ACCOUNTING FOR CORPORATIONS

Pro-Forma Entries

Memorandum Entry Method Journal Entry Method

Authorization of Share Capital

Authorized to issue XXX shares of XXX share capital with a Unissued XXX Share Capital XXX
par value of PXXX Authorized XXX Share Capital XXX
(Authorized shares X Par value)

Note: This method cannot be used if the share capital is a no-par and
no-stated value stock.
Issuance of Share Capital (equal to par value)
Cash XXX Cash XXX
XXX Share Capital XXX Unissued XXX Share Capital XXX

Issuance of Share Capital (Above Par Value)

Cash XXX Cash XXX
XXX Share Capital XXX Unissued XXX Share Capital XXX
XXX Share Premium XXX XXX Share Premium XXX

Issuance of Share Capital (Below Par Value)

Cash XXX Cash XXX
Discount on XXX Share Capital XXX Discount on XXX Share Capital XXX
XXX Share Capital XXX Unissued XXX Share Capital XXX

Note: Under the Corporation Code of the Philippines, however, the

original issuance of share capital below par value is not allowed.
Therefore, problems involving discounts are used for illustrations
purposes only.
Issuance in Exchange for Non- Cash Assets or Properties
The asset received is recorded at its fair market value (also known as direct measurement), unless the FMV can’t be
estimated reliably. If the FMV of the asset received can’t be estimated reliably, it will be recorded at the fair value of the
share capital issued, also known as indirect measurement.

Upon issuance of the stock, Share Capital or Unissued Share Capital is credited at par value. The excess of the value
assigned to the asset received over the par value of the stock issued is credited to Share Premium or Additional Paid-in
Capital or Share Capital in Excess of Par.
Issuance in Exchange for Service Rendered
The services received is recorded at its fair value

Fair value is above par

Organization Cost XXX
Share Capital (or Unissued Share Capital) XXX
Share Premium XXX
Sale of Share Capital on a Subscription Basis
1. To record the receipt of subscription
a. Subscription price is equal to the par value
Subscription Receivable XXX
Subscribed Share Capital XXX
 b. Subscription price is above par value
It should be noted that the Subscribed Share
Subscription Receivable XXX
Subscribed Share Capital XXX Capital is always credited at par value, regardless
Share Premium XXX of the subscription price.
2. To record collection of subscription from subscribers
Cash XXX
Subscription Receivable XXX
3. To record issuance of stock certificate upon full payment of subscription
Subscribed Share Capital XXX
Share Capital (or Unissued SC) XXX

Subscription Defaults
a. Upon Default
Receivable from Highest Bidder XXX Other term for RFHB is Due from Highest Bidder
Subscription Receivable XXX
b. Costs incurred in connection with the delinquency sale
Receivable from Highest Bidder XXX
Cash XXX
c. Upon receipt of payment from Highest bidder
Cash XXX
Receivable from Highest Bidder XXX
d. Upon issuance of certificates of stock
Subscribed Share Capital XXX
Share Capital (or Unissued SC) XXX

All subscribed shares are issued. Shares are first given to the highest bidder. The excess, if any, are given to the defaulting
subscriber.
If there is no bidder, all of the delinquent shares will be issued to the name of the corporation. Such shares are
considered Treasury shares and the ff. entries will be made, after making the entries (a) and (b).

a. Treasury Shares XXX

Receivable from Highest Bidder XXX
b. Subscribed Share Capital XXX
Share Capital (or Unissued SC) XXX

Dividends

Date of Declaration Date of Record Date of Payment

(Announcement Date) (Distribution of Dividends to shareholders)
●Cash Dividends

Retained Earnings XXX No entry Cash Dividends Payable XXX

Cash Dividends Payable XXX Share Capital
(or Unissued SC) XXX
If the dividends declared are still unpaid as of the statement of financial position date, the balance of the account Cash
Dividends Payable is reported as current liability.
Cash dividends may either be:
1. Peso dividend- expressed in peso amount
2. Percentage dividend- expressed in percentage.
 ●Scrip Dividends

Retained Earnings XXX No entry Scrip Dividends Payable XXX

Scrip Dividends Payable XXX Interest Expense XXX
Cash XXX
-- Scrip dividends are deferred cash dividends.
-- Scrip dividends are declared if the company has no sufficient funds at that time for cash dividends but has sufficient
retained earnings.
-- Scrip dividends consist of a written promise to pay certain amounts at some future date.
●Property Dividends

Retained Earnings XXX No entry a. A. The carrying amount of the payable and
Property Dividends Payable XXX the carrying amount of the assets are the
same

Property Dividends Payable XXX

Assets XXX

B. The carrying amount of the payable is

greater than the carrying amount of the
assets

Property Dividends Payable XXX

Assets XXX
Gain on Distribution of
Non-Cash Assets XXX

C. The carrying amount of the payable is less

than the carrying amount of the assets

Property Dividends Payable XXX

Loss on Distribution of
Non-Cash Assets XXX
Assets XXX

●Share Capital Dividends (Bonus Issue)

A. A. Small Share Capital Dividend

B. A share capital dividend representing less than 20% of the outstanding shares
C. Retained Earnings is debited for the Fair Value
D. Share Dividends Distributable is always credited for the Par value

Retained Earnings XXX No entry Share Dividends Distributable XXX

Share Dividends Distributable XXX Share Capital
Share Premium XXX (or Unissued Share Capital) XXX

B. Large Share Capital Dividend

E. A share capital dividend representing more than 20% of the outstanding shares
Retained Earnings is debited for the Par Value
Retained Earnings XXX No entry Share Dividends Distributable XXX
Share Dividends Distributable XXX Share Capital
(or Unissued Share Capital) XXX

Donated Capital

Donation is in the form of shares

a. Receipt of donated shares by a shareholder
“Memorandum entry”

b. Sale of Donated shares

Cash XXX
Donated Capital XXX

Donation is in the form of non-cash assets

Asset XXX
Donated Capital XXX

Treasury Shares

1. Purchase of Treasury Shares (COST METHOD) Treasury share is recorded at cost regardless of
Treasury Shares XXX whether the share is acquired below or above par
Cash XXX or stated value
2. Reissuance of Treasury Shares
a. At Cost
Cash XXX 1. The excess over cost is not regarded as a “gain”
Treasury Share XXX but as a component of share premium.
b. Above Cost
Cash XXX
Treasury Share XXX 2. The excess of the cost over reissue should be
Share Premium1- T/S XXX debited to share premium-treasury share to the
c. Below Cost extent of its balance. In the absence of any balance
Cash XXX
2 in this account, the loss is debited to Retained
Share Premium- T/S (if any) XXX
Retained Earnings XXX Earnings.
Treasury Share XXX
3. Retirement of Treasury Shares
3. The “loss” on retirement should be debited to
a. With Gain on Retirement
Share Capital XXX the following accounts in the order given:
*SP to the extent of the credit when the share is
Treasury Share XXX
Share Premium- Retirement of T/S XXX issued
*SP from Treasury Share
b. With Loss on Retirement3
Share Capital XXX *Retained Earnings
Share Premium 4 XXX
Share Premium- T/S (if any) XXX Share Premium from the original issuance=
Retained Earnings XXX No. of retired treasury shares/ Total number of
Treasury Share XXX outstanding shares X Total Share Premium
Summary of Effect of Various Share Transactions

Summary of Reacquisition, Reissuance and Retirements

Sources:

Accounting for Partnership and Corporation by Baysa and Lupisan

Partnership and Corporation Accounting by Ballada

 End of Material 