Accounting for Corporation

1. Copyright © by Houghton Miffin Company. All rights reserved. 1

2. Authorized Share Capital
Authorized Shares
• the maximum number of shares that
ordinary and preference share may issue
Authorized Share Capital
• when the authorized share is being
multiplied by PAR VALUE or STATED
VALUE

3. Memorandum Entry and Journal Entry Methods
Two Methods in Accounting for Share
Capital:
• Memorandum Entry Method
• Journal Entry Method

4. Memorandum Entry and Journal Entry Methods
Transactions MEMO ENTRY METHOD JOURNAL ENTRY METHOD
Authorized to issue
8% of Preference
shares, 5,000 shares
at P100 par and
20,000 shares at P50
par value share
8% Preference Share Capital
___________________________________
Authorized to issue 8% preference share
5,000 with par value, P100
Ordinary Share Capital
___________________________________
Authorized to issue 20,000 share
with par value, P50
Unissued Pref. Share 500,000
Authorized Pref. Share 500,000
Unissued Ord. Share1,000,000
Authorize Ord. Share 1,000,000
25% of Authorized Share
Capital for both Pref.
and Ordinary are
subscribed
Subscription Receivable-P 125T
Subscription Receivable-O 250T
Subscribed Share Capital-P 125T
Subscribed Share Capital-O 250T
Subscription Receivable-P 125T
Subscription Receivable-O 250T
Subscribed Share Capital-P 125T
Subscribed Share Capital-O 250T
25% of Subscribed Share
Capital was Paid-up
Cash 93,750
Subscription Receivable-P 31,250
Subscription Receivable-O 62,500
Cash 93,750
Subscription Receivable-P 31,250
Subscription Receivable-O 62,500
Full payment of
subscription
Cash 281,250
Subscription Receivable-P 93,750
Subscription Receivable-O 164,500
Cash 281,250
Subscription Receivable-P 93,750
Subscription Receivable-O 164,500
Issuance of Shares Subscribed Share Capital-P 125T
Subscribed Share Capital-O 250T
Share Capital- P 125T
Share Capital- O 250T
Subscribed Share Capital-P 125T
Subscribed Share Capital-O 250T
Unissued Share Capital- P 125T
Unissued Share Capital- O 250T

5. ACCOUNTING FOR PAR VALUE SHARES
(Subscription Basis)
Illustration:
SheRock Corporation has authorized share capital of P100,000
at P50 par value per share.
Case 1- at Par Value (100 shares were subscribed at par, 30%
down payment and the remaining were paid in full)
Upon Subscription:
Subscription Rec’l 5,000
Subscribed Share Capital 5,000
Upon Partial Payment:
Cash 1,500
Subscription Rec’l 1,500
Upon Full Payment:
Cash 3,500
Subscription Rec’l 3,500
Upon Issuance of Certificate
Subscribed Share Capital 5,000
Share Capital 5,000

6. ACCOUNTING FOR PAR VALUE SHARES
(Subscription Basis)
Illustration:
SheRock Corporation has authorized share capital of P100,000
at P50 par value per share.
Case 2- Above Par Value (100 shares were subscribed at P60 per
share, 30% down payment and the remaining were paid in full)
Upon Subscription:
Subscription Rec’l 6,000
Subscribed Share Capital 5,000
Additional Paid-in 1,000
Upon Partial Payment:
Cash 1,800
Subscription Rec’l 1,800
Upon Full Payment:
Cash 4,200
Subscription Rec’l 4,200
Upon Issuance of Certificate
Subscribed Share Capital 5,000
Share Capital 5,000

7. ACCOUNTING FOR PAR VALUE SHARES
(Subscription Basis)
Illustration:
SheRock Corporation has authorized share capital of P100,000
at P50 par value per share.
Case 3- Below Par Value (100 shares were subscribed at P40 per
share, 30% down payment and the remaining were paid in full)
Upon Subscription:
Subscription Rec’l 4,000
Discount on Share Capital 1,000
Subscribed Share Capital 5,000
Upon Partial Payment:
Cash 1,200
Subscription Rec’l 1,200
Upon Full Payment:
Cash 2,800
Subscription Rec’l 2,800
Upon Issuance of Certificate
Subscribed Share Capital 5,000
Share Capital 5,000

8. ACCOUNTING FOR PAR VALUE SHARES
(Subscription Basis)
Illustration:
SheRock Corporation has authorized share capital of P100,000
at P50 par value per share.
Case 4- Sold for Cash
At Par Value
Cash 5,000
Share Capital 5,000
Above Par Value (P60 per share)
Cash 6,000
Share Capital 5,000
Additional Paid-In 1,000
Below Par Value (P40 per share)
Cash 4,000
Discount on Share Capital 1,000
Share Capital 5,000

9. Accounting on Stock Issued for Non-cash Consideration
Rules:
1.If issued for tangible, intangible
properties and services
a) FMV of Non-Cash consideration received
b) FMV of the Share Capital issued
c) Par Value of the share capital
2. If issued for outstanding liability
a) Recorded at the amount equal to the liability set off.
3. If issued in exchange of other equity securities
a) FMV of equity received
b) FMV of share capital issued
c) Par Value of the share capital issued

10. Accounting on Stock Issued for Non-cash Consideration
Illustration:
1. SheRock Corp. issued 1,000 shares with par value P100
per share in exchange of land with FMV of 130,000. The
FMV per share is P110.
Entry:
Land 130,000
Share Capital 100,000
APIC-Excess par 30,000
2. SheRock Corp. issued 1,000 shares with par value P100
per share. The outstanding obligation amounts to
120,000.
Entry:
Loans Payable 120,000
Share Capital 100,000
APIC 20,000

11. Share Issuance Expense
Includes the following:
1. Professional Fees- Accountant’s and attorney’s
fees
2. Underwriting fees or Commission
3. Cost of printing share certificates
4. Filing fees with SEC
5. Cost of advertising the issuance
6. Doc stamp tax

12. Accounting for No Par Value Shares
Same treatment as with
Par Value shares, just
replace the account titles
to “Stated Value”
Ex: Additional Paid-in Capital in
Excess of Stated Value

13. Accounting for Delinquent Subscription
Delinquent shares
• Subscription that was not paid in full
• No collection was made after 30 days
from the date of subscription.
Illustration:
Pao subscribes 100 ordinary shares at par
value of P10 per share in SheRock Corp and
made a down payment equal to 30% of the
subscription

14. Accounting for Delinquent Subscription
Illustration:
Pao subscribes 100 ordinary shares at par value of P10
per share in SheRock Corp and made a down
payment equal to 30% of the subscription.
Entry:
Subscription Receivable- Ordinary 1,000
Subscribed Share Cap-Ordinary 1,000
Cash 300
Subscription Receivable 300

15. Accounting for Delinquent Subscription
Illustration:
Pao subscribes 100 ordinary shares at par value of P10
per share in SheRock Corp and made a down
payment equal to 30% of the subscription.
Entry:
Subscription Receivable- Ordinary 1,000
Subscribed Share Cap-Ordinary 1,000
Cash 300
Subscription Receivable 300