CORPORATIONS 1. The varied aspect of corporations.—In different volumes of the Modern Business Text, corporations are treated from different standpoints. In "Organ ization and Control," the legal phases of corporations are considered. In "Corporation Finance" the topic is the procedure followed in securing the capital for the enterprise. Here it is the purpose to deal par ticularly with the accounting of corporations, tho it is in practice sometimes difficult to draw distinct lines of demarcation between law, finance and accounting in the discussion of corporate problems.
2. Difference between accounting practice of cor porations and that of partnerships.—There is no dif ference in the general scheme of accounts in a cor poration from that employed in a partnership, except as to the opening and closing entries, the booking of the proprietorship and the distribution of profits., A corporation is required to keep certain incidental books which differ from the records of partnerships.
3. Books incidental to a corporation.—Most if not all of the following auxiliary books are necessary if proper records are to be kept of transactions of a corporation: (a) Minute book, (b) Subscription book, (c) Instalment book, (d) Instalment-scrip book, (e) Stock-certificate book, (f) Stock ledger, (g) Stock-transfer book, (h) Dividend book.
4. Minute book.—The minute book contains a rec ord of all the meetings of the stockholders, and gen erally of all the meetings of the board of directors, altho in some cases it is advisable to have a separitte minute book for the meetings of the directors. In certain corporations where some of the duties of the directors are delegated to an executive committee, there will be a separate minute book for the meetings of the executive committee.
5. Subscription book.—The, subscription book is used for the purpose of recording the subscriptions of stockholders. It should contain the date of each sub scription, the name and the address of the subscriber and the number of shares which he agrees to take. This book records the contract existing with the sub scribers, whereby each binds himself to take the amount of stock for which he has subscribed. If the corporation is small, or if it is a close corporation, the account of subscriptions is commonly kept in the gen eral ledger.
6. Instalment book.—The instalment book is made up from the records of the subscription book and con tains the name of each subscriber and the amount of each instalment paid. A separate record should be kept for each instalment. It is hardly necessary to state that the use of the instalment book and of the instalment-scrip book is limited to cases where the stock is to be paid for by instalment.
7. Instalment-scrip book.—The instalment-scrip book is the receipt book for instalments paid by stock holders. It contains blank receipts to be filled out and signed by the secretary and the treasurer as the instalments are paid; the receipts are given to the subscriber by the secretary. In some cases the by laws of a corporation provide that the president and the secretary, instead of the treasurer and the secre tary, shall sign these receipts. Upon the payment of the last instalment, the scrip should be taken up and a certificate of stock should be issued in its place.
8. Stock-certificate "stock-certificate" book, or simply the "certificate" book, contains blank certificates to be filled out and signed, in accordance with the provisions of the by-laws of the corporation, either by the secretary, the president and treas urer, or by the secretary and the treasurer. For con venience, these certificates are numbered consecu tively. A transfer form is usually printed on the back of the certificate, in order to facilitate the trans fer or sale of the stock.
9. Stock ledger.—The stock ledger contains an ac count entitled "capital stock," which is debited with the par value of all the stock issued. It also con tains an account for each stockholder, which is credited with the par value of the stock issued to him. When stock is transferred, for any reason, from one owner to another, the transferee is debited, and the trans feree is credited, with the par value of the stock trans ferred. Thus this ledger is always self-balancing, and the account for capital stock is exactly the re verse of the capital-stock account in the general ledger, which is credited with the par value of the stock is sued, to record the liability of the corporation thereon. Furthermore, this ledger shows the detail of the capi tal-stock account in the general ledger. In those cases in which it is customary to place upon the gen eral books of the corporation the total amount of the authorized issue of stock, as a ledger account, off setting it by the total amount unissued, the differ ence at any time between the capital-stock-authorized account and the balance remaining in the capital stock-unissued account will be the amount of the capi tal-stock issued. This latter amount, of course, should equal the amount shown in the capital-stock account in the stock ledger, and should agree with the data that is given on detailed list of stockholders, as shown by the stock ledger.