Basic Journal Entries for

Corporations
Lord Gen A. Rilloraza, CPA, MBA
Topics
• Corporation – Formation; Financial
Statements
• Journal Entries for:
o Share Issuance
o Treasury Shares
o Retained Earnings
o Dividends
Topics
• Corporation – Formation; Financial
Statements
• Journal Entries for:
o Share Issuance
o Treasury Shares
o Retained Earnings
o Dividends
Corporation – Formation; FS
Corporation
• Artificial being created by operation of law
• It has the right of succession
• It has the powers, attributes, and properties
expressly authorized by law and incident to its
existence
Corporation – Formation; FS
Equity Section of SFP
Corporation – Formation; FS
Composition of Shareholders’ Equity Section
• Contributed Capital
• Retained Earnings (or Accumulated Profits or
Losses)
• Accumulated Other Comprehensive Income
or Losses
Corporation – Formation; FS
Composition of Shareholders’ Equity Section
• Contributed Capital
o Share Capital
o Additional Paid-In Capital
• Retained Earnings (or Accumulated Profits or
Losses)
• Accumulated Other Comprehensive Income
or Losses
Corporation – Formation; FS
Composition of Shareholders’ Equity Section
• Contributed Capital
• Retained Earnings (or Accumulated Profits
or Losses)
o Unappropriated
o Appropriated
• Accumulated Other Comprehensive Income
or Losses
Corporation – Formation; FS
Composition of Shareholders’ Equity Section
• Contributed Capital
• Retained Earnings (or Accumulated Profits or
Losses)
• Accumulated Other Comprehensive
Income or Losses
Topics
• Corporation – Formation; Financial
Statements
• Journal Entries for:
o Share Issuance
o Treasury Shares
o Retained Earnings
o Dividends
JE: Share Issuance
Kinds of Shares
• Par value shares
• No par value shares with stated value
• No par, no stated value shares
JE: Share Issuance
Kinds of Shares
• Par value shares
• No par value shares with stated value
• No par, no stated value shares

• One with a value stated in the Articles of Incorporation and in the Certificate
of Stock
• May be issued at par value, or above par value, but NOT below par value
JE: Share Issuance
Kinds of Shares
• Par value shares
• No par value shares with stated value
• No par, no stated value shares

• One with a nominal value stated in the Articles of Incorporation

• May be issued at stated value, or above stated value
JE: Share Issuance
Kinds of Shares
• Par value shares
• No par value shares with stated value
• No par, no stated value shares

• Also called “true no-par value share”

• One from which all payments received shall be recorded as share capital
JE: Share Issuance
Kinds of Par Value Shares
• Common or Ordinary Shares
• Preference Shares
JE: Share Issuance
Kinds of Par Value Shares
• Common or Ordinary Shares
• Preference Shares

A company may issue ordinary shares only, or both ordinary and preference
shares, but NOT preference shares only.
JE: Share Issuance
Kinds of Par Value Shares
• Common or Ordinary Shares
• Preference Shares
Preference shares have potential rights over ordinary shares on
(a) Dividends;
(b) Net assets upon liquidation; or
(c) both
JE: Share Issuance
Kinds of Par Value Shares
• Common or Ordinary Shares
• Preference Shares

Ordinary shares have voting powers; preference shares have limited voting power
(i.e., they can only vote on some decisions)
JE: Share Issuance
Journal Entry for Issuance

Issuance at par:
Cash xxx
Share Capital xxx

Issuance above par:

Cash xxx
Share Capital xxx
Share Premium xxx
JE: Share Issuance
Issuance at Par
On July 1, 2021, ABC Corporation issued 10,000 ordinary shares out of the 10,000,000 authorized
ordinary shares, and 2,000 preference shares out of the 1,000,000 authorized preference shares.

The shares were issued at par. The par value per ordinary share is P20; while the par value per
preference share is P200.
JE: Share Issuance
Issuance at Par
On July 1, 2021, ABC Corporation issued 10,000 ordinary shares out of the 10,000,000 authorized
ordinary shares, and 2,000 preference shares out of the 1,000,000 authorized preference shares.

The shares were issued at par. The par value per ordinary share is P20; while the par value per
preference share is P200.

Journal Entries:
Cash (10,000sh * P20/sh) P200,000
Ordinary Share Capital P200,000

Cash (2,000sh * P200/sh) P400,000

Preference Share Capital P400,000
JE: Share Issuance
Issuance at Above Par
On July 1, 2021, ABC Corporation issued 10,000 ordinary shares out of the 10,000,000 authorized
ordinary shares, and 2,000 preference shares out of the 1,000,000 authorized preference shares.

The ordinary shares were issued for P30 per share (par value is P20/sh); while the preference shares
were issued at P220 per share (par value is P200/sh).
JE: Share Issuance
Issuance at Above Par
On July 1, 2021, ABC Corporation issued 10,000 ordinary shares out of the 10,000,000 authorized
ordinary shares, and 2,000 preference shares out of the 1,000,000 authorized preference shares.

The ordinary shares were issued for P30 per share (par value is P20/sh); while the preference shares
were issued at P220 per share (par value is P200/sh).

Journal Entries:
Cash (10,000sh * P30/sh) P300,000
Ordinary Share Capital (10,000sh * P20/sh) P200,000
Ordinary Share Premium 100,000
JE: Share Issuance
Issuance at Above Par
On July 1, 2021, ABC Corporation issued 10,000 ordinary shares out of the 10,000,000 authorized
ordinary shares, and 2,000 preference shares out of the 1,000,000 authorized preference shares.

The ordinary shares were issued for P30 per share (par value is P20/sh); while the preference shares
were issued at P220 per share (par value is P200/sh).

Journal Entries:
Cash (10,000sh * P30/sh) P300,000
Ordinary Share Capital (10,000sh * P20/sh) P200,000
Ordinary Share Premium 100,000

Cash (2,000sh * P220/sh) P440,000

Preference Share Capital (2,000sh * P200/sh) P400,000
Preference Share Premium 40,000
JE: Share Issuance
Issuance of no par with stated value shares
On November 30, 2021, DEF Corporation issued 5,000 ordinary shares for P25 per share. The shares
have no par value, but with a stated value of P5 per share.
JE: Share Issuance
Issuance of no par with stated value shares
On November 30, 2021, DEF Corporation issued 5,000 ordinary shares for P25 per share. The shares
have no par value, but with a stated value of P5 per share.

Journal Entry:
Cash (5,000sh * P25/sh) P125,000
Share Capital (5,000sh * P5/sh) P25,000
Share Premium 100,000
JE: Share Issuance
Issuance of no par, no stated value shares
On November 30, 2021, DEF Corporation issued 5,000 ordinary shares for P25 per share. The shares
have no par value, no stated value.
JE: Share Issuance
Issuance of no par, no stated value shares
On November 30, 2021, DEF Corporation issued 5,000 ordinary shares for P25 per share. The shares
have no par value, no stated value.

Journal Entry:

Cash P125,000
Share Capital P125,000
JE: Share Issuance
Shares may be issued in exchange of:
• Cash
• Property
• Services
JE: Share Issuance
Shares may be issued in exchange of:
• Cash
• Property The property must be recorded at its fair
value.
• Services
JE: Share Issuance
Shares may be issued in exchange of:
• Cash
The service is recorded at:
• Property (a) The amount billed; or
(b) The fair value of the service if there was
• Services no billing
JE: Share Issuance
Shares issued in exchange of property
On February 1, 2021, GHI Corporation issued 20,000 shares in exchange of a building with a fair
value of P1,000,000. The par value per share is P10.
JE: Share Issuance
Shares issued in exchange of property
On February 1, 2021, GHI Corporation issued 20,000 shares in exchange of a building with a fair
value of P1,000,000. The par value per share is P10.

Journal Entry:
Building P1,000,000
Share Capital P200,000
Share Premium 800,000
JE: Share Issuance
Shares issued in exchange of services
A lawyer billed JKL Corporation P500,000 for legal services rendered. The company issued 30,000
shares in exchange of the legal services. The par value per share is P10.
JE: Share Issuance
Shares issued in exchange of services
A lawyer billed JKL Corporation P500,000 for legal services rendered. The company issued 30,000
shares in exchange of the legal services. The par value per share is P10.

Journal Entry:
Legal Expenses P500,000
Share Capital P300,000
Share Premium 200,000
Topics
• Corporation – Formation; Financial
Statements
• Journal Entries for:
o Share Issuance
o Treasury Shares
o Retained Earnings
o Dividends
JE: Treasury Shares
• Treasury Shares – shares previously issued
by a corporation, and reacquired by the
corporation
JE: Treasury Shares
• Treasury Shares – shares previously issued
by a corporation, and reacquired by the
corporation
• Not entitled to dividends;
• Cannot vote in any meeting of the shareholders
• The cost of the treasury shares on hand is a
restriction on Retained Earnings (i.e.,
Appropriated Retained Earnings)
JE: Treasury Shares
Journal Entry

Treasury Shares xxx

Cash xxx

Unappropriated Retained Earnings xxx

Appropriated Retained Earnings xxx
JE: Treasury Shares
Journal Entry

Treasury Shares xxx

Cash xxx

Unappropriated Retained Earnings xxx

Appropriated Retained Earnings xxx

*Treasury Shares are measured at cost.

JE: Treasury Shares
MNO Corporation has the following balances in the equity section of its Statement of Financial
Position as of December 31, 2021:
Share Capital (P10 par value; 500,000 shares issued and outstanding;
1,000,000 shares authorized) P5,000,000
Share Premium 800,000
Retained Earnings 14,850,000
On January 1, 2022, the company reacquired 20,000 of its own shares for P15 per share.
JE: Treasury Shares
MNO Corporation has the following balances in the equity section of its Statement of Financial
Position as of December 31, 2021:
Share Capital (P10 par value; 500,000 shares issued and outstanding;
1,000,000 shares authorized) P5,000,000
Share Premium 800,000
Retained Earnings 14,850,000
On January 1, 2022, the company reacquired 20,000 of its own shares for P15 per share.

Presentation before acquisition of treasury

shares:
JE: Treasury Shares
MNO Corporation has the following balances in the equity section of its Statement of Financial
Position as of December 31, 2021:
Share Capital (P10 par value; 500,000 shares issued and outstanding;
1,000,000 shares authorized) P5,000,000
Share Premium 800,000
Retained Earnings 14,850,000
On January 1, 2022, the company reacquired 20,000 of its own shares for P15 per share.

Journal Entries:
Treasury Shares P300,000
Cash P300,000

Unappropriated Retained Earnings P300,000

Appropriated Retained Earnings P300,000
JE: Treasury Shares
MNO Corporation has the following balances in the equity section of its Statement of Financial
Position as of December 31, 2021:
Share Capital (P10 par value; 500,000 shares issued and outstanding;
1,000,000 shares authorized) P5,000,000
Share Premium 800,000
Retained Earnings 14,850,000
On January 1, 2022, the company reacquired 20,000 of its own shares for P15 per share.

Presentation after acquisition:

JE: Treasury Shares
What can corporations do with treasury shares?
• Keep the treasury shares
• Reissue the treasury shares
• Retire the treasury shares
JE: Treasury Shares
What can corporations do with treasury shares?
• Keep the treasury shares
• Reissue the treasury shares
• Retire the treasury shares
JE: Treasury Shares
What can corporations do with treasury shares?
• Keep the treasury shares
• Reissue the treasury shares
• Retire the treasury shares
JE: Treasury Shares
Reissuance of Treasury Shares
• Reissuance at cost
• Reissuance above cost
• Reissuance below cost
JE: Treasury Shares
Reissuance at Cost
PQR Corporation is currently holding 10,000 treasury shares, which it reacquired for P150,000 (i.e.,
P15 per share). The balances in the equity section of the company are as follows:
Ordinary Share Capital (P10 par value; 800,000 shares issued;
1,000,000 shares authorized) P8,000,000
Share Premium - Ordinary 7,500,000
Retained Earnings 11,500,000
Treasury Shares 150,000
The company reissued its treasury shares at P15 per share.
JE: Treasury Shares
Reissuance at Cost
PQR Corporation is currently holding 10,000 treasury shares, which it reacquired for P150,000 (i.e.,
P15 per share). The balances in the equity section of the company are as follows:
Ordinary Share Capital (P10 par value; 800,000 shares issued;
1,000,000 shares authorized) P8,000,000
Share Premium - Ordinary 7,500,000
Retained Earnings 11,500,000
Treasury Shares 150,000
The company reissued its treasury shares at P15 per share.

Journal Entries:
Cash P150,000
Treasury Shares P150,000

Appropriated Retained Earnings P150,000

Unappropriated Retained Earnings P150,000
JE: Treasury Shares
Reissuance Above Cost
PQR Corporation is currently holding 10,000 treasury shares, which it reacquired for P150,000 (i.e.,
P15 per share). The balances in the equity section of the company are as follows:
Ordinary Share Capital (P10 par value; 800,000 shares issued;
1,000,000 shares authorized) P8,000,000
Share Premium - Ordinary 7,500,000
Retained Earnings 11,500,000
Treasury Shares 150,000
The company reissued its treasury shares at P20 per share.
JE: Treasury Shares
Reissuance Above Cost
PQR Corporation is currently holding 10,000 treasury shares, which it reacquired for P150,000 (i.e.,
P15 per share). The balances in the equity section of the company are as follows:
Ordinary Share Capital (P10 par value; 800,000 shares issued;
1,000,000 shares authorized) P8,000,000
Share Premium - Ordinary 7,500,000
Retained Earnings 11,500,000
Treasury Shares 150,000
The company reissued its treasury shares at P20 per share.

Journal Entries:
Cash P200,000
Treasury Shares P150,000
Share Premium – Treasury 50,000

Appropriated Retained Earnings P150,000

Unappropriated Retained Earnings P150,000
JE: Treasury Shares
Reissuance Below Cost
PQR Corporation is currently holding 10,000 treasury shares, which it reacquired for P150,000 (i.e.,
P15 per share). The balances in the equity section of the company are as follows:
Ordinary Share Capital (P10 par value; 800,000 shares issued;
1,000,000 shares authorized) P8,000,000
Share Premium - Ordinary 7,500,000
Retained Earnings 11,500,000
Treasury Shares 150,000
The company reissued its treasury shares at P9 per share.

The “loss” on reissuance will be debited to (in order of priority):

• Share premium from treasury shares
• Share premium from original issuance
• Retained earnings
JE: Treasury Shares
Reissuance Below Cost
PQR Corporation is currently holding 10,000 treasury shares, which it reacquired for P150,000 (i.e.,
P15 per share). The balances in the equity section of the company are as follows:
Ordinary Share Capital (P10 par value; 800,000 shares issued;
1,000,000 shares authorized) P8,000,000
Share Premium - Ordinary 7,500,000
Retained Earnings 11,500,000
Treasury Shares 150,000
The company reissued its treasury shares at P9 per share.

Journal Entries:
Cash P90,000
Share Premium – Ordinary 60,000
Treasury Shares P150,000

Appropriated Retained Earnings P150,000

Unappropriated Retained Earnings P150,000
JE: Treasury Shares
Reissuance Below Cost
STU Corporation is currently holding 20,000 treasury shares, which it reacquired for P2,000,000
(i.e., P100 per share). The treasury shares were sold for P60 per share. The balances in the equity
before the reissuance were as follows:
Share Capital (1,000,000 shares issued) P10,000,000
Share Premium - Ordinary 1,000,000
Share Premium – Treasury 1,000,000
Retained Earnings 22,000,000
JE: Treasury Shares
Reissuance Below Cost
STU Corporation is currently holding 20,000 treasury shares, which it reacquired for P2,000,000
(i.e., P100 per share). The treasury shares were sold for P60 per share. The balances in the equity
before the reissuance were as follows:
Share Capital (1,000,000 shares issued) P10,000,000
Share Premium - Ordinary 1,000,000
Share Premium – Treasury 1,000,000
Retained Earnings 22,000,000

Journal Entries:
Cash P1,200,000
Share Premium – Treasury 800,000
Treasury Shares P2,000,000
JE: Treasury Shares
Reissuance Below Cost
STU Corporation is currently holding 20,000 treasury shares, which it reacquired for P2,000,000
(i.e., P100 per share). The treasury shares were sold for P60 per share. The balances in the equity
before the reissuance were as follows:
Share Capital (1,000,000 shares issued) P10,000,000
Share Premium - Ordinary 1,000,000
Share Premium – Treasury 500,000
Retained Earnings 22,000,000
JE: Treasury Shares
Reissuance Below Cost
STU Corporation is currently holding 20,000 treasury shares, which it reacquired for P2,000,000
(i.e., P100 per share). The treasury shares were sold for P60 per share. The balances in the equity
before the reissuance were as follows:
Share Capital (1,000,000 shares issued) P10,000,000
Share Premium - Ordinary 1,000,000
Share Premium – Treasury 500,000
Retained Earnings 22,000,000

Journal Entries:
Cash P1,200,000
Share Premium – Treasury 500,000
Share Premium – Ordinary 300,000
Treasury Shares P2,000,000
JE: Treasury Shares
Reissuance Below Cost
STU Corporation is currently holding 20,000 treasury shares, which it reacquired for P2,000,000
(i.e., P100 per share). The treasury shares were sold for P60 per share. The balances in the equity
before the reissuance were as follows:
Share Capital (1,000,000 shares issued) P10,000,000
Share Premium - Ordinary 200,000
Share Premium – Treasury 300,000
Retained Earnings 22,000,000
JE: Treasury Shares
Reissuance Below Cost
STU Corporation is currently holding 20,000 treasury shares, which it reacquired for P2,000,000
(i.e., P100 per share). The treasury shares were sold for P60 per share. The balances in the equity
before the reissuance were as follows:
Share Capital (1,000,000 shares issued) P10,000,000
Share Premium - Ordinary 200,000
Share Premium – Treasury 300,000
Retained Earnings 22,000,000

Journal Entries:
Cash P1,200,000
Share Premium – Treasury 300,000
Share Premium – Ordinary 200,000
Retained Earnings 300,000
Treasury Shares P2,000,000
JE: Treasury Shares
What can corporations do with treasury shares?
• Keep the treasury shares
• Reissue the treasury shares
• Retire the treasury shares
JE: Treasury Shares
Retirement of Shares
• Results in reduction of share capital

Share Capital xxx

Treasury Shares xxx
JE: Treasury Shares
Retirement of Shares
• If par value is greater than the cost per
treasury share

Share Capital xxx

Treasury Shares xxx
Share Premium – Treasury xxx
JE: Treasury Shares
Retirement of Shares
• If cost per treasury share is greater than the
par value
Share Capital xxx
Share Premium – Treasury (1) xxx
Share Premium – Ordinary (2) xxx
Retained Earnings (3) xxx
Treasury Shares xxx

Order of priority:
(1) Share Premium – Treasury
(2) Share Premium – Ordinary
(3) Retained Earnings
Topics
• Corporation – Formation; Financial
Statements
• Journal Entries for:
o Share Issuance
o Treasury Shares
o Retained Earnings
o Dividends
JE: Retained Earnings
• The net income (or net loss) of the company
during the year is closed to retained earnings
JE: Retained Earnings
• The net income (or net loss) of the company
during the year is closed to retained earnings
Closing Entries:
Revenue Accounts xxx
Income Summary xxx

Income Summary xxx

Expense Accounts xxx

Net Income
Income Summary xxx
Retained Earnings xxx

Net Loss:
Retained Earnings xxx
Income Summary xxx
Topics
• Corporation – Formation; Financial
Statements
• Journal Entries for:
o Share Issuance
o Treasury Shares
o Retained Earnings
o Dividends
JE: Dividends
Dividends:
• Distribution of profits to shareholders
• Can only be declared from unappropriated
retained earnings
JE: Dividends
Dividends:
• Distribution of profits to shareholders
• Can only be declared from unappropriated
retained earnings
Retained Earnings xxx
Cash xxx
JE: Dividends
Dates to Consider:
(1) Date of Declaration
(2) Date of Record
(3) Date of Payment
JE: Dividends
Dates to Consider:
(1) Date of Declaration
(2) Date of Record
(3) Date of Payment
• The date when the BOD declares dividends
• On this date, there is already a liability on the part of
the company to pay dividends

Journal Entry:
Retained Earnings xxx
Dividends Payable xxx
JE: Dividends
Dates to Consider:
(1) Date of Declaration
(2) Date of Record
(3) Date of Payment
• The date upon which the company checks the final list
of shareholders recorded in its records
• Those who are listed as shareholders on this date are
paid dividends
JE: Dividends
Dates to Consider:
(1) Date of Declaration
(2) Date of Record
(3) Date of Payment
• The date the company settles its dividends payable to
the shareholders on record on the date of record

Journal Entry:
Dividends Payable xxx
Cash xxx
JE: Dividends
Dates to Consider:
VWX Corporation declared dividends on December 1, 2021 to shareholders on record on December
31, 2021. The dividends will be paid out on January 15, 2022.

The dividend per share is P0.15. On December 1, 2021, 1,000,000 shares are issued, of which,
150,000 shares are held as treasury shares, while 850,000 are held by shareholders.
JE: Dividends
Dates to Consider:
VWX Corporation declared dividends on December 1, 2021 to shareholders on record on December
31, 2021. The dividends will be paid out on January 15, 2022.

The dividend per share is P0.15. On December 1, 2021, 1,000,000 shares are issued, of which,
150,000 shares are held as treasury shares, while 850,000 are held by shareholders.

Journal Entries:
Dec. 1, 2021 Retained Earnings P150,000
Dividends Payable P150,000

Jan. 15, 2022 Dividends Payable P150,000

Cash P150,000
Questions?
End