Accounting
provide quantitative information primarily financial
ECONOMIC ENTITIES
Forms of Business Organizations
Single Proprietorship
ECONOMIC ENTITIES
Forms of Business Organizations
Partnership
ECONOMIC ENTITIES
Forms of Business Organizations
Corporation
Artificial being
Legal personality
Perpetual existence
A Service Activity that is main purpose is to
in nature about economic entities that is intended
to be useful in making economic decisions
- The simplest form of business
organization is owned by one person.
- Business organization jointly owned and
managed by two or more persons
- A corporation is an artificial being created
by operation of law having the right of succession
and the powers, attributes, and properties
expressly authorized by law or incident to its
existence. (Section 2 of the Revised Corporation
Code of the Philippines)
A corporation is a separate and distinct
personality from the shareholders, and as such, it
may acquire or dispose of properties, incur and
pay obligations, sue, and be sued. In other words,
the firm is viewed as a separate and distinct
personality from the people who own it.
A corporation has a separate and distinct identity
from its stockholders, and as such, it can buy and
sell assets, incur and pay debts, bring lawsuits. In
other terms, the company is seen as a different
entity from the people who own it.
A corporation's identity is legally created by
operation of law and as such is a juridical person
with rights, powers, and duties pertaining thereto.
The identity of a corporation is legally established
by operation of law, and as such, it is a juridical
person with rights, powers, and responsibilities.
A corporation shall exist for an indefinite period
unless its term is expressly limited as provided in
its articles of incorporation.
Unless the life of a company is specifically
specified in its articles of incorporation, it will
continue indefinitely.
Corporate ownership The interest and right over the corporation is
divided into shares of stock. An investor buys
shares of stock to become a shareholder whose
interest and rights in the firm is based on the
number of shares and the kind of shares
acquired.

The corporation's interests and rights are divided

into stock or shares. An investor buys stock to
become a shareholder, and his or her interest and
rights in the company are determined by the
number of shares and the kind of stock
purchased.

Limited liability The shareholders are not liable for corporate acts
nor are they liable for corporate debts. Their
personal properties cannot be confiscated and
used to pay for the corporate liabilities when the
corporation becomes insolvent unlike those of a
sole proprietor or partner.

The stockholders are not accountable for the

actions of the corporation or for its obligations. In
contrast to a single proprietor or partner, their
personal assets (stockholders) cannot be taken
and used to pay for the debts and liabilities if the
company goes bankrupt.

Transferability of interest The shares of stock owned by a shareholder may

be sold or transferred without the prior consent of
the other stockholders. Such transfer or sale does
not affect the business operation.

A shareholder's shares of stock can be sold or

transferred without the approval of the other
stockholders. The operations of the firm is
undisturbed by such a transfer or sale.

ECONOMIC ENTITIES Derives its income mainly from the sale of service
Modes of Business Operations to clients.

The customer gets intangible products or services

Service Business
as a result of this mode of business. It generally
makes sales by charging customers, the
government, or other businesses for labor or
other services.

ECONOMIC ENTITIES This type of goods buys goods which are already
Modes of Business Operations for sale.

This type of business buys goods from other firms

Merchandising (Trading) Business
or manufacturers and then sells them to
customers. They generally make sales by

ECONOMIC ENTITIES
Modes of Business Operations
Manufacturing Business
Advantages of Corporation
Capital
Advantages of Corporation
Liability to corporate creditors
Advantages of Corporation
Transferability of interest
charging a markup for the goods they have for
sale.
The mode of business that buys raw materials,
processes them, and sells them as a finished
product.
This type of company transforms raw materials,
labor, and expenses into finished products that
can be sold to customers.
A large amount of resources can easily be
acquired by selling the shares through the
investment market such as the Philippine Stock
Exchange where a great number of individuals
and firms channel their investments.
Selling shares on an investment market like the
Philippine Stock Exchange, where a great portion
of individuals and businesses direct their money,
is a simple way to obtain a huge amount of
resources.
A shareholder is limited or liable only to the extent
of his or her investment in the corporation. The
personal assets of the shareholder are not
available for the satisfaction of the claim of the
corporate creditors, unlike a sole proprietor or
partner. In like manner, the corporation is not also
liable for the personal debts of the shareholders.
A shareholder's liability is limited to the amount of
money he or she has invested in the company.
Unlike a single proprietor or partner, the
shareholder's personal assets are not available to
satisfy the claim of the corporate creditors.
Similarly, the company is not accountable for the
stockholders' personal debts.
After shares are issued to a shareholder, these
shares may be transferred to others through the
stock market (Philippine Stock Exchange) or
through other brokers and investment houses.
Recall that a new partner cannot be admitted in
the partnership without the consent of all
partners.
After a shareholder's shares are issued, they can
be transferred to others through the stock market
(Philippine Stock Exchange) or other brokers and
investment houses. Keep in mind that a new
partner cannot join the partnership without the
permission of all partners.
Advantages of Corporation
Formation
Advantages of Corporation
Skilled Management
Disadvantages of Corporation
Tax Liability
Disadvantages of Corporation
Legal requirements
Corporators
Shareholders
Members
Board of Directors
it is easy to form a corporation especially by the
small and medium enterprise with a One Person
Corporation allowed in the Revised Corporation
Code.
With the Revised Company Code's One Person
Corporation, it is simple to create a corporation,
especially for small and medium businesses.
A corporation may be managed by a team of
professionals hired to oversee the daily operation
of the firm. These managers are more likely to be
specialists in the areas of marketing, finance,
accounting, and production.
A corporation may be managed by a group of
professionals who are employed to oversee the
company's day-to-day operations. These leaders
are more likely to be specialists in marketing,
finance, accounting, and production.
Corporations and partnerships are taxed 30% on
their income but starting 2020 this will decrease
by an increment of 1% until it reaches 20%.
Corporations and partnerships pay a 30% tax on
their earnings, but starting in 2020, this will be
reduced by 1% each year until it reaches 20%.
Corporations are subject to government scrutiny
more than the sole proprietorship and partnership
forms of business because of the large number of
approval not only their Articles of Incorporation
but also their Corporate By-Laws to the Securities
and Exchange Commission.
Because corporations must submit not only their
Articles of Incorporation but also their Corporate
By-Laws to the Securities and Exchange
Commission, they are subject to more
government scrutiny than sole proprietorships
and partnerships.
The corporators are the owners of the
corporation.
The Board of Directors of a stock corporation is
elected by its owners or the stockholders.
The Board of Trustees of a non-stock corporation
is elected by its owners or the members.
The Board of Directors is responsible for the
overall supervision of the firm. They have the final
 authority on policy-making and control of
corporate activities. They evaluate management
performance and act on legal matters, as well.
Expansion programs, dividend declaration, the
introduction of new products, and entry into a new
market, ventures, mergers, and consolidations
are some of the problems tackled and decided
upon by the Board of Directors.

The firm's overall oversight is the responsibility of

the Board of Directors. They have the last say in
policy-making and business activity control. They
also assess managerial performance and take
legal action. Expansion programs, dividend
declarations, the launch of new goods, and entry
into a new market, as well as ventures, mergers,
and consolidations, are all matters that the Board
of Directors addresses and decides on.

Chief Executive Officer or CEO) responsible for implementing the policies set up
and the other officers and the plans drawn by the Board of Directors.

They are in responsible for putting the policies

and strategies put in place by the Board of
Directors into reality.

Vice Presidents who are given specific areas of responsibility as

managers of the following departments:
production, finance, marketing, and human
resources.

They are assigned specific responsibilities as

managers in the departments of production,
finance, marketing, and human resources.

KINDS OF CORPORATIONS A private corporation is one owned organized for

a private purpose or objective.
private corporation
A private corporation is one that is privately
owned and operated for a specific purpose or
goal.

KINDS OF CORPORATIONS A stock corporation is one that is privately owned

by individuals or by some non-government units
stock corporation and is organized for profit which is distributed as
dividends to the owners. Ownership is sold in
units called shares or stock.

A stock corporation is a business that is privately

owned by individuals or non-government entities
and is established to make a profit that is
distributed to the shareholders as dividends.
Shares or stock are the units of ownership that
are sold.
KINDS OF CORPORATIONS such as a religious sect or a religious school is
non-profit in nature therefore no shares of stock
non-stock corporation are distributed nor is there dividend or profit
distribution. The corporators or owners are called
members and the purpose for its creation may be
religious, civic or social in nature.

Because a religious sect or a religious school is a

non-profit organization, no stock is given, and no
dividends or profits are distributed. Members are
the owners or corporators, and the purpose for its
formation might be religious, civic, or social.

Corporation Code of the the general law by and under whose authority
Philippines private corporations are created.

The general legislation that governs the formation

of private corporations.

KINDS OF CORPORATIONS a government corporation organized for the

accomplishment of its public functions such as
public corporation the national government, provincial, city or
municipal government.

a government corporation, such as the national

government, provincial government, city
government, or municipal government, that is
formed to carry out its public responsibilities.

KINDS OF CORPORATIONS a family corporation or one which stock is held by

a selected few and not open to any person. It is
close corporation also called a privately-held corporation.

a family corporation or one in which only a few

people own stock and which is not available to
the public. A privately held corporation is yet
another term for it.

KINDS OF CORPORATIONS one where the stock is listed in the stock market
available for purchase by any person or entity. It
open corporation is also called a publicly-held corporation.

one in which the stock is publicly traded and

available for purchase by any individual or
business. It's also known as a publicly held
corporation.

KINDS OF STOCKS A par value stock is one in which a fixed value is

As to value stated in the certificate of stock and in the articles
of incorporation.
par value stock
A par value stock is one whose certificate of stock
and articles of organization both indicate a fixed
value.
minimum basis means that the stock can be issued at par and
above par but not below the par value.

This indicates that the stock can be issued at par

or above par value, but not below it.

KINDS OF STOCKS one without a designated value stated in the

As to value stock certificate but it cannot be sold at less than
P5.00 as provided in the Corporation Code of the
no par value stock Philippines. The law, however, allows the Board
of Directors or shareholders to fix the value at
some later date. The stock is then called a no par
but with an issued value or stated value stock.

one without a specified value on the stock

certificate, but which, according to the Philippine
Corporation Code, cannot be sold for less than
P5.00. The law, on the other hand, permits the
Board of Directors or the shareholders to set the
value at a later time. The stock is then referred to
as a no par stock with an issued value or a stock
with a stated value.

KINDS OF STOCKS an ordinary stock issued by a corporation that

As to right
common stock or ordinary share
entitles the owner to a pro-rata dividend without
any priority or preference over any other
stockholders. If only one kind of stock is issued
by the corporation, it is presumed to be common
stock or ordinary share. These shares have
voting rights and can be issued at par or no par.
The corporation code prohibits some corporations
to issue no par shares.

an ordinary stock issued by a corporation that

allows the owner to a pro-rata dividend with no
preference or priority over other shareholders. If
the corporation only issues one type of stock, it is
assumed to be common stock or ordinary share.
These shares can be issued at par or no par
value and have voting rights. Some corporations
are prohibited from issuing no-par shares under
corporate laws.

KINDS OF STOCKS a class of stock with preferential rights on claims

As to right over the common stock. The most common
preferential right is its priority claim over dividend
preferred stock or preference share distribution. Preference share is usually issued at
par and the dividend rate is expressed as a
percentage of the par value. These shares have
no voting rights except in matters of amendment
over the articles of incorporation or by laws. Only
par value shares can be issued for this kind of
stock.
 a type of stock that has first rights on claims
against the common stock. The most prevalent
preferential privilege is a claim to first dibs on
dividends. The dividend rate on a preference
share is generally stated as a percentage of the
par value. These shares do not have voting rights
unless the articles of incorporation or bylaws are
amended. For this type of stock, only par value
shares can be issued.

Authorized Share Capital Maximum number of shares allowed to be stated

times par value

Stock Subscription A subscription is an agreement o purchase

shares of stock and states the number of shares
being subscribed, the subscription price, and
terms of payment and call dates. In the absence
of fixed call dates, payment is made upon by the
Board of Directors.

A subscription is an agreement to buy stock that

specifies the amount of shares being purchased,
the subscription price, payment conditions, and
call dates. Payment is made by the Board of
Directors if there are no specified call dates.

Share Capital Contributed paid-in capital or resources received

from investors / shareholders for which a
certificate of stock is issued and serves as
evidence of stock ownership

Certificate of Stock This is a written acknowledgment by the

corporation of the shareholder’s interest in the
corporation and its net assets. The practice is to
issue a certificate for a block of shares
subscribed and fully paid for.

This is the corporation's formal acknowledgment

of the shareholder's stake in the company and its
net assets. The standard procedure is to issue a
certificate for a block of shares that has been fully
subscribed and paid for.

Contributed or Paid in-Capital contributed or paid-in capital represents total

contributions made by the shareholders. Capital
account titles for individual shareholders are not
maintained because of the number of
shareholders and the constant transfer of shares
from one shareholder to another

The entire contributions made by the

shareholders are represented by contributed or
paid-in capital. Because of the large number of

Subscribed Share Capital
Additional Paid-In Capital
Paid in capital in excess of par
Total Contributed Capital
Incorporators
Corporators
shareholders and the frequent transfer of shares
from one shareholder to another, capital account
titles for individual shareholders are not
maintained.
Subscribed share capital is the value of shares
investors have promised to buy when they are
released.
The value of shares that investors have promised
to acquire when they are issued is known as
subscribed share capital.
Additional paid-in capital (APIC) is the difference
between the par value of a stock and the price
that investors actually pay for it.
The difference between a stock's par value and
the amount paid by investors is known as
additional paid-in capital (APIC).
Paid-in capital in excess of par is essentially the
difference between the fair market value paid for
the stock and the stock's par value. In other
words, it's the premium paid for an appreciated
stock. Paid-in capital in excess of par is created
when investors pay more for their shares of stock
than the par value.
The difference between the fair market value paid
for the stock and the stock's par value is known
as paid-in capital in excess of par. In other words,
it's the amount spent for a stock that has
increased in value. When investors pay more for
their stock than the par value, they produce
paid-in capital in excess of par.
Contributed capital is the sum of common stocks
at book value and the premium paid by
shareholders.
The amount of common stocks at book value
including the premium paid by shareholders is
known as contributed capital.
Persons who originally formed the corporation
and whose names appear in the articles of
incorporation
Persons whose names appear in the articles of
incorporation and who founded the corporation.
A person who compose the corporation whether
as shareholders or members
 individuals who make up the company, whether
as shareholders or members

Issue Price Issue price refers to the amount by which the

stock is sold

The sum by which the shares is sold is referred to

as the issue price.

Stated Value it refers to the amount appearing in the articles of

incorporation and sometimes in the stock
certificate

It refers to the amount stated in the articles of

incorporation, as well as the stock certificate on
occasion.