3. SHARES SOLD ON SUBSCRIPTION

CASH (CONSIDERATION RECEIVED)

SUBCRIPTION RECEIVABLE
SUBSCRIBED SHARE CAPITAL-ORDINARY (# OF SHARES X PV or SV or (Total Subs.Price)
SHARE PREMIUM-ORDINARY ( # OF SHARE X (MV-PV))

CASH
SUBSCRIPTION RECEIVABLE (PARTIAL OR FULL PAYMENT)

SUBSCRIBED SHARE CAPITAL

SHARE CAPITAL - ORDINARY
(UPON FULL PAYMENT , FOR ISSUANCE OF STOCK CERTIFICATE)

NO STOCK CERTIFICATE CAN BE ISSUED, IF NOT YET FULLY PAID.

ANY BALANCE IN THE SUBSCRIBED SHARE CAPITAL ACCOUNT IS PRESENTED IN THE SHAREHOLDER’S
EQUITY SECTION – UNDER THE CONTRIBUTED CAPITAL.

SUBCRIPTION RECEIVABLE ACCOUNT – DEDUCTION FROM SHAREHOLDER’S EQUITY

- CURRENT ASSET IF RECEIVABLE WITHIN 1 YEAR

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 P a g e | 12

4. DELINQUENT SUBSCRIPTIONS

CORP HAS 2 REMEDIES TO COLLECT:

A. SUE DELINQUENT SUBSCRIBER TO ENFORCE COLLECTION

B. SELL THE DELINQUENT SHARES AT PUBLIC AUCTION TO THE HIGHEST BIDDER

HIGHEST BIDDER- ONE WHO IS WILLING TO PAY THE UNPAID SUBS. PLUS ALL COST RELATED
TO THE DEFAULTED SHARES AND WILLING TO RECEIVE THE LEAST NO OF SHARES.

CASH
SUBCRIPTION RECEIVABLE
SUBSCRIBED SHARE CAPITAL-ORDINARY (# OF SHARES X PV or SV or (Total Subs.Price)
(UPON SUBSCRIPTION)

CASH
SUBSCRIPTION RECEIVABLE (PARTIAL OR FULL PAYMENT)
(INSTALLMENT)

RECEIVABLE FROM HIGHEST BIDDER

SUBSCRIPTION RECEIVABLE (UNPAID SUBSCRIPTION)
CASH (ADVERTISING COST)
(UPON AUCTION)

CASH
RECEIVABLE FROM HIGHEST BIDDER
(PAYMENT BY HIGHEST BIDDER)

SUBSCRIBED SHARE CAPITAL-ORDINARY SHARES

SHARE CAPITAL –ORDINARY SHARES
(ISSUANCE OF STOCK CERTIFICATE TO ORIGINAL SUBSCRIBER AND
THE HIGHEST BIDDER)

NO BIDDER ON DELINQUENT SHARES – SHARES ARE PLACES IN THE TREASURY

TREASURY SHARES
RECEIVABLE FROM HIGHEST BIDDER

SUBSCRIBED SHARE CAPITAL-ORDINARY SHARES

SHARE CAPITAL –ORDINARY SHARES
(ISSUANCE OF STOCK CERTIFICATE IN THE NAME OF THE CORP)

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 P a g e | 13

5. SHARES ISSUED WITH OTHER SECURITIES

-2 OR MORE CLASSES ARE ISSUED FOR A LUMP-SUM PRICE

-LUMP SUM PRICE IS ALLOCATED TO THE CLASSES OF SECURITIES BASED ON THEIR

RELATIVE FAIR VALUES (PROPORTIONAL METHOD) –

COMPUTATION:

A. FAIR VALUE /CLASS

= TOTAL # OF SHARES X ( FAIR VALUE /SHARE)

B. TOTAL FAIR VALUES

= ADD FAIR VALUES /CLASS

C. ALLOCATION OF LUMP SUM PRICE

= LUMP SUM PRICE X (FV/CLASS / TOTAL FAIR VALUES)

ENTRIES:

CASH
SHARE CAPITAL-ORDINARY
SHARE PREMIUM-ORDINARY
SHARE CAPITAL-PREFERENCE
SHARE PREMIUM-PREFERENCE

WHEN NOT ALL FAIR VALUES ARE DETERMINABLE (RESIDUAL METHOD)-

TOTAL LUMP SUM PRICE

LESS: FAIR VALUE OF SHARES DETERMINABLE (# OF SHARES X FAIR VALUE)
ISSUED PRICE ASSIGNED TO SHARES WITH UNDETERMINABLE FAIR VALUES

ENTRIES:

CASH
SHARE CAPITAL-ORDINARY
SHARE PREMIUM-ORDINARY
SHARE CAPITAL-PREFERENCE
SHARE PREMIUM-PREFERENCE

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 P a g e | 14

SHARE ISSUE COST AND TAX ASSESSMENTS

PHIL .INTERPRETATIONS.COMM. – INTERPRETATION Q AND A -2100-4)

COST OF OFFERING SHARE -

DEDUCTIONS FROM EQUITY AND ARE NETTED AGAINST OR CHARGED TO SHARE PREMIUM

 DOC. STAMP TAX AND OTHER PERCENTAGE TAX IMPOSED ON PUBLIC OFFERRINGS OF SHARES
 UNDERWRITING COST
 NEWS PAPER PUBLICATION
 SEC REGISTRATION FOR NEW SHARES

RECOGNIZED AS EXPENSES IN PROFIT OR LOSS

 PUBLIC RELATIONS COSULTANTS FEE

 ROAD SHOW PRESENTATION
 STOCK EXCHANGE LISTING FEES

TRANSACTION COST –RELATING TO ISSUANCE OF A COMPOUND FINANCIAL INSTRUMENT LIKE

BONDS WITH SHARE WARRANTS

- ARE ALLOCATED TO THE LIABILITY AND EQUITY COMPONENTS OF THE INST.

IN PROPORTION TO THE ALLOCATION OF THE PROCEEDS.

- THAT ARE DEDUCTIONS FROM EQUITY IS DISCLOSED SEPARATELY IN THE F/S

-ADDITIONAL AMOUNTS ASSESSED TO SHAREHOLDERS ORIG CONTRIBUTION IS

CREDITED TO SHARE PREMIUM ACCOUNT (ARISING FROM ASSESSMENT)

SHARES REACQUIRED BY THE CORPORATION

REACQUISITION OF SHARE CAPITAL –

 TO IMPROVE EARNINGS PER SHARE =REDUCING # OF SHARES OUTSTANDING

TO SUPPORT MARKET PRICE OF THE SHARES
 INCREASE THE RATIO OF DEBT TO SECURITY
 OBTAIN SHARES FOR SHARE OPTION PLANS AND CONVERSION OF OTHER SECURITIES

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 P a g e | 15

5. SHARES REACQUIRED FOR IMMEDIATE RETIREMENT

A. RETIREMENT PRICE IS LESS THAN THE ORIG. ISSUE PRICE

SHARE CAPITAL –PREFERENCE (# OF SHARES X PV)

SHARE PREMIUM –PREFERENCE (# OF SHARES X PREMIUM /SHARE – ORIG ISS.)
CASH ( # OF SHARES X RETIREMENT PRICE)
SHARE PREMIUM-PREFERENCE ( # OF SHARES X DIFF. OF ORIG. ISSUE PRICE AND RET. PRICE)

B. RETIREMENT PRICE IS GREATER THAN THE ORIG. ISSUE PRICE

SHARE CAPITAL –PREFERENCE (# OF SHARES X PV)

SHARE PREMIUM –PREFERENCE (# OF SHARES X PREMIUM /SHARE –ORIG ISS.)
RETAINED EARNINGS (# OF SHARES X DIFF. OF ORIG. ISSUE PRICE AND RET. PRICE)
CASH ( # OF SHARES X RETIREMENT PRICE)

7. SHARES RE-ACQUIRED FOR RE-ISSUE - TREASURY SHARES

-EQUITY INSTRUMENTS (TREASURY STOCK)

-CORPORATIONS OWN SHARE THAT HAS BEEN ISSUED AND FULLY PAID, REACQUIRED BUT
NOT RETIRED BY THE CORP.
-ONCE REACQUIRED, IT IS NOT AN ASSET, BUT A REDUCTION IN ITS CAPITALIZATION.
-DOES NOT HAVE THE RIGHTS OF A REGULAR ISSUED SHARE –ORDINARY OR PREFERENCE SHARE.
-NO GAIN OR LOSS IS RECOGNIZED.
-CONSIDERATION PAID OR RECEIVED RECOGNIZED DIRECTLY TO EQUITY.

-RECORDED AT COST WHETHER ACQUIRED BELOW OR ABOVE PAR VALUE

TREASURY SHARES (AT COST)

CASH

-UPON RESALE OR TREASURY SHARE

 RE-ISSUE PRICE IS MORE THAN THE ACQUISITION COST

CASH
TREASURY SHARES (AT COST)
SHARE PREMIUM-TREASURY SHARE

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 P a g e | 16

a) RE –ISSUE PRICE IS LESS THAN THE ACQUISITION COST

-TREASURY ACCOUNT IS CREDITED AT COST

-AND THE DIFF. TO SHARE PREM-TREASURY SHARE (UP TO EXTENT OF BAL.) AND
-REMAINDER TO RETAINED EARNINGS.

CASH
SHARE PREMIUM-TREASURY SHARE (UP TO EXTENT OF BALANCE IF ANY)
RETAINED EARNINGS ( TREASURY COST-CASH RECEIVED-SHARE PREMIUM)
TREASURY SHARE (AT COST)

LIMITATION ON TREASURY SHARES

SHARE PREMIUM (PAID –IN CAPITAL ACCOUNT) MAY BE DEBITED OR CREDITED BUT THE
RETAINED EARNINGS ACCOUNT IS NEVER CREDITED FOR TREASURY TRANSACTIONS.

ACC. TO SEC 41 OF THE CORP. CODE OF THE PHILS., A CORP. CAN RE-ACQUIRE OR RE-PURCHASE
TREASURY SHARES AS LONG IT HAS UNRESTRICTED RETAINED EARNINGS IN THE BOOKS , SO AS NOT
TO IMPAIR LEGAL CAPITAL, EVEN WITH THE PURCHASE. SO , WHEN A CORP. HAS

TREASURY SHARES (RECORDED AT COST) = AMOUNT OF RETAINED EARNINGS APPROPRIATED FOR

THAT PURPOSE

COST OF TREASURY SHARES IS PRESENTED IN THE F/S AS A DEDUCTION FROM TOTAL SHARE H. E.

8.DONATED TREASURY SHARES

-DOES NOT HAVE ANY EFFECT ON THE F/S, NO COST INVOLVED

-DOES NOT AFFECT THE TOTAL ISSUED SHARES , BUT DECREASES THE OUTSTANDING SHARES

b) RECORDED BY MEMO ENTRY – IF NO AVAILABLE FAIR VALUE AT TIME OF DONATION

c) RE-ISSUED AT FAIR VALUE

CASH
DONATED CAPITAL (# OF SHARES X FAIR VALUE)

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 P a g e | 17

d) AVAILABLE FAIR VALUE AT TIME OF DONATION

TREASURY SHARES
DONATED CAPITAL (# OF SHARES X FAIR VALUE)

e) RE-ISSUED ABOVE FAIR VALUE (AT TIME OF DONATION)

CASH
TREASURY SHARE (# OF SHARES X FV AT TIME OF DONATION)
DONATED CAPITAL (# OF SHARES X (FVD-FVR})

TOTAL SHE IS NOT AFFECTED BY CHOICE OF THE METHOD USED TO ACCOUNT FOR DOANTED
TREASURY SHARES

8.SHARE SPLIT
-PROMPTED TO INCREASE THE NO. OF OUTSTANDING SHARES
- ISSUANCE OF ORDINARY SHARES TO ITS ORDINARY SHARE HOLDERS WITHOUT CONSIDERATION
-PURPOSE IS THE REDUCTION IN THEIR UNIT MARKET PRICE
-TO OBTAIN WIDER DISTRIBUTION AND MARKETABILITY OF ITS SHARE
- ACCOMPANIED BY THE REDUCTION IN THE PAR VALUE OF THE SHARE CAPITAL

EX. 2 FOR 1 SHARE SPLIT

PAR VALUE / 2
# OF ISSUED AND OUTSTANDING SHARES X 2

REVERSE SHARE SPLIT

-DECREASES THE NO OF SHARES OUTSTANDING
-CORRESPONDING INCREASE IN THE VALUE OF THE SHARES
-RAISE THE UNIT MARKET PRICE OF THE CORP. SHARE OF STOCK

EX. 1 FOR 2 SHARE SPLIT

PAR VALUE X 2
# OF ISSUED AND OUTSTANDING SHARES / 2

BOTH ARE RECORDED IN THE BOOKS AS MEMO ENTRIES

SHAREHOLDERS EQUITY COMPONENT AND TOTAL SHAREHOLDERS EQUITY ARE LEFT UNCHANGED.
AFFECTS ALL ISSUED SHARES ,INCLUDING TREASURY SHARES.(AT COST)

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 P a g e | 18

8.SHARE RIGHTS
-ISSUED TO EXISTING SHAREHOLDERS TO MAINTAIN A PROPORTIONATE INTEREST IN THE OWNERSHIP
OF THE CORP WHEN NEW SHARES ARE ISSUED.
-OFFERED FIRST TO EXISTING SHAREHOLDERS
-PROPORTIONATE TO SHAREHOLDERS PREVIOUS HOLDINGS, BEFORE OFFERED TO OTHER INVESTORS
-PRE-EMPTIVE RIGHT OF ORDINARY SHARE HOLDERS
-PREVENTS DILUTION OF VOTING RIGHTS WITHOUT THE CONSENT OF THE EXISTING SHAREHOLDERS.
-SHAREHOLDERS ARE PRIVILEGE TO PURCHASE SHARE AT A PRICE LOWER THAN THE FAIR VALUE/SHARE

ISSUANCE OF THE RIGHTS: MEMO ENTRY

TOTAL # OF STOCK RIGHTS EXERCISED/ # OF RIGHTS = # OF SHARES ENTITLED TO SHAREHOLDERS

CASH ( # OF SHARES X FV)

SHARE CAPITAL –ORDINARY (# OF SHARES X PAR VALUE)
SHARE PREMIUM-ORDINARY (# OF SHARES X (DIFF. BETWEEN PV AND FV)

EXPIRED RIGHTS –MEMO ENTRY

8.SHARE WARRANTS ATTACHED TO OTHER SECURITIES
-USUALLY ATTACHED TO PREFERENCE SHARES OR TO BONDS
-SO AS TO MAKE THEM MORE ATTRACTIVE TO INVESTORS
-DICTATE BETTER PRICE

PREFERENCE SHARES W/ DETACHABLE WARRANTS

-PROCEEDS ALLOCATED BETWEEN THE PREFERENCE SHARES AND WARRANTS BASED ON THE FAIR
VALUES OF THE 2 SECURITIES AT THE TIME OF THE ISSUANCE
-VALUE ATTACHED TO THE WARRANT IS CREDITED TO ORDINARY SHARE WARRANTS OUTSTANDING

CASH (# OF SHARES X FV)

SHARE CAPITAL-PREFERENCE SHARES (# OF SHARES X PV)
SHARE PREMIUM-PREFERENCE
(# OF SHARES X (DIFF OF VALUE W/O WARRANT ATTACHED AND PV)
SHARE PREMIUM –ORDINARY SHARE WARRANTS OUTSTANDING
(#OF SHARES X VALUE OF WARRANT/SHARE)

-IF WARRANTS ARE EXERCISED,

-VALUE ASSIGNED TO THE ORDINARY SHARE = VALUE ALLOCATED TO THE WARRANTS
PLUS
THE CASH PROCEEDS FROM THE ISSUANCE OF
THE ORDINARY SHARE

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 P a g e | 19

IF WARRANTS ARE ALLOWED TO EXPIRE,

-VALUE ASSIGNED TO THE WARRANTS = MAYBE TRANSFERRED TO ANOTHER PAID –IN CAPITAL
ACCOUNT SUCH SHARE PREMIUM FROM EXPIRED
WARRANTS

CASH (# OF SHARES EXERCISED X FV OF ORDINARY SHARE)

SHARE PREMIUM ORDINARY SHARE WARRANTS OUTSTANDING
( # OF SHARES EXERCISED X VALUE OF WARRANT)
SHARE CAPITAL-ORDINARY (# OF SHARES EXERCISED X PV )
SHARE PREMIUM –ORDINARY (# OF SHARE X (DIFF OF FV AND PV + WV)

SHARE PREMIUM-ORDINARY SHARE WARRANTSOUTSTANDING (EXPIRED WARRANTS X WV)

OUTSTANDING SHARE PREMIUM FROM EXPIRED WARRANTS

9.SHARE OPTIONS

-CONTRACT THAT GIVES THE HOLDER THE RIGHT, BUT NOT THE OBLIGATION
- TO SUBSCRIBE TO THE ENTITY’S SHARE AT A FIXED OR DETERMINABLE PRICE FOR A SPECIFIED PERIOD
-GRANTED TO OFFICERS AND EMPLOYEES AS PART OF A COMPENSATION PLAN AND AS COMPENSATION
FOR SERVICES RENDERED
-GRANTED TO SELECTED KEY OFFICERS OR MANAGERS WITHIN THE CORP.(INCENTIVE)
-PART OF A BONUS ARRANGEMENT NOT AS BASIC REMUNERATION
SHARE BASED TRANSACTIONS UNDER IFRS 2 FALL UNDER THE FF CLASSIFICATIONS

a.) EQUITY –SETTLED SHARE BASED TRANSACTIONS – SHARE OPTIONS

b.) CASH SETTLED SHARE BASED TRANSACTIONS
c.) TRANSACTIONS IN WHICH THE ENTITY RECEIVES OR ACQUIRES GOODS OR SERVICES AND THE
TERMS OF THE ARRANGEMENT PROVIDE THAT THE ENTITY CAN CHOOSE WHETHER TO SETTLE IT IN
CASH OR BY ISSUING EQUITY INSTRUMENTS

9.SHARE APPRECIATION RIGHTS

-INCENTIVES FOR IMPRESSIVE PERFORMANCE OF THE COMPANY GRANTED TO KEY EMPLOYEES IN THE
FROM OF CASH BASED ON THE INCREASE IN THE MARKET VALUE COMPANY’S SHARE FROM DATE OF
GRANT
-CASH SETTLED SHARE BASED TRANSACTION
-REQUIRES THAT THE VALUE OF THE SERVICES RECEIVED AND THE LIABILITY INCURRED BE MEASURED
AT THE FAIR VALUE OF THE LIABILITY
-UNTIL SETTLEMENT OF THE LIABILITY , THE LIABILITY SHALL BE RE-MEASURED RECOGNIZING ANY
PROFIT OR LOSS FOR THE PERIOD.

9.SHARE BASED TRANSACTIONS WITH CASH BASED ALTERNATIVES

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 P a g e | 20

-AN ENTITY IN THE GRANT OF SHARE APPRECIATION RIGHTS OR SHARE OPTIONS, CAN CHOOSE
WHETHER THE ADDITIONAL BENEFITS TO EMPLOYEES CAN BE SETTLED IN THE CASH OR IN
EQUITY INSTRUMENTS.
-PRESENT OBLIGATION TO SETTLE IN CASH IF THE EQUITY INSTRUMENTS HAS NO COMMERCIAL
SUBSTANCE. (CASH-SETTLED SHARED BASED TRANSACTION)

10.RETAINED EARNINGS (ACCUMULATED PROFITS –IFRS)

-REPRESENTS THE FIRMS ACCUMULATED
 PROFIT OR LOSS, INCLUDING PRIOR PERIOD ADJMTS
 LESS THE DIVIDENDS DECLARED
 OTHER AMOUNTS TRANSFERRED TO CAPITAL ACCOUNTS

PROFIT OR LOSS FOR THE CURRENT PERIOD

FINAL CLOSING ENTRIES IN THE BOOKS OF THE CORP-

PROFIT OR LOSS SUMMARY HAS A CR. BALANCE - PROFIT

PROFIT OR LOSS SUMMARY HAS A CR. BALANCE- LOSS

10.DIVIDENDS
-DISTRIBUTION OF CORPORATE INCOME TO ITS SHAREHOLDERS ON A PRO-RATA BASIS
-TAKEN FROM ITS ACCUMULATED EARNINGS EXCEPT FOR
LIQUIDATING DIVIDENDS –RETURN TO THE SHAREHOLDERS OF THEIR INVESTMENT
-POWER TO DECLARE IS VESTED UPON THE BOARD OF DIRECTORS WITH 3 IMPT DATES

 DATE OF DECLARATION-APPROVES AND ANNOUNCES THE DIVIDDENDS

 DATE OF RECORD (CUT-OFF DATE) – LIST OF SHAREHOLDERS ENTITLED TO DIVIDENDS
 DATE OF PAYMENT OR DISTRIBUTION-SETTLEMENT OF THE DIVIDENDS

KINDS OF DIVIDENDS

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 P a g e | 21

 CASH – CORP MUST HAVE ENOUGH CASH AND RETAINED EARNINGS TO PAY THE DIVIDEND
- % OF THE PAR VALUE OF SHARE CAPITAL OR AS A PESO AMOUNT PER SHARE.
- WHEN DECLARED , CURRENT LIABILITY IS RECOGNIZED IN THE ACCOUNT( CR. DIV. PAYABLE)
DR TO RETAINED EARNINGS)
-DECLARATION OF THE DIVIDEND DECREASES THE TOTAL SHAREHOLDERS EQUITY.

 PROPERTY – PAYABLE IN ASSETS, EQUITY OR DEBT SECURITIES HELD IN OTHER COMPANY’S

-OTHER NON-CASH ASSETS
-MEASURED AT LOWER OF THE CARRYING AMOUNT AND FAIR VALUE
LESS COST TO DISTRIBUTE.

 SHARE DIVIDENDS (CAPITALIZATION ORBONUS ISSUE)-PRO-RATA DISTRIBUTION OF A CORP.

OWNS SHARE TO ITS SHAREHOLDERS.
-CONSIST OF SAME CLASS OF SHARE OR ORDINARY BONUS ISSUE
-DIFFERENT CLASS OF SHARE- SPECIAL BONUS ISSUE
-DOES NOT AFFECT TOTAL ASSETS AND TOTAL SHAREHOLDERS EQUITY, JUST A
TRANSFER OF CAPITAL FROM RETAINED EARNINGS TO CONTRIBUTED CAPITAL
-20% EFFECT ON THE SHARES PREVIOUSLY OUTSTANDING- SMALL BONUS ISSUE
-FV OF ADDITIONAL SHARES TRANSFERRED FROM R/E TO PAID-IN CAP. ACCPOUNT
-MORE THAN 20% EFFECT – AMT CAPITALIZED=PAR OR STATED VALUE OF THE S/C

 FRACTIONAL SHARE WARRANTS- DIVIDENDS W/C RESULTS TO FRACTION OF A SHARE

CORP. MAY
-ISSUE THE FRACTIONAL SHARE
-PAY THE SHAREHOLDER AN AMOUNT EQUAL TO THE MARKET PRICE OF THE
FRACTIONAL SHARE
- REQUIRE THE SHAREHOLDER TO PAY SUFFICIENT AMOUUNT TO RECEIVE A
FULL SHARE

 SCRIP DIVIDEND- PROMISSORY NOTE REQUIRING CORP TO PAY DIVIDENDS AT SOME

FUTURE DATE
-CORP HAS ENOUGH RETAINED EARNINGS BUT NOT ENOUGH CASH
-INTEREST BEARING
-ACCRUED INTEREST IS RECORDED AS AN EXPENSE

 LIQUIDATING DIVIDENDS – RETURN OF CONTRIBUTED CAPITAL THAN A DISTRIBUTION OF

EARNINGS
-WHEN CORP. IS CEASING OR REDUCING OPERATIONS

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 P a g e | 22

11.ALLOCATION OF CASH DIVIDENDS BETWEEN PREFERENCE SHARE AND ORDINARY SHARES

-PREFERENCE SHARES HAS NO VOTING RIGHTS BUT HAS PRIORITY OVER DIVIDENDS

 NON-CUMULATIVE PREFERENCE SHARES –NOT ENTITLED TO PRIOR YRS DIVIDENDS

 CUMULATIVE PREFERENCE SHARES –ENTITLED TO CURRENT AND PRIOR YRS DIVIDENDS
 NON-PARTICIPATING PREFERENCE SHARES- NOT ENTITLED TO ADDITONAL DIVIDENDS AFTER
PAYMENT TO ORDINARY SHARE
 PARTICIPATING PREFERENCE SHARES- ENTITLED TO ADDITONAL DIVIDENDS AFTER PAYMENT
TO ORDINARY SHARE

12. APPROPRIATIONS FOR RETAINED EARNINGS

RESTRICTED RETAINED EARNINGS –UNAVAILABLE FOR DIVIDENDS

-EARMARKED FOR A DESIGNATED PURPOSE
- LEGAL REQUIREMENTS – REACQUISITION OF OWN SHARES
AS TREASURY SHARES
-CONTRACTUAL AGR. –ISSUANCE OF LONG TERM BOND
-DISCRETIONARY ACTIONS-FUTURE EXPANSION OR
POTENTIAL LOSSES

13. CORRECTION OF PRIOR PERIOD ERRORS

 OMISSIONS FORM, AND MISTATEMENTS IN THE ENTITY’S FINANCIAL STATEMENTS FOR ONE
OR MORE PERIODS ARISING FROM
 FAILURE TO USE, MIS- USE OF RELIABLE INFORMATION THAT WAS AVAILABLE DURING THE
PREPARATION OF THE F/S
 ERRORS INCLUDE MATHEMATICAL MISTAKES,MISTAKES IN APPLYING ACCOUNTING POLICIES,
OVERSIGHT AND MISINTERPRETATION OF FACTS AND FRAUD
 RESULT IN EITHER A NET UNDERSTATEMENT OR NET OVERSTATEMENT IN RETAINED
EARNINGS ACCOUNT.
 ADJUSTMENT ON R/E SHOULD NET OF INCOME TAX.

14. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING POLICY

 ACCOUNTING POLICIES SHOULD BE CONSISTENT – ENHANCED COMPARABILITY OF F/S

UNLESS IT WOULD RESULT TO PROVIDING MORE RELIABLE AND MORE RELEVANT
TRANSACTIONS OR CONDITIONS ON THE ENTITY’S FINANCIAL POSITION, PERFORMANCE
OR CASH FLOWS

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 P a g e | 23

 CHANGES IN ACCOUNTING POLICIES

-INVOLUNTARY CHANGE – REQUIRED BY A STANDARD OR AN INTERPRETION
-VOLUNTARY CHANGE – EFFECTED BECAUSE THE MANAGEMENT BELIEVES THAT IT WOULD
RESULT TO MORE RELIABLE INFORMATION AND RELEVANT
PRESENTATION OF THE PERFORMACE AND FINANCIAL POSITION
OF THE ENTERPRISE.

15. QUASI-REORGANIZATION

-AN ACCOUNTING PROCEDURE THAT INVOLVES THE REVALUATION OF CORP.ASSETS AND LIABILITIES
-RESTATEMENT OF THE CORP. STRUCTURE TO ENABLE THE CORP TO HAVE A FRESH START TOWARDS
FINANCIAL SOLVENCY AND PROFITABILITY
-ONLY FINANCIALLY DISTRESSES CO. MAY APPLY FOR QUASI-REORGANIZATION
PROVIDED : THAT THEY HAVE SUBSTANTIAL SURPLUS IN THE MV OF THEIR PPE
-AMT OF REVALUATION SURPLUS IS ENOUGH TO ABSORB THE DEFICIT TO BE
ELIMINATED.
-AFTER QR –CORP MUST HAVE A ZERO BALANCE IN R/E
-IN SUBSEQUENT F/S -THE R/E MUST BE DATED FOR APPROXIMATELY 10 YRS –DATE OF QR
-FOR AT LEAST 3 YRS FROM QR –AMOUNT OF ACC. DEFICIT ELIMINATED SHOULD BE DISCLOSED IN F/S

16. CUMULATIVE OTHER COMPREHENSIVE INCOME

- UNREALIZED GAIN AND LOSSES DURING A REPORTING PERIOD RESULTING FROM
 CHANGE IN THE FAIR VALUE OF EQUITY AND DEBT INVESTMENT
 REVALUATION INCREASE IN PROPERTY .PLANT AND EQUIPTMENT AND OR INTANGIBLES
 REMEASUREMENT ADJMT IN DEFINED BENEFIT OBLIGATION
 FOREIGN CURRENCY TRANSLATION ADJMT GAINS AND LOSSES
 CASH FLOW HEDGES FOR THE PORTION OF GAIN AND LOSS ON THE HEDGING INSTRUMENT

17. STATEMENT OF CHANGES IN EQUITY

 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
 FOR EACH COMPONENT EQUITY-EFFECTS CHANGES IN ACCOUNTING POLICIES AND
CORRECTION ERRORS
 FOR EACH COMPONENT EQUITY- A RECONCILIATION OF CARRYING AMOUNT AT BEG
AND END OF PERIOD DISCLOSING CHANGES IN
-PROFIT OR LOSS
-EACH ITEM OF OTHER COMPREHENSIVE INCOME
- TRANSACTIONS WITH OWNERS, SHOWING SEPARATELY CONTRIBUTIONS BY
AND DISTRIBUTIONS TO OWNERS

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA
 P a g e | 24

18. BOOK VALUE PER SHARE

-AMOUNT THAT IS PAID ON EACH SHARE ASSUMING THAT THE COMPANY IS LIQUIDATED
AND THAT ASSETS ARE REALIZED AT THEIR CARRYING AMOUNTS.
-FACTOR USED IN EVALUATING THE VALUE WORTH OF A SHARE OF STOCK

 ONE CLASS OF OUTSTANDING SHARE CAPITAL

TOTAL SHAREHOLDERS EQUITY – TREASURY SHARE AMOUNT + SUBSCRIBED AMT

NO. OF OUTSTANDING SHARES – NO. OF TREASURY SHARES + NO. OF SUBSCRIBED SHARES

 ONE CLASS OF OUTSTANDING SHARE CAPITAL

TOTAL SHAREHOLDERS EQUITY

LESS: EQUITY IDENTIFIED W/ PREF. SHARES (LIQ.VALUE X # OF SHARE)
EQUITY IDENTIFIED WITH ORDINARY SHARES

BOOK VALUE PER SHARE

PREFERENCE SHARE (LIQUIDATION VALUE/ TOTAL # OF SHARES)

ORDINARY SHARE (EQUITY IDENTIFIED /TOTAL # OF SHARES)

SOURCES: FINACIAL ACCTG PART 2 – C. VALIX 2017 ED.;INTERMEDIATE ACCOUNTING PART 2, ROBLES &
EMPLEO 2017; PARTNERSHIP & CORP. , R. PALMA 2014 ED; PARTNERSHIP & CORP. MADE EASY, WIN
BALLADA