Journalizing Corporations

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Welcome to the learner’s guide for the module: Journalizing

Transactions for Corporation.. This learning material contains activities
for you to complete.
The unit of competency “Journalize Transactions” contains the

knowledge, skills and attitudes required for BOOKKEEPING NC III as
Core Unit of Competency.
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Code No. Developed by: Date Developed: Page #

Journalizing Transactions for 1
HCS 412301 Corporation Dorothea B. Cavalles June 3, 2014
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UNIT OF COMPETENCY : JOURNALIZE TRANSACTIONS
MODULE TITLE : JOURNALIZING TRANSACTIONS FOR

CORPORATION
MODULE DESCRIPTOR : This module covers the knowledge, skills, and

attitudes in preparing chart of accounts, analyze
documents and preparing journal entries for
Corporation.
NOMINAL DURATION : 24 hours
SUMMARY OF LEARNING OUTCOMES:
Upon completion of this module the students/ trainees will be able to:
LO1. Prepare chart of accounts
LO2. Analyze documents
LO3. Prepare journal entry

LO1. PREPARE CHART OF ACCOUNTS
ASSESSMENT CRITERIA:
1. List of asset, liability, equity, income, and expense account titles are
prepared in accordance with Generally Accepted Accounting Principles.
2. Chart of Accounts is coded according to industry practice.
CONTENTS:
 Definition and functions of Bookkeeping and Accounting.
 Types of business organization
 Types of business activities
 Basic Accounting Equation
 Basic Financial Statement

LO2. ANALYZE DOCUMENTS
1. Documents are gathered, checked and verified in accordance with

verification and validation processes.
2. Account titles are selected in accordance with standard selection

processes.
CONTENTS:
 Types of Business Documents
 Account Title Selection

LO3. PREPARE JOURNAL ENTRY
1. Journal entries are prepared in accordance with generally accepted

accounting principles.
2. Debit and credit account titles are determined in accordance with chart
of accounts.
3. Explanation to journal entry is prepared in accordance with the nature of

transaction.
CONTENTS:
 Generally Accepted Accounting Principles
 Accounting Equation
 Journalizing of Corporation account titles

INFORMATION SHEET
CORPORATION
It is a separate legal entity that has been incorporated directly

through registration process established by law . It has legal rights and
liabilities that are distinct from those of their shareholders and members.
Shareholders do not manage a corporation . They elect or appoint a board
of directors to control the corporation in a fiduciary capacity
Corporation has a juridical legal personality , have the same rights and
responsibilities like natural person, responsible for human rights violations
and liable for criminal offense like fraud
This form of business organization is characterized by limited liability of

its owners, issuance of shares of easily transferable stock and existence as
going concern .
The process of becoming a corporation gives the company the

separate legal standing from its owner and protect those owners from
being personally liable in the event that the company is sued . It provides
company with a more flexible to manage their ownership structure.
Corporation enjoy most of the rights and responsibilities that an

individual possesses; that is, a corporation has the right to enter into
contracts, loan and borrow money, sue and be sued, hire employees, own
assets and pay taxes.
Owners of the corporations are called stockholders or shareholders. and

they were represented by stock certificates. They are no right to vote for the
members of the board of director the right of refusal when additional
shares are issued . They have to maintain the same ownership percentage
of the company before and after the new share are issued called Pre-
Emptive rights and share their assets up to their investment

ATTRIBUTES OF A CORPORATION
1. It is an artificial being with personality separate and apart from its

individual shareholders
2. It is created by operation of law and it is regulated by the Securities

and Exchange Commission
3. It enjoy the right of succession. The transfer of ownership of rights

does not dissolves the corporation. It has perpetual life existence.
4. It has the powers, attributes and properties expressly authorized by

law.
ADVANTAGES OF A CORPORATION
1. The corporation has the legal capacity to acts as a legal entity.
2. Shareholders have limited liability
3. It has continuity of existence
4. Shares of stock can be transferred without the consent of the other

shareholders.
5. Its management is centralized by the board of directors.
6. Shareholders are not general agents of the business
7. Greater ability to acquire funds.
DISADVANTAGES OF A CORPORATION
1. Complicated in formation and management
2. Greater degree of government control and supervision
3. Requires high cost of formation and operation
4. Subject to heavier taxation compared to other business establishment

5. Minority shareholders are subservient to the wishes of the majority
6. Management and control is separated from its owner.
7. Transferability of shares permits the uniting of incompatible and
conflicting elements in one venture.
CLASSES OF CORPORATIONS
1. Stock corporation
Corporation which have share capital dividend into shares and are
authorized to distribute to the holders of such shares dividends or
allotment of the surplus profits on the bases of the share held.
2. Non- stock corporation

Is one where no part of an its income is distributable as dividends to
its members, trustees or officers. Profit obtain by its operation shall
be used for the purposes for which the corporation was organized. It
may be in the formed for charitable, religious, educational ,
professional , cultural , recreational, fraternal, literary, scientific ,
social, civic service or similar purposes ( Sec. 88 of the Code ).
CLASSIFICATION OF CORPORATION
1. According to number of persons
a. Corporation aggregate. A corporation consisting of more than
one corporator.
b. Corporation Sole or special form of corporation. A corporation
consist of only one member or corporator and his successor.
Example. A Catholic church.

2. According to nationality:
a. Domestic corporation - a corporation organized under the Philippine

laws.
b. Foreign corporation- a corporation organized under foreign laws
3. According to public or private purpose :
a. Public corporation . A corporation formed or organized for the

government of a portion of the state.( Ex. provinces, cities, municipalities
and barangays)
b. Private corporation. It is created for private aim, benefits and

purposes
4. According to whether for charitable purpose or not :
a. Eccelesiastical corporation is organized for religious purposes.
b. Eleemosynary is established for public charity.
c. Civil corporation established for business or profit
5. According to their legal right to corporate existence
a. De jure corporation . A corporation existing in fact and in law. It is

organized in strict in conformity with the law.
b. De facto corporation . A corporation existing in fact but not in law.

6. According to degree of public participation with regard to share
ownership:
a. Closed corporation - share ownership is limited to selected persons or

members of a family not exceeding 20 persons.
b. Open corporation – share is available for subscription or purchase by any

person.
7. According to their relation to another corporation:
a. Parent or holding corporation – it is related to another corporation that

has the power to either directly or indirectly elect majority of the directors
of a subsidiary corporation.
b. Subsidiary corporation - is controlled by another corporation known as a

parent corporation
STEPS IN THE CREATION OF A CORPORATION
1. Promotion – the process of bringing together the incorporators

interested in the business, procuring subscriptions or capital for the
corporations and setting the machineries necessary for its operations.
2. Incorporation – this steps includes the following :
a. Verification from the records of the Securities nd Exchange

Commission of the proposed corporate name.

b. Drafting and execution of the articles of incorporation by the
incorporators. The person elected as temporary treasurer should
execute an affidavit regarding the share capital subscribe and paid
up.
Treasurer has to submit affidavit sworn statement of asset and
liabilities of the corporation.
c. Deposit of the treasurer by the cash paid for the shares

subscribed in the bank in the name of the treasurer in trust for and
to the credit of the corporation. The bank has to issue a certificate
of deposit.
d. Filing of the articles of incorporation with the SEC together with

the treasurer’s affidavit, statement of financial position , certificate
of bank deposit and certificate as to the name of the corporations.
e. Payment of the filing and publication fees,
f. Issuance by the SEC of the certificate of incorporation.
3. Formal organization and commencement of business operation.
It requires the adoption of by-laws and the election of the board of

directors and of the administrative officers. Includes are those steps
necessary for the corporation to conduct the legitimate business.
In case the corporation failed to organized and commence the

transactions of its business within 2 years from the date of
incorporation, automatically its corporate power cease and the
corporation shall deemed dissolved . ( Sec. 22 Corporation
Code)

ARTICLES OF INCORPORATION
Private corporation in the Philippines is governed by the Corporation

Code of the Philippines. It requires that all corporations organized under
the Corporation Code shall file with the Securities and Exchange
Commission its articles of incorporation in any of its official language duly
signed and acknowledge by all incorporators containing the following :
1. The name of the corporation ;
2. The specific purpose for which the corporation is formed ;
3. The principal place of business which must be within the Philippines
4. The term of existence ;
5. The names, nationalities and residences of the incorporators ;
6. The number of directors or trustees, which shall not less than Five(5)
nor more than fifteen (15) ;
7. The names, nationalities and residences of the persons who shall act
as directors or trustees until the first regular directors or trustees are
elected and qualified.
8. If it be a Stock corporation::
a. Amount of authorized share capital
b. Number of shares into which it is divided
c. In case the Shares are Par Value shares
 the par value of each share
 names, nationalities, and residences of the original

subscribers
 the amount subscribed and paid by each subscribers or his

subscription .
d. In case of No-Par Value, the articles need only state such fact , and
the number of shares into which said share capital is divided
9.In case of Non-stock corporation , the amount of capital , the names

nationalities and residences of the contributors and the amount
contributed.
e.
BY- LAWS
These are rules of action adopted by the corporation. It shall be

adopted within one month from the issuance of the certificate of
incorporation by the Securities and Exchange Commission. Failure to
file a code of by-laws shall render the corporation liable for the
revocation of its registration.
The By-Laws required for:
1. The time, place and manner of calling and conducting regular or

special meetings of the board of directors or trustees ;
2. The time and manner of calling and conducting regular or special

meetings of the shareholders or members;
3. The required quorum in meeting of shareholders or members and

the manner of voting therein ;
4. The form for proxies of shareholders and members and manner of

voting them ;
5. The qualifications, duties and compensation of directors or trustees

, officers and employees;
6. The time for holding the annual election of directors or trustees

and the mode of manner in giving notice;
7. . The manner of election or appointment and the term of office of all

officers other than the directors or trustees ;
8. . The penalties or violation of the by-laws ;
9. 9 In case of stock corporations, the manner of issuing stock

certificates and ;
10. 10 Other manner as need for the convenient transactions of its

corporate business.

.
SAMPLE FORMAT
ARTICLES OF INCORPORATION
OF
__________________________
(Name of Corporation)
KNOW ALL MEN BY THESE PRESENTS:
The undersigned incorporators, all of legal age and a majority of whom are
residents of the Philippines, have this day voluntarily agreed to form a (stock)
(non-stock) corporation under the laws of the Republic of the Philippines;
AND WE HEREBY CERTIFY:
FIRST: That the name of said corporation shall be
".............................................., INC. or CORPORATION";
SECOND: That the purpose or purposes for which such corporation is

incorporated are: (If there is more than one purpose, indicate primary and
secondary purposes);
THIRD: That the principal office of the corporation is located in the

City/Municipality of ............................................., Province of
.................................................., Philippines;
FOURTH: That the term for which said corporation is to exist is ................ years
from and after the date of issuance of the certificate of incorporation;
FIFTH: That the names, nationalities and residences of the incorporators of the
corporation are as follows:

NAME NATIONALITY RESIDENCE
... ................................ ..................................... …………………………………

..................................... . .................................... ..................................
..................................... ..................................... ..................................
..................................... ..................................... ..................................
..................................... . .................................... . ..................................
SIXTH: That the number of directors or trustees of the corporation shall be

.............; and the names, nationalities and residences of the first directors or
trustees of the corporation are as follows:
NAME NATIONALITY RESIDENCE
.................................... ................................... …………………………..………

..................................... ................................... .....................................
..................................... ................................... .....................................
..................................... ................................... .....................................
..................................... .................................. ……………………..…………..
SEVENTH: That the authorized capital stock of the corporation

is................................................. (P......................) PESOS in lawful money of the
Philippines, divided into ............... shares with the par value
of................................... (P.......................) Pesos per share.
(In case all the share are without par value):
That the capital stock of the corporation is ........................... shares without par
value. (In case some shares have par value and some are without par value): That
the capital stock of said corporation consists of ........................ shares of
which....................... Shares are of the par value of..............................
(P.....................) PESOS each, and of which................................ Shares are
without par value.
EIGHTH: That at least twenty five (25%) per cent of the authorized capital stock
above stated has been subscribed as follows:

Name of Subscriber Nationality No of Shares Amount
Subscribed
.................................. .................... ................. ....... .......................

.................................. .................... ................. ....... .......................
.................................. .................... ................. ....... .......................
.................................. .................... ................. ……………………….......
NINTH: That the above-named subscribers have paid at least twenty-five

(25%) percent of the total subscription as follows:
Name of Subscriber Amount Subscribed Total Paid-In
................................... ... ................................... ...............................

................................... ... ................................... ...............................
................................... .... .................................. . ..............................
................................... .... .................................. . ..............................
................................... .... ...............................…… …………………………….
(Modify Nos. 8 and 9 if shares are with no par value. In case the corporation is
non-stock, Nos. 7, 8 and 9 of the above articles may be modified accordingly,
and it is sufficient if the articles state the amount of capital or money
contributed or donated by specified persons, stating the names, nationalities
and residences of the contributors or donors and the respective amount given
by each.)
TENTH: That ....................................... has been elected by the subscribers as

Treasurer of the Corporation to act as such until his successor is duly elected
and qualified in accordance with the by-laws, and that as such Treasurer, he
has been authorized to receive for and in the name and for the benefit of the
corporation, all subscription (or fees) or contributions or donations paid or
given by the subscribers or members.

ELEVENTH: (Corporations which will engage in any business or activity
reserved for Filipino citizens shall provide the following)
"No transfer of stock or interest which shall reduce the ownership of Filipino
citizens to less than the required percentage of the capital stock as provided by
existing laws shall be allowed or permitted to recorded in the proper books of
the corporation and this restriction shall be indicated in all stock certificates
issued by the corporation."
IN WITNESS WHEREOF, we have hereunto signed these Articles of

Incorporation, this ................... day of .............................., 20.......... in the
City/Municipality of ........................................, Province of
................................................., Republic of the Philippines.
............................................ .............................................
........................................... ............................................
...........................................
(Names and signatures of the incorporators)
SIGNED IN THE PRESENCE OF:
............................................ .............................................
( Notarial
Acknowledgment)

TRESURER'S AFFIDAVIT
REPUBLIC OF THE PHILIPPINES ) S.S.

City of Iligan
I, ...................................., being duly sworn, depose and say:
That I have been elected by the subscribers of the corporation as Treasurer

thereof, to act as such until my successor has been duly elected and qualified in
accordance with the by-laws of the corporation, and that as such Treasurer, I
hereby certify under oath that at least 25% of the authorized capital stock of the
corporation has been subscribed and at least 25% of the total subscription has
been paid, and received by me, in cash or property, in the amount of not less than
P5,000.00, in accordance with the Corporation Code.
.......................................
(Signature of Treasurer)
SUBSCRIBED AND SWORN to before me, a Notary Public, for and in the
City/Municipality of.................................. Province of ..........................................,
this ............. day of ........................., 19 ........; by............................................ With
Res. Cert. No. ..................... Issued at ................. On ......................, 20..........
NOTARY PUBLIC
My commission expires on .........................20 ____

Doc. No. _______
Page No. ______
Book No. ______
Series of 20 ____

RIGHTS OF A SHAREHOLDERS
1. Rights to be issued certificate of stock or other evidence of share

ownership and to transfer such shares.
2. Right to attend and vote in person or by proxy at shareholder’s

meeting
3. Right to elect and remove directors;
4. Right to adopt, amend or repeal the by-laws ;
5. Right to purchase a portion of any new shares issued to maintain the

same percentage of stock ownership. The right is known as Pre-
Emptive rights( This right is not absolute and maybe waive)
6. Rights to receive dividend when declared.
7. right to inspect corporate books of records and to receive financial

report s of the corporation operations.
8. Right to participate the distribution of corporate asset upon

dissolution.
COMPONENTS OF A CORPORATION
1. Corporators – this includes the incorporators, shareholders, or

members. A corporation or partnership can be a corporator but
cannot be an incorporator. A partnership can be a corporator in a
corporation but a corporation cannot be a general partner in a
partnership
2. Incorporators- are shareholders or members in the article of

incorporation and are signatories of articles of incorporation (Sec.5
Corporation Code ).They are natural persons of legal age and at
least five but not exceeding fifteen persons and majority a residence
of the Philippines.

3. Shareholders or stockholders – are corporators in a stock corporation
may be natural or juridical persons.( Sec. 5 )
4. Members- are corporators of a non-stock corporation ( Sec. 5 )
5. Subscribers – are persons who have agreed to take and pay for original,
unissued shares of a corporation formed or to be formed.
All incorporators are subscribers but a subscriber need not be an

incorporator.
6. Promoters – are persons who bring the formation and organization of a

corporation
7. Underwriters are investment banker who have:
a. agreed, alone or with others to buy at stated terms an entire or

substantial part of an issue certificate of securities ;
b. guaranteed the sale of an issue by agreement to buy from the issuing

corporation any unsold portion at a stated price or ;
c. agreed to use his best efforts to market all or part of an issue ; or
d. offered for sale shares he has purchased from a controlling

stockholder
CLASSES OF SHARES
1. Par value shares - a specific amount is fixed in the articles of

incorporation and appearing on the certificate of stocks. It is the
minimum issue price of the shares.
2. No Par value shares – One without appearing on the face of the

certificate of stock. It may have stated value which may be fixed in the
articles of incorporation or by the board of directors or the
shareholders. The issue price may vary from time to time as it is
usually fixed based on the book value of the corporation’s share
3. Minimum stated value – of a No par value is five thousand pesos

(P5,000) per share. Shares issued without par value are deemed fully
paid . ( Sec. 6 )

Banks, trust companies, insurance companies, public
utilities, building and loan associations are not permitted
to issue no-par value shares of stocks.
4. Voting share - issued with the right to vote
5. Non- voting share – issued without right to vote.
6. Ordinary share or Common Stock entitle the holder to an equal

pre-rata division of profits without any preference.
7. Preference shares – entitle the holder to certain advantages or

benefits over the holders of ordinary shares.
8. Promotion shares - issued to promoters as compensation in

promoting the incorporation of a corporation, or for services
rendered in launching the welfare of the corporation.
MINIMUM SUBSCRIPTION AND PAID –IN CAPITAL
Twenty five percent (25% ) of the authorized capital stock must be

subscribed and 25% of the total subscription must be paid at the
upon subscription at time of the incorporation. The balance to be
payable on a date fixed in the contract of the subscription without
need of a call.
Paid in capital shall not be less than five thousand pesos

(P5,000)

BASIC CORPORATE ORGANIZATIONAL STRUCTURE
The shareholders are the owners and has control of the corporation
. They elect the members of the board of directors. The board of directors
are responsible for the formulation of the overall policies for the
corporation. The board of directors elects a chairman of the board.
The group composed of the following :
1. President- must be a director of the corporation. He is the only

officer required by law to be a director. He cannot act as
president and secretary or president and treasurer at the same
time.
2. Corporate secretary- resident of the Philippines, make ad keep

corporate records and proper entries of the votes, resolutions and
proceedings of the shareholders and directors.
3. Corporate treasurer – is the proper officer entrusted with the

authority to receive and keep the money of the corporation and to
disburse them .
CORPORATE BOOK OF RECORDS
1. Minutes book - contain the minutes of the meeting of the

directors and shareholders.
2. Stock and transfer book – It is a record of the names of

shareholders, installments paid and unpaid by shareholders and
dates of payment, transfer of stocks and dates .

4. Subscription book - it is a book of printed blank subscription.
5. Shareholder’s ledger – It deals the number of shares issued

each shareholders.
6. Subscriber’s ledger - it is a subsidiary ledger for the subscription

receivable account.
7. Stock certificate book – it is a book of printed certificates of

stock
THE SHAREHOLDER’S EQUITY
It is the owner’s equity of the corporation. It has two components:
a. Share capital ( contributed paid in capital )
b. Retained earnings
Sample of Shareholder’s Equity
Share Capital
Preference shares 30 par , 2,000 shares authorized
issued and outstanding P60,000
Ordinary Shares - 10 par , 20,000 shares authorized
10,000 shares issued and outstanding P100,000
100,000 200,000
Shared Premium – Ordinary P260,000
Retained earnings 40,000
Total Shareholder’s Equity P300,000
======

TERMS ON CAPITAL SHARE
 Share capital - reflects the amount of resources received by

a corporation as a result of investment by shareholders.
 Retained earnings - the amount of capital accumulated and

net income earned through the profitable operations of the
business,
 Legal capital - capital contributed by the shareholders comes

from the sale of stocks. It is the portion of the contributed
capital which must remain in the corporation for the protection
of the creditors.
 Share premium – additional paid in capital and the portion of

the paid –in capital representing amount paid by shareholders
in excess of par value.
 Ordinary share or Common Stock – represent the basic

ownership class of the corporation.
 Preference share – a special benefits related to the receipts of

dividends when declared before the ordinary shareholders.
 Authorized capital share – the maximum number of shares the

corporation has issue as specified in the Articles of
Incorporation.
 Issued share capital – shares which have been sold and paid
in full
 Subscribed share capital - portion of authorized share capital

that had been subscribed but not yet fully paid.
 Outstanding share capital – issued shares which are in the

hands of the shareholders
 Treasury stock – issued shares acquired by the corporation

but not retired and awaiting to be reissued at a alter date.

CONSIDERATION FOR ISSUANCE OF SHARES
1 Actual cash paid to the corporation
2. Tangible or intangible properties actually received by the

corporation
3. Labor already performed for or services actually rendered to the

corporation
4. Incurred indebtedness by the corporation.
METHODS OF SHARE ISSUANCE FOR CASH
1) Issuing Share Capital at Par
Problem Illustration :
DBC Holding is authorized to issue 2,000,000 ordinary shares

divided into 20,000 shares with par value of 100 per share. It
issued on cash basis 4,000 shares at par
Journal Entry
Date Particular F Debit Credit
Cash 400,000
Ordinary Shares 400,000

2) Issuing Share Capital above Par
ASSUME : The 4,000 shares were sold at P125. per share
Cash 500,000
Share premium 100,000
3. Issuing No- Par Share Capital
GRAINEE Inc is a department store located in Iligan City, Philippines.

They have two classes of shares, preferences shares and no par
ordinary shares. 6,000 ordinary shares were issued for P100,000
Journal Entry :
Cash 100,000
When share without par value is sold, the proceeds should be

credited to the Ordinary Shares account

4. Issuing No Par Share Capital with Stated Value
ASSUME : GRAINEE Inc., no par ordinary shares have a stated value

of P25, The company issue 5,000 shares at 30 per share.
Journal Entry :
Cash 150,000
when par value are sold, the proceeds should be credited to the
Ordinary Share accounts. If the no par stocks has a stated value , the
excess proceeds over stated value . P5 per share is credited to share
premium
Journal Entry :
Cash 150,000

SUBSCRIPTION OF SHARES
Corporation sells its share to the investors on a subscription basis. The

subscription contract is a binding contract that provides number of shares
, price and terms of payment. A subscriber becomes a shareholders upon
subscription but the stock certificates are not issued until the full collection
of the subscription.
Archer D Corporation is a distributor of a beauty product based in Iligan

City. Assumed that 10,000 at P10 par value ordinary shares of the
company were sold on subscription at P15 per share on April 2014 to
Janjan Namocatcat. Subscription installment of P60 ,000 and P80,000
will be due May 15 and 30.
Journal Entries
Subscription receivable 150,000

Subscribed Ordinary Shares 100,000
To record subscription above par
Cash 60,000
To record initial installment
Cash 80,000
To record final installment
Subscribed Ordinary shares 100,000

Ordinary shares 100,000
To record issuance of stock
certificates

SHARES ISSUANCE FOR NON-CASH CONSIDERATION
Fair market value- is the estimated amount that willing seller would
receive from the buyer for the sale or exchange of the asset in a free
market.
Problem Illustration:
Elena Temple Corporation engaged in sugar cane plantation. Ramon

Bodios wanted to acquire shares of the company . The company allowed
Mr. Bodios to make investment. One consideration she gave was a
machinery with a fair market value of P1,500,000.
The entry to record the issue of 1,000 shares of P1,500 par ordinary
shares for the machinery is as follows:
Journal Entry :
Machinery 1,700,000
Ordinary shares 1,500,000
Premium shares 200,000
To record issuance of 1,000
shares of stock in exchange for
machinery

ISSUING SHARES FOR SERVICES OR OUTSTANDING LIABILITIES
ASSUME : That Elena Temple Corporation engaged in the milling of

sugar cane. The corporation issued 1,000 shares of 120 par value
ordinary shares for the services. The fair market values of such services
is P150,000.
Journal Entry :
Date Particular F Credit

Debit
Organization expense
150,000
Premium shares 300,000
To record issuance of 1,000 of
stock in exchange for services

TWO METHODS OF ACCOUNTING FOR SHARE CAPITAL
1. The Journal Entry methods
2. Memorandum methods
ASSUME : Elena Temple Corporation was authorized to issue P500,000

ordinary shares divided into 5,000 shares with par value of P100 per share.
On April 15 , 2014 , the company received a subscription for 2,000 shares
at par from different subscribers. As of July 15, 2014, 1,200 shares have
been fully paid and was issued with a stock certificates. On July 20, 2014,
the company issued 800 shares at par for cash.
Journal entry method
Authorization
Unissued Ordinary shares 500,000

Authorized ordinary shares 500,000
Memorandum Method
Authorization
Memo copy: The company was authorized to 500,000

issue P500,000 ordinary shares, divided
into 5,000 shares , with P100 par
Shares Subscription at par :
Subscriptions receivable 200,000

Subscribed ordinary shares 200,000
Memorandum method
Subscriptions receivable 200,000


Subscription fully collected
Cash 120,000
Subscriptions receivables 120,000
Memorandum method
Cash 120,000
Subscriptions receivables 120,000
Issuance of stock certificates after full payment of subscriptions
Journal entry methods

Unissued ordinary shares 120,000
Memorandum method

Cash subscription at par
Cash 80,000
Unissued ordinary shares 80,000
Memorandum method
Cash 80,000

Position of Shareholder’s Financial Statement
Journal Entry Method
Shareholder’s Equity
Authorized Ordinary Shares, P100 par , 5,000 shares P500,000

Less : Unissued ordinary Shares ,3,000 shares 300,000
Issued Ordinary Shares P200,000

Less; Subscription receivable 80,000___________________P200,000
Memorandum Method
Shareholder’s equity
Ordinary Shares,P100 par, 5,000 shares authorized

2,000 shares issued P200,000
Subscribed Ordinary shares 80,000

Less : Subscription Receivable 80,000__________ - P200,00

TREASURY STOCKS
Treasury stocks are shares of stock which was issued and fully paid for
but subsequently reacquired by the issuing corporation either by
purchase, redemption or donation. It may again be disposed for a
reasonable price fixed by the board of directors.
Reasons for the Purchase Treasury Stock
1. To support employee stock compensation plans
2. To improve the stock market price
3. To avoid takeover by an outsider
Methods of Accounting for Treasury Stock Transactions
1. Par or Stated Value method – this method Treasury Stock is

debited for the amount equal to the Par or Stated value of the stock
reacquired.
2. Cost Method – is the preferred method of accounting for Treasury

Stocks
PURCHASE OF TREASURY STOCKS
When the Cost method is used, Treasury stocks is recorded at cost

regardless the share is acquired below or above Par or Stated value .
If the Treasury stock is purchased for cash, the cost is equal to

the cash payment.
If the Treasury stock is acquired for non-cash consideration,

the cost is measured by the recorded amount of the non-cash
assets given in exchange

Problem Illustration:
ARCHER D Corp. is a successful distributors of beauty products To

avoid takeover by outsiders, the officers of the company minimize
outstanding shares by purchasing 2,000 shares with a par value of
P1,000 for 1,000
Journal entry :
Treasury Stock 2,000,000

Cash 2,000,000
To record acquisition of treasury shares
REISSUANCE OF TREASURY STOCK
ASSUME : All the Treasury shares were reissued at P1,300 per share.
Above Cost
Journal Entry
Cash 2,600,000
Treasury stock 2,000,000
Share Premium -treasury 600,000
To record reissue of treasury shares above
cost
ASSUME: Treasury shares were reissued at P850, per share
Below cost
Journal entry
Cash 1,700,000
Retained earning 300,000
To record reissue of treasury shares below
cost

RETIREMENT OF TREASURY STOCK
Retirement is a result of gain of loss. The shares purchased may be

retired and the Ordinary Shares account is reduced by its par value. The
number of shares issued is reduced in the stock retired . The Treasury
account is credit at cost.
With Gain on Retirement
ASSUME : ARCHER D Corp. .purchased the treasury shares for P700

per share.
Journal entry
Ordinary shares (2,000 xP1,000 par 2,000,000

Share premiums 600,000
Treasury stock(2,000 x 700 par 1,400,000
To record retirement of treasury shares
There is gain on retirement if the cost on treasury shares is Less

than par value
With Loss on Retirement
ASSUME : ARCHER D Corp. purchase 2,000 Treasury shares for

P1,500 per share and were not reissued and ultimately retired.
Ordinary shares (2,000 xP1,000 par 2,000,000

Share premiums 500,000
Treasury stock(2,000 x 1,500 par) 3,000,000
To record retirement of treasury shares
The Loss on retirement should be debited to the following accounts:
1) Share premium to the extent of the credit when the share is

issued.
2) Share premium from the treasury stock transactions of the same

class of share
3) Retained earnings.

DONATION CAPITAL
Contributions, donation capital received from the shareholders should be

recorded at the fair market value of the item.
ASSUME : ARCHER D Corp. received set of Furniture from one of

the stockholder a gift. the donated asset worth P120,,000.
Journal entry :
Furniture 120,000.
Donated capital 120,000
To record receipt of the donated furniture
DIVIDENDS- are subscribed par value shares and distributed to

shareholders for cash, property or stocks from unrestricted earnings on
the basis of all issued and fully paid shares.
Important Dates in Declaration and Payment of Dividends
1. Date of declaration
2. Date of record
3. Date of payment
ASSUME: ARCHER D Corp declared a cash dividend of P10 per share

of ordinary on November 1 and payable on November 24. The
corporation has 15,000 ordinary shares issued at 800 are held in
treasury
Journal entry:
Retained earnings 142,000.

Cash dividends payables 142,000
To record declaration of dividends
P10 per share ( 15,000 issued shares=800 treasury shares)
=P142,000

DIVIDENDS OF PREFERENCE AND ORDINARY SHARES
Declared cash dividends are received by the preference shareholders

entitled to dividends before ordinary shareholders received any
distribution. The dividend is stated as a percentage of the par value
preference share.
Example : If the holder of 6% preference share with a par value of P150

are entitled to the annual dividend of P9 per share before any
distribution is made in the ordinary shareholders.
FEATURES OF PREFERENCE SHARES
1. non- cumulative and participating
2. non- cumulative and participating
3. cumulative and non participating
4. cumulative and participating
Non- Cumulative Preference Shares- the holders are entitle to the

payment of current dividend when declared to the extend of the
preference rate before ordinary shareholders are paid.. When there is no
dividend declared for a certain year , the dividend for that year is
forfeited.
Cumulative Preference Shares - the holders are entitled to the

payment current dividends and dividends in arrears when dividends are
declared and received before ordinary shareholders are paid.

Non- Participating Preference Shares – holders are entitle only to the extent
of the stipulated preference divided.
Participating Preference Shares - holders are entitle to participate with the

holders of ordinary shares pro-rata in the remainder after the ordinary
shareholders have received their initial share based on the preference rate.
PROBLEM ILLUSTRATION
Ferenz Medical Supplies Inc, distributors medical supplies , has the following
accounts its shareholders equity:
10% Preference Shares ,P120, par authorized

500 shares, 1,500 shares issue and outstanding P180,000
Ordinary Shares , P100 par, authorized 5,000 shares

4,000 shares issued and outstanding 400,000
Retained Earnings 300,000
The board failed to declare dividends for 1 year . The board of director
declared dividends in the current year of P300,000
Problem 1 . Non – Cumulative and Non Participating Preference
Preference Ordinary Total
Outstanding Share Capital P180,000 P300,000 P480,000

Current Preference Dividends in
(P180,000 x 10b% ) 18,000 14,400
Remainder to Ordinary 162,000 165.600
P180,000-P18,000 = 165,600
TOTAL 18,000 162,000 180,000
Dividends Per Share P10 P54.00

The balance of P162,000 after current dividends is distributed to the
ordinary shareholders. The preference shares are not entitle to receive
beyond the stipulated dividends rate.
Dividends per share is obtained by dividing the total dividend

distribution per class of share y its corresponding outstanding shares.
Problem 2 : Non –Cumulative and Participating Preferences Shares

(P180,000 x 10b% ) 18,000 14,400
Current Ordinary Dividends at
Preference Rate 30,000
P300,000 x 10%)
Remainder for Participation
(P180,000-P18,000 –
132,000
30,000=132,000)
Preference 3/8 x 132,000 50,160
Ordinary 5/8 x 132,000 81,840
TOTAL 68,160 111,840 180,000
Dividends per Share P37.88 P37.28
Preference shares are entitled to current dividends of P18,000 and

pro-rat share in the remainder after an initial allocation to ordinary
shares.
The ordinary shareholders are given their initial share of P30,000 based
on the preference rate
The ratio is 3/8(180,000/480,000) and 5/8 ( 300,000/480) for preference

and ordinary shares.

Problem 3- Cumulative and Non- Participating Shares

Preference Dividends in Arrear 18,000
(P180,000 x 10% x1 year )
(P180,000 x 10b% ) 18,000 14,400
Remainder for Ordinary
(P180,000-P18,000 – P18,000
=144,,000) 144,000 144,000
TOTAL 36,000 144,000 180,000
Cumulative preference shares entitle the holders to current dividends and

dividends in arrears
Preference shares is entitled to 18,000 of dividends in arrears for 1 year

and P18,000 for the current year.
The excess dividends of P144,000 is distributed to ordinary shareholders.

Problem 4 - Cumulative and Participating Preference Shares

Preference Dividends in Arrear 18,000 18,000
(P180,000 x 10% x1 year )
(P180,000 x 10b% ) 18,000 18,000
Current Ordinary Dividends at
Preference Rate : 30,000 30,000
(300,000 x 10% )
Remainder for Participation
(P180,000-P18,000 – P18,000 –
30,000 = 114,000 ) 114,000
Preference (3/8 x 114,000) 43,320
Ordinary (5/8 x 114,000 ) 70,680
TOTAL P79,320 P100,680. P180,000

RESTRICTIONS ON RETAINED EARNINGS
A restrictions on retained earnings is a portion of a retained earnings set

aside for a specific purpose.
ASSUME : ARCHER D Corp bought 1,000 of its shares at P120. A portion

of the retained earnings is restricted for the cost of treasury purchased
Journal entry
Retained earnings 120,000.

Appropriate Retained earnings 120,000
To restrict retained earnings for the
cost of treasury shares purchased
The restrictions portion is not available for dividends declarations.
If the Treasury stocks subsequently reissued , the restricted balance is

reversed
Journal entry :
Appropriate Retained earnings 120,000.

Retained Earnings 120,000
To remove the restrictions

SELF-CHECK
TEST 1- ENUMERATION
Direction : In a separate sheet of paper answer enumerate the

correct answer of the following questions as stated below:
A. Classes of Corporations
1.
2.
B .Steps in the Creation of a Corporation
1.
2.
3.
C. Components of a Shareholders
1.
2.
3.
D. Terms Related to Share Capital
1.
2.
3.
4.
5.
E. Classes of Share in General
1.
2.
3.
4.
5.
6.
7
8.
9.
10.

SELF-CHECK
TEST II- TRUE OR FALSE
Direction : In a separate sheet of paper write True if the statement

is correct and False if it is incorrect .
1. Corporation is an artificial being.

2. Shareholders are the owners of the corporation
3. Foreign corporation is organized under Philippine laws
4. Eleemosynary corporation are organized for public charity.
5. The shareholders has the ultimate control of the corporations
6. Non –stock corporation have share capital divided into shares
7. The government has a lesser degree in control to corporation.
8. Shares of stock issued generally referred to as a share capital
9. De jure corporation is a corporation existing in fact but not in law.
10. The shareholders has the right and remove the board of directors.
11. No par value is a specific amount appearing on the certificate of stock
12. The president of the corporation must be a director a board of director.
13. Legal capital of the shareholders comes from the sale of shares of the stock .
14. Fair market value is the estimated amount that willing seller would received from
the buyer.
15. Shareholders has the right to participate the distribution of corporate asset upon
dissolution
16. The articles of incorporation are rules and action adopted by the corporation for its
internal government.
17. Closed corporation is limited to selected person or member of the family not
exceeding 20 persons.
18. Subsidiary corporation is a corporation where a share is available for
subscription or purchase by any persons.
19. Outstanding share capital are issued shares which are in the hands of the
shareholders.
20. Treasury stocks are issued shares acquired by the corporation awaiting to be
reissued for the latter date.

SELF-CHECK
TEST III – MULTIPLE CHOICE

Direction : In a separate sheet of paper write the letter that
corresponds the correct answer on each questions
1. A corporation which is no part of its income is distributable as dividends to its

members , trustees or officers.
a .De jure corporation c. Stock corporation

b. De facto corporation d. Non-stock corporation
2. The president of the corporation is required by law to be :
a. Shareholder c. Director
b. Corporator d. Incorporator
3. The proper officer to entrusted to received and disburse the money of the
corporation
a. Corporate secretary c. Corporate disbursing officer

b. Corporate treasurer d. Chairman of the Board
4. The authorized minimum percentage of the capital stock to be subscribed.
a. 50% c. 15%
b. 25% d. 10%
5. Contains the records of all business transactions
a. Books of accounts c. Stock & transfer book

b. Minutes books d. Subscription book
6. Specific amount is fixed in the articles of incorporation that appears in the stock
certificates.
a. Ordinary shares c. Par value shares

b. Preference shares d. Promotion shares
7. Stocks which are changeable from one class to another class.
a. Treasury shares d. Voting shares

b. No par value shares d. Convertible shares

8. Corporation organized for religious purposes
a. Civil corporation c. Public corporation

b. Eleemosynary d. Ecclesiastical corporation
9. The corporation issued 1,000 shares of 120 par value . The ordinary shares
is
a. 100,000 c. 120,000
b. 1,200 d. 1,000
10. When par value are sold the proceeds should be credited to the :
a. Ordinary Share accounts. c. Cash account

b. Premium shares account d. Subscription accounts
12. Artificial being with personality separate and apart from its individual
shareholders or members.
a. Corporators c. Shareholders
b. Incorporators d. Corporation
13. Corporation where the share is available for another subscription by any
person.
a. Domestic corporation c. Corporation sole

b. Open corporation d. Private corporation
14. A corporation consisting of more than one corporator.
a. De facto corporation c. Close corporation

b. Corporation aggregate d. Public corporation
15. Corporation requires special authority for creation.

a. Right of succession c. Creation by operation of law
b. Pre-emptive right d. Juridical personality
16. Persons who cause the formation and organization of a corporation.
a. Underwriters c. Members
b. Subscribers d. Promoters

SELF- CHECK
T EST IV- PROBLEM SOLVING :
Direction : Answer the demonstrated problem in a separate sheet

of paper
1. Jewels Holdings authorized to issue 3,000.000 ordinary shares

divided into 30,000 shares with par value of P100. Journalize The
company issued on cash basis 4,000 shares at par. Ho much is
the issuance entry ?
2. Suppose the 4,000 shares were sold at P130 per share , how
much is the issuance Capital Above Par. ?
4. Suppose the no –pr ordinary shares have stated value of 25.

The company issued 7,000 shares at P30 per share. How much
issuance No -par Capital with Stated Value?
5. LLJ wanted to acquire shares from Jewels Holdings. She offered

a land with a fair market value of 1,200,000. The offer was
accepted . The entry to record the issue of 1,000 par ordinary in
exchange for the land How much the issuance in exchange for the
land ?

SELF- CHECK
T EST V- A. PROBLEM SOLVING :

of paper a journal entry on the following:
1. The board of directors of JCS Hotel consolidate control of the company to

corporate takeover from outside. They minimize outstanding shares and
bought 3,000 shares with par value of P1,000 for P1,500
a. Assume that the treasury shares were reissued at P1,200 per

share
b. Assume that the treasury shares were reissued at P1,750 per
share
2. JanJan Corp . bought 2,000 of its shares for P100,000. A portion of the
retained earning is restricted for the cost of the treasury purchase.
TEST V- B
1. Explain the Preference Shares

a) Non – Cumulative Preference Shares
b) Cumulative Preference Shares
c) Non –Participating Preference Shares
d) Participating Preferences Shares

ANSWER KEY
TEST 1- ENUMERATION
Direction : In a separate sheet of paper answer enumerate the

correct answer of the following questions as stated below:
A. Classes of Corporations
1. Stock Corporation
2. Non Stock k Corporation
B. 2. Steps in the Creation of a Corporation

1.Promotion
2.Incorporation
3.Formal Organization and Commencement
C. Components of a Shareholder
1.Corporators
2.Incorporators
3.Shareholders
D. Terms Related to Share Capital

1..Authorized Share Capital
2. Issued Share Capital
3. Subscribed Share Capital
4 Outstanding Share Capital
5. Treasury Stock
E. Classes of Shares in General

1. Par Value shares
2 No- Par Value shares
3. Minimum Stated value of P5.00
4. Voting shares
5 Non Voting shares
6. Ordinary Shares
7. Preference shares
8. Promotion shares
9. Treasury shares
10. Convertible shares
.

ANSWER KEY
TEST II- TRUE OR FALSE
Direction : In a separate sheet of paper write True if the statement

is correct and False if it is incorrect .
1. True
2. True
3. False
4. False
5. True
6. False
7. False
8. True
9. False
10. True
11. False
12. True
13. True
14. True
15. True
16. False
17. True
18. True
19. True
20. True

ANSWER KEY
TEST III- MULTIPLE CHOICE
Direction : In a separate sheet of paper write the letter that

corresponds the correct answer on each questions
1. d
2. c
3. b
4. b
5. a
6. c
7. d
8. c
9. c
10. a
11. a
12. d
13. b
14. b
15. d

ANSWER KEY
TEST IV
1. Jewels Holdings authorized to issue 3,000.000 ordinary shares divided

into 30,000 shares with par value of P100. Journalize The company
issued on cash basis 4,000 shares at par. How much the issuance
entry ?
Journal entry:
Cash 400,000
2. Suppose the 4,000 shares were sold at P130 per share , how much the
issuance Capital Above Par.
Journal entry :
Cash 520,000
3. Suppose the no –pr ordinary shares have stated value of 25. The
company issued 7,000 shares at P30 per share. How much issuance No
-par Capital with Stated Value?
Journal entry
Cash 210,000

ANSWER KEY
4. LLJ wanted to acquire shares from Jewels Holdings. She offered a land
with a fair market value of 1,200,000. The offer was accepted . The entry to
record the issue of 1,000 par ordinary in exchange for the land How much
the issuance in exchange for the land ?
Journal entry :
Land 1,200,000
Ordinary Shares 1,000,000
Share to premium 200,000
To record issuance of
1,000 of stock in exchange for
land

ANSWER KEY
TEST V- A
of paper
1. The board of directors of JCS Hotel consolidate control of the company to

corporate takeover from outside. They minimize outstanding shares and
bought 3,000 shares with par value of P1,000 for P1,500. How much is the
issuance entry?
Journal entry :
Treasury Stock 4,500,000
Cash 4,500,000
To record acquisition of treasury shares
a. Suppose the treasury shares of 3,000 were reissued at P1,600 per share .
Journal entry
Cash 4.800,000
Share Premium -treasury 300,000
To record reissue of treasury shares above
cost
b. Suppose the treasury shares were reissued at P1.450 per share
Journal entry
Cash 4,300,000
Retained earning 150,000
To record reissue of treasury shares below
cost

ANSWER KEY
3. JanJan Corp . bought 2,000 of its shares for P100,. A portion of the
retained earning is restricted for the cost of the treasury purchase.
Journal entry :
Appropriate Retained earnings 200,000
To restrict retained earnings for for the
cost of the treasury shares purchased
TEST V- B
2. Explain the following Preference Shares
a) Non – Cumulative Preference Shares – shares entitle the holders

only to the payment of current dividends to the extent of the
preference rate if and when declared and before the ordinary
shareholders are paid
b) Cumulative Preference Shares- shares entitle the holders to

payment of the current dividends and dividend in arrears., if and when
declared , before the ordinary shareholders are paid.
c) Non –Participating Preference Shares – shares entitle the holders

only to the extent of the stipulated preference dividend,
d) Participating Preferences Shares - shares entitle the holders to

participate with the holders of ordinary shares pro-rata in the
remainder after the ordinary shareholders have received their initial
share based on the preference rate.

Learner’s Diary
DIARY NOTES
Record important dates, jobs undertaken and other workplace events that will assist
you in providing further details to an Assessor.
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Record of Achievement
Module: Journalizing Transactions for Corporation
LO #1: PREPARE CHART OF ACCOUNTS
PERFORMANCE CRITERIA:
1. List of asset, liability, equity, income, and expense account titles are
prepared in accordance with Generally Accepted Accounting Principles.
2. Chart of Accounts is coded according to industry practice.
Comments:
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Learner has satisfied the above performance criteria:
.......................................................................................................................................
Learner’s signature:
.......................................................................................................................................
Trainer’s signature:
.......................................................................................................................................
Date: ............................................................................................................................

LO #2: ANALYZE DOCUMENTS
1. Documents are gathered, checked and verified in accordance with

verification and validation processes.
2. Account titles are selected in accordance with standard selection
processes.
Comments:
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Date: ............................................................................................................................
LO #3: PREPARE JOURNAL ENTRY
1. Journal entries are prepared in accordance with generally accepted

accounting principles.
2. Debit and credit account titles are determined in accordance with
chart of accounts.
3. Explanation to journal entry is prepared in accordance with the
nature of transaction.
Comments:
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Date: ............................................................................................................................


Journalizing Corporations

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How to use this Competency- Based Learning Material

Welcome to the learner’s guide for the module: Journalizing

The unit of competency “Journalize Transactions” contains the

You are required to go through a series of learning activities in order

Recognition of Prior Learning (RPL)

 Been working for some time

If you can demonstrate to your trainer that you are competent in a

Code No. Developed by: Date Developed: Page #

Code No. Developed by: Date Developed: Page #

MODULE TITLE : JOURNALIZING TRANSACTIONS FOR

MODULE DESCRIPTOR : This module covers the knowledge, skills, and

NOMINAL DURATION : 24 hours

SUMMARY OF LEARNING OUTCOMES:

LO1. Prepare chart of accounts

LO2. Analyze documents

LO3. Prepare journal entry

Code No. Developed by: Date Developed: Page #

2. Chart of Accounts is coded according to industry practice.

 Definition and functions of Bookkeeping and Accounting.

 Types of business organization

 Types of business activities

 Basic Accounting Equation

 Basic Financial Statement

Code No. Developed by: Date Developed: Page #

1. Documents are gathered, checked and verified in accordance with

2. Account titles are selected in accordance with standard selection

 Types of Business Documents

 Account Title Selection

Code No. Developed by: Date Developed: Page #

1. Journal entries are prepared in accordance with generally accepted

3. Explanation to journal entry is prepared in accordance with the nature of

 Generally Accepted Accounting Principles

 Journalizing of Corporation account titles

Code No. Developed by: Date Developed: Page #

It is a separate legal entity that has been incorporated directly

This form of business organization is characterized by limited liability of

The process of becoming a corporation gives the company the

Corporation enjoy most of the rights and responsibilities that an

Owners of the corporations are called stockholders or shareholders. and

Code No. Developed by: Date Developed: Page #

1. It is an artificial being with personality separate and apart from its

2. It is created by operation of law and it is regulated by the Securities

3. It enjoy the right of succession. The transfer of ownership of rights

4. It has the powers, attributes and properties expressly authorized by

1. The corporation has the legal capacity to acts as a legal entity.

2. Shareholders have limited liability

3. It has continuity of existence

4. Shares of stock can be transferred without the consent of the other

5. Its management is centralized by the board of directors.

6. Shareholders are not general agents of the business

7. Greater ability to acquire funds.

1. Complicated in formation and management

2. Greater degree of government control and supervision

3. Requires high cost of formation and operation

4. Subject to heavier taxation compared to other business establishment

Code No. Developed by: Date Developed: Page #

2. Non- stock corporation

Code No. Developed by: Date Developed: Page #

a. Domestic corporation - a corporation organized under the Philippine

b. Foreign corporation- a corporation organized under foreign laws

3. According to public or private purpose :

a. Public corporation . A corporation formed or organized for the

b. Private corporation. It is created for private aim, benefits and

4. According to whether for charitable purpose or not :