Fundamentals of Accounting Theory and Practice Part 2 : Accounting for Corporation Study Guide

Fundamentals of Accounting Theory and Practice Part 2 Accounting for Corporation The approved application for incorporation or charter of a corporation specifies the kinds or types of stock, its par value, (if any) and the number of shares the company is authorized to issue or sell. These authorized stocks are usually issued or sold for cash but there are also some cases when shares of stock are issued in exchange of services or plant assets. Shares can also be sold on a subscription basis. Before we illustrate the recording process for stocks, let us recall some important terminologies from our previous module. Authorized capital stocks or shares are the shares stated in the articles for incorporations that are authorized by the Securities and Exchange Commission to be sold by the corporation. Issued shares are the sold stocks from the authorized shares. Issued because the stock certificate will be issued only when the payment for the shares are already complete. The issued shares are always less or equal to the authorized number of shares to be sold. Outstanding shares of stock are the shares that are already in the hands of the stockholder (this is also called Issued and Outstanding Share Capital. The number of outstanding shares is always less than or equal to the issued shares. Unissued share capital or unissued capital stock is the amount of shares not yet issued to shareholders. Subscribed share capital or subscribed capital stock is the amount of stock that is contracted or subscribed by the shareholders which are not yet fully paid. Stock certificate is the evidence of stock ownership. Par value is the nominal or stated value of each share of stock that is stated or printed in the stock certificate. It is the amount which is corporation should sell such shares. (In the Philippines, par value shares can be originally sold only at a price not less than its par value)