Reviewer in Partnership and Corporation

Page 1 of 15

Reviewer in Partnership and Corporation

By | March 2013
Page 1 of 15
Introduction to Corporation Accounting
CORPORATION - 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 (New Corporation Code of the Philippines). A corporation is an entity created by law that is separate and distinct from its owners and its continued existence is dependent upon the corporate statutes of the state in which it is incorporated. Characteristics of a Corporation The characteristics that distinguish a corporation from proprietorships and partnerships are: 1. Separate legal entity – A corporation is an artificial being with a personality separate from that of its individual owners (i.e., the corporation has separate legal existence from its owners). 2. Created by operation of law – A corporation is generally created by operation of law. The mere agreement of the parties cannot give rise to a corporation. 3. Right of succession – A corporation continues to exist notwithstanding the withdrawal, death, insolvency or incapacity of the individual owners. Changes in the ownership structure do not dissolve a corporation this means that the corporation can have a continuous life. 4. Powers, attributes, properties expressly authorized by law – Being a creation of law, a corporation can only exercise powers provided by law and powers which are incidental to its existence. 5. Ownership divided into shares – Proprietorship in a corporation is divided into units known as shares of stocks. Ownership is shown in shares of capital stock, which are transferable units. 6. Board of Directors (BOD) – Management of the business is vested in a board of directors elected by the stockholders. The BOD is the governing body or decisionmaking body of the corporation. 7. The stockholders have limited liability. 8. It is relatively easy for a corporation to obtain capital through the issuance of stock. 9. The corporation is subject to numerous...