INTRODUCTION TO ACCOUNTING The classifying phase involves sorting or

grouping similar items into assets, liabilities, equity,

Accounting income, or expenses. This is the phase wherein
- The “language of business” recorded data are grouped systematically in one place.
-is a process of identifying, measuring, recording The term “ledger “refers to the book wherein
financial information to be communicated to interested classifications are recorded.
users at the right time. 3. Summarizing
-is a systematic recording of financial The summarizing phase involves preparing the
transactions and presenting the information to the financial statements such as statement of financial
different users of accounting information. position (balance sheet), statement of financial
performance (income statement), statement of changes
in owner’s equity, cash flow statement, and notes to
Measuring financial statement. This is to summarize the effects of
-refers to the process of assigning and all business transactions that transpired during the
determining the monetary value of business transactions accounting period such as monthly, quarterly, semi-
or events. annually, annually.
4. Interpreting
NATURE OF ACCOUNTING
Interpreting phase is concerned with analyzing
1. Accounting is a process. the results on the financial statements to evaluate the
A process is a systematic series of action liquidity, profitability, and solvency of the business entity.
directed towards a particular outcome. Accounting is This final function interprets the recorded data in a
identified as a process as it follows logical phases in the manner which enables the users of financial information
accounting cycle such as recording, classifying, make a meaningful judgement and sound decisions of
summarizing financial transactions, and communicating business personal account. This data is used to prepare
the results after. future plans and policies of the business entity.
2. Accounting is an art.
The word “art’ refers to the way of how FUNCTIONS OF ACCOUNTING IN
something can be performed. It is a behavioral
knowledge which involves creativity and skill. Accounting
BUSINESS
activity is systematic that requires a definite techniques 1. Accounting is a means by which financial
and application of accounting expertise and skills. So, by information are communicated to business owners
nature, accounting is an art. and other users of financial information.
3. Accounting is a service activity. Accounting provides relevant information for
It is concerned with providing service of ensuring owners and managers to use in business operation.
that the financial statements are available to users on a 2. Accounting information allows business owners
timely basis. or managers assess the efficiency and
4. Accounting is an information system. effectiveness of business operations.
An information system is a set of interrelated Financial reports could be compared with other
components working together to achieve common goal. industry standards to determine how the business is
Accounting is characterized as a storehouse of doing. Also, business owners may use historical financial
information. A business uses a structure to collect, statements to create trends for analyzing and forecasting
record, classify, summarize, and communicate financial future sales.
information of any entity. 3. Accounting helps the management or owners
5. Accounting deals with financial fulfill its stewardship function.
information and transactions. With the accounting information, the
management must ensure the assets and other
Accounting records financial transactions and
resources of the business are taken care of on behalf of
data, classifies and summarize the results for a given
the owners or stakeholders by keeping proper books of
specific period, as needed by the users. At all times,
account.
accounting deals with financial information only and
does not deal with non-monetary or non-financial 4. Accounting helps interested users come up with
aspects of information. 6. Accounting is a means not an informed decisions.
end. Accounting finds out the financial results and Users of financial information such as potential
position of an entity and the same time, it communicates investors, banks/creditors, suppliers, and government
this information to its users. The users then take their needs financial information to make decisions.
own decisions on the basis of such information. Thus, 5. Support the daily operations of the business.
accounting itself is not an objective, it helps attaining a In order for a business to survive, business
specific objective. So, it is said the accounting is “a owners or managers must be well-informed to see the
means to an end’ and it is not “an end” in itself. true picture of the business in financial terms.
Accounting serves as a tool to achieve specific objective
LUCA BARTOLOMES PACIOLI
PHASES OF ACCOUNTING An Italian monk and mathematician, Luca
1. Recording Bartolomeo Pacioli is known as the “Father of Modern
Recording is the basic phase of accounting that Accounting” for his work in the double entry
is also known as bookkeeping. In this phase, financial bookkeeping.
transactions are recorded systematically and
chronologically in the “journal” which is also known as PUBLIC ACCOUNTING
the book of original entry. Accounting recorders need
source documents such as receipts, invoices, checks to What is Public Accounting?
record business transactions. Good and accurate Public accounting refers to a business that
records allow the owners/managers keep track of the provides accounting services to other firms. In public
progress of their business. accounting, the accountant performs or offers to perform
2. Classifying any activity that will result to the issuance of an attested
report that is in accordance with professional standards.
 specialization are of accounting that involves setting up
What are the public accounting services? systems of recording business transactions that are
1. External Auditing aggregated into financial statements. Private accounting
-Public accountants examine the financial is responsible for the preparation of financial statement
statements in order to express an opinion on whether and as well as interpretation of this accounting
statements have been fairly presented or not in all information to assist management in business operation.
material respects. That is, they show a true and fair view It is also particular with the internal aspects of the
in all material respects of the company's financial business, agency and government.
position, results of operations, and cash flows, in
conformity with national or international generally 7 BRANCHES OF ACCOUNTING
accepted accounting principles (GAAP).
The auditor critically examines the accounting 1. Financial Accounting
records of the clients to check if business transactions Is a branch of private accounting which is governed by
have been properly recorded. generally accepted accounting principles (GAAP). It
The auditor, then, issues an independent audit focuses on the following services:
report of his or her findings. Take note that the external  recording and classifying of business
auditor is not an employee of the company which is transactions while applying the GAAP.
being audited.  preparation of reports on financial position and
2. Tax Preparation and Planning Service results of operations at the end of the accounting period.
-Some Certified Public Accountants (CPAs) offer It includes supporting explanatory notes in the financial
services such as: Tax services - wherein they advise statements to further explain report of findings. (The
and help their clients in tax planning and preparing tax general financial statements such as income statement,
returns. In this branch of public accounting, the statement of owner’s equity, cash flow statement and
accountant is a tax specialist. As a tax specialist, he or statement of financial position are being prepared and
she is expected to be knowledgeable about revenue presented.)
regulations and tax laws. He or she also represents the  providing economic and financial information
client in any tax-related case filed by the Bureau of for internal users, investors, creditors, and other external
Internal Revenue (BIR). users through using a system of reporting.
3. Management Advisory Services
-Accountants offer management consulting The financial information (financial statements) could
which involves financial planning and control, help the investors and creditors to see whether they
development of accounting and computer systems, would invest or lend money to a certain company. This
advising management on matters such as the illustration could also help internal users such as owner, manager,
of an accounting system, finance, budgeting, business and staff in making sound decisions for the business.
processes, introduction of new products, and other
business activities. 2. Cost Accounting
This branch of private accounting is being used in
What are the businesses that require the manufacturing businesses. The different types of
services of Public Accounting? services under this branch are as follows:
1. Merchandising Businesses -recording, analyzing, and reporting the
company’s fixed and variable costs in producing finished
– this is a type of business that is commonly
output or product.
known as a “buy & sell” business. Products are bought
-determining the accounting manufacturing costs
from manufacturers or other merchandisers and are sold
for financial reporting and decision-making purposes.
as is (or with minimal changes) at an amount higher than
-providing the management tools and
the purchase price. (e.g., grocery stores, minimarts,
information for planning and controlling activities so it
souvenir shops, clothing stores, hardwares, drug stores,
can maximize the profit margin.
and many others)
2. Manufacturing Businesses
These services are being performed by a cost
- these are businesses that process raw
accountant.
materials to make finished goods or products.
3. Service Businesses
- these are businesses that offer services to their
3. Budgeting
This branch of private accounting which is involved in
customers or clients (e.g., private schools, hotels, spas,
planning the estimated income and expenses based on
salons, and many others.)
the business future plans and objectives. These have
several services such as:
Who are the other clients that require the -providing a detailed collection and reporting of
services of Public Accounting? the expenditures and revenues involved in a business or
1. Non-Profit Organizations company operations.
– these are institutions that conduct their affairs -tracking of the financial details of the firm (this
for the purpose of assisting other individuals, groups, or includes the inflow and outflow of money in the
causes rather than gaining profits for themselves. company).
2. Individuals -assisting the management in quantifying goals
– these are individual taxpayers who seek help concerning revenue, cost of sales or services, and
from an accounting firm in preparing necessary operating expenses.
requirements to file for an income tax or annual income
tax. 4. Accounting Information System
This is a branch of private accounting is a system that
PRIVATE ACCOUNTING collects, stores and process financial and accounting
data to be used by users of accounting information. Its
purposes/services are:
According to Florenz C.Tugas, et.al from the book
-collects and processes transaction data.
Fundamentals of Accountancy, Business and
-disseminates information to interested parties.
Management I, Private Accounting is one of the
 -designing of both manual and computerized 1. To provide quantitative information concerning past
data processing systems. operations and present conditions.
2. To provide a basis for guidance for future operations.
5. Tax Accounting- 3. To provide for control of the account of public entities
This branch of private accounting is similar to the tax and officers in the receipt, disposition and utilization
preparation and planning services of public accounting. funds and properties
Its main focus is to: 4. To report on the financial position and the result of the
-prepare various tax returns and doing tax operations of the government agencies for the
planning for the business. information of the public.

Some examples: Quarterly Income Tax Returns, Annual In the Philippines, there is a Government Accounting
Income Tax Returns, and Quarterly Income Tax Returns. Manual (GAM) prescribed by Commission on Audit as
basis and for use of all national government agencies.
6. Internal Auditing
This is a branch of private accounting that provides an What are the three (3) types of
objective and independent consulting activity that governmental organization units?
focuses on the improvement of the business operation.
The purposes of which are: 1. National Government Agencies
-reviews of business operations in order to see if -are agencies that include all departments,
it complies to management policies. bureaus, offices, boards, commissions, councils, state
-evaluates the efficiency of business operations. colleges and universities.
These services or activities are being performed by an Examples: Commission on Audit, Bureau of Internal
internal auditor who is a hired employee of the company. Revenue, Department of Budget and Management and
many more.
7. Management Accounting 2. Local Government Unit
This is a branch of private accounting that provides -are political subdivisions of the Philippines
financial data and advisory services to a company for the having substantial control over local affairs, consisting of
development of a business that concerns with the provinces, cities, municipalities, and barangays.
following services: Examples: Different provinces, cities, municipalities, and
-Preparation and analysis of accounting barangays within the Philippines.
information within the organization.
-Provide timely and relevant information for 3. Government Owned or Controlled Corp
those internal users of accounting information such as (GOCC)
managers and employees in their decision-making -are agencies organized by law or pursuant to
needs. This information is confidential and sensitive that law vested with functions relating to public needs
is not distributed to those outside the business. Example whether government or propriety in nature, owned by the
of these are prices, plans to open up branches, government directly or through its instrumentalities either
customer list, etc. wholly or, where applicable as in case of stock
-Involves financial analysis, budgeting and corporation, to the extent of at least fifty one percent of
forecasting, cost analysis, evaluation of business its capital stock.
decisions, and other similar areas. Examples: Lung Center of the Philippines, Government
Service Insurance System (GSIS), Home Development
Mutual Fund (Pag-Ibig Fund), National Food Authority
BRANCHES OF ACCOUNTING (NFA) and many others.
What is Government Accounting?
-Under section 109 of the Presidential decree
What is Forensic Accounting?
(PB no. 1445 ) defines Government accounting as one -Forensic Accounting is considered as one of
that encompasses the process of analyzing, classifying, the specialty practice areas of accounting, or in some
summarizing and communicating all the transactions that other books it is considered as a branch or specialized
involved in the receipt and disbursement of all area of accounting. Either way, it has the same purpose
government funds and properties, and interpreting the or function. It engages on using the accounting, auditing,
result there of. and investigative skills to analyze, examine, investigate
-In the Philippines, the New Government and report financial information in a manner suitable to
Accounting System or NGAS is being used in generating the court. The examined financial information can be
periodic financial reports or financial statements. The used as evidence to white-collar financial crimes such as
users of these reports are usually both internal users stealing and fraud.
(elected officials, government officers, employees and
the like), and external users (usually the Filipino citizens) Forensic Accounting includes both Litigation Support
for decision-making and transparency purposes. and Investigative Support.
1. Litigation Support
What is the main function of Government -provides assistance of an accounting nature in
a matter involving existing or pending litigation. It deals
Accounting? primarily with issues related to the qualification of
-The main function of Government Accounting is economic damages.
to provide quantitative information primarily financial in
nature about the operations of the government, both 2. Investigative Support
national and local, to be used by the administration in -is often associated with investigation of criminal
making decisions for a more effective and efficient public matters.
service.
FORENSIC ACCOUNTING
What are the objectives of Government -A forensic accountant is a specialist at resolving
Accounting? financial and compliance puzzles for businesses, non-
profits, governmental entities, and individuals, using
precise processes and a systematic investigation of
data. He/she is often a certified public accountant (CPA) and operation of the business. They need a detailed
but may also have worked for a government agency information to support their decisions.
before retiring and entering the private sector.
Management - is comprised of the members of the
INFORMATION TECHNOLOGY organization that can make a decision on its behalf that
will affect company’s operations in the future.
SERVICES (TECH SAVVY)
-This specialized area of accounting is for CPAs
Employees- are concerned on company’s financial
who have competencies/skills in information technology.
performance and its ability to provide proper
They can work with e-commerce ventures and consult
compensation and benefits. It is their core interest to
with others to 5 determine which decisions are the most
know whether they are going to be secured in their job
financially and technologically sound for a company.
so that they can continue to work in the company and be
Basically, businesses or other organizations tend to seek
properly paid.
help to IT experts like them who can design and
implement customized software systems. Employees - increase their value in the company
through the years of their service. It improves their
knowledge and skills and lead them to accept positions
ENVIRONMENTAL ACCOUNTING that has a greater responsibility.
-is a field/specialized area of accounting that
focuses on the following services/purposes:
Owners - are current investors of the company. They
-Identifies resource use, measures and
are particular with the financial statement to assess how
communicates costs of the impact on the environment
the business is performing. Such financial statements
by the company or national economy.
give them information about business and give them a
Examples of Cost: cost to clean up or remediate
hint of how risky their business is.
contaminated sites, environmental fines, penalties and
taxes, purchase of pollution prevention technologies and
waste management costs. EXTERNAL USERS – are individuals and
--Determines how companies can be both organization outside a company who wants financial
profitable and environmentallyresponsible. information about the company. These users are not
-Involves environmental compliance audits directly involved in management and operation of the
-Sets-up preventative systems to ensure business but hold some financial interest. They make
compliance and avoid future environmental-related their decision based on the financial information that is
claims or disputes. provided to them by the organization.
-Achieves sustainable development
-Maintains favourable relationship with the Types of External users:
community 1. Potential and existing investors
-Pursues effective and efficient environmental 2. Creditors and potential creditors
conservation activities. 3. Customers
4. Taxing authorities
INTERNATIONAL ACCOUNTING 5. Regulatory bodies
-International accounting is considered as a 6. Public
subset/branch/specialized area of accounting wherein it 7. Academe
gives focus on the description or comparison of 8. Supplier
accounting in different countries and the accounting
dimensions of international transactions. International Potential and existing Investors - they need
accountants are expected to be knowledgeable in: the information to help them to decide whether they
-international trade rules and regulations should invest, hold, or sell their shares in the business.
-international mergers Shareholders are also interested on the past
-government regulations performance of the business, which enable them to
-tax laws assess the potential returns on their investment. The
-overseas transactions. level of profits presented in the financial statement is a
primary concern of the investors. The information is a
International Accounting Standards (IAS) and key indicator if the investment will be profitable.
International Financial Reporting Standards (IFRS) are
the same. The main difference between them is IAS Creditors and potential creditors – creditors
represents the old standards while IFRS represents the are interested on the financial information that would
new standards. IAS was replaced by IFRS. International guide them to determine the capability of the business to
Financial Reporting Standards (IFRS) are accounting pay their loans including the related interest on maturity
standards issued by the IFRS Foundation and the date. Before a creditor grant loans to business, they first
International Accounting Standards Board (IASB). It has examine the financial statements, which enables them to
set of common rules so that financial statements can be find out whether the company has the ability to meets its
consistent, transparent, and comparable around the loan obligation from its cash flow. Creditors include
world. These standards were established to create a banks, suppliers, and other lending institutions.
common accounting language so that businesses and
their financial statements can be consistent and reliable Suppliers – This is similar to Creditors and other
from company to company and country to country. lenders. They uses accounting information to assess the
credit worthiness of the customers before they will offer
USERS OF ACCOUNTING their goods and services to their client business or
INFORMATION customers.

INTERNAL USERS – These users are within the Customers – they are particularly interested in the
accounting information of a business to determine if it
company who uses accounting information for daily
profitable for them to transact with the business. They
decision-making. They are directly involved in managing
also look for the capabilities of the business to honor its
product warranties and after sales services. It is good to A partnership is an artificial being created by operation
point out that even large companies can be a customer. of law, having juridical personality separate and distinct
from the owners (called partners). Unlike a sole
Taxing Authorities –they use financial statement proprietorship, a partnership can enter into contracts
to compute the amount of taxes payable by a company. under its own name.
They also want to guarantee that that the business paid 2. Mutual agency
the correct amount of taxes. Mutual agency means that the acts of a partner are
binding on a partnership even without authorization from
Regulatory bodies –they use financial statement other partners, as long as the acts concern the normal
primarily to regulate the businesses in the economy. business operation of the partnership.
Businesses are required to submit reports to regulatory 3. Unlimited liability
agencies like Securities and Exchange Commission Like in sole proprietorship, creditors and other parties
(SEC) and Bangko Sentral ng Pilipinas (BSP). These can go after the personal assets of the partners when
agencies watch over compliance to corporate trade and partnership assets are not sufficient to pay their
laws to protect the interest of the investors and owners obligations.
who rely on those accounting information. 4. Limited life
There are two ways on how to end the life of a
Public – financial statements may assist the public by partnership: dissolution and liquidation. Partnership
providing information about the trends and recent dissolution occurs when one of the partners withdraws
development in the prosperity of the enterprise and the from the partnership or when a new partner is admitted.
range of its activities so that the public can respond Dissolution does not mean that the partnership will
properly. They want to know the financial health of the cease to exist. It only leads to the formation of a new
businesses to get a fair idea of economic situation of the partnership. On the other hand, partnership liquidation
country, thus affecting the decision of the public, which ends the operations of the partnership. During
involves: liquidation, partnership assets are sold, liabilities are
1. Whether or not it is wise to start a business given the paid, and the remaining assets are distributed to the
current business environment and economic condition. partners.
2. To stay or look for another high paying and promising 5. Co-ownership of partnership property
job When the partnership is formed, the contributed money
3. To look for the best use where they can put their or properties from the partners belong to the partnership
money and the partners only have a proportionate share of the
4. To determine the level of savings and consumptions. assets.
6. Partnership agreement
Academe- this group may not have a direct interest in Partnership is a contract. It could be in oral or written
the business however, members of academe such as agreement. However, to protect the interest of all
professors, researcher, students utilize financial partners, it is best if they secure a written contract called
statement for academic purposes. Result of studies may articles of partnership, which contains the following
help identify business trend on particular industry and information:
can greatly help the government in assessing the a. Name of the partnership
condition of the economy. Study on financial statement b. Location of the main office of the partnership
improves the accountancy practice by searching the c. The names, citizenships, and residence of the
weaknesses and possible improvements in the partners
accounting standard currently being used. d. Term for which the partnership is to exist
e. The purposes for which the partnership is formed
FORMS OF BUSINESS f. original capital contributions of the partners
g. Profit and loss sharing agreement among the partners
ORGANIZATION h. Stipulations pertaining to admission and withdrawal
and death of a partner, and partnership liquidation.
SOLE PROPRIETORSHIPS
-are businesses formed by a single individual FORMS OF A PARTNERSHIP
called sole proprietor. It is the cheapest, simplest, and Individuals planning to work together may choose a form
easiest among the forms of business organizations. The of partnership according to the extent of liability of each
law does not recognize a sole proprietorship as separate type.
and distinct from its owner. Thus, all transactions of the
business are under the name of the owner, unlike that of
the other forms of organizations. However, the owner
General Partnership
may opt to operate the business under his/her own -the owners have unlimited liability. In other
name or use fictitious names such as “Mang Juan Sari- words, the owners are still liable for all the debts of the
sari Store”. business regardless of the amount of his investment.
Limited Partnership
-allows the partners to limit their liability for
PARTNERSHIP business debts proportional to their investments. In this
Title IX Article 1767 of the Civil Code of the Philippines type of partnership, at least one partner has unlimited
states that, “By the contract of partnership two or more liability (general partner) and at least one partner as
persons bind themselves to contribute money, property, limited liability (limited partner). Because general
or industry to a common fund, with the intention of partners have higher level of risks, they are the only
dividing the profits among themselves.” ones allowed to participate in the management of the
partnership.
Two or more persons may also form a partnership for Limited Liability Partnership
the exercise of a profession. (Civil Code of the -is a type of partnership that aims to protect
Philippines: innocent partners from the wrongdoings of other
Title IX Article 1767) General Features of a Partnership partners by possessing multiple insurance claims. It is
1. Separate legal existence usually used by individuals forming a partnership for the
practice of a profession (example: lawyers, accountants, of other stockholders unless the corporation is privately
doctors). held.
Limited Liability 4. Virtually unlimited life
-company have features of both a corporation The life of a corporation shall not exceed 50
and a partnership. The owners are called members and years from the date of its formation. It can be extended
they have limited liability. Members of this type of for a period not exceeding 50 years. There is no limit to
partnership can participate in the management without the number of extensions a corporation can avail of. The
losing the limited liability protection. withdrawal, death, and admission of stockholders do not
require formulation of new agreement unlike a
TYPES OF PARTNERS partnership.
1. General partner. 5. Corporation management
One who is liable to the extent of his personal Unlike the other forms of organizations, the
property after all the assets of the partnership are owners of a corporation have limited involvement in the
exhausted. company’s operations. The stockholders elect the board
2. Limited partner. of directors who controls the management of the
business.
One who is liable only to the extent of his capital
contribution. 6. Government regulations
3. Capitalist partner. Corporations are subject to stricter government
regulations than sole proprietorships and partnerships.
One who contributes money or property to the
Being one of the major contributors to the economy, the
common fund of the partnership.
government designed regulations not only for the
4. Industrial partner. protection of public interest, but for the stockholder’s as
One who contributes his knowledge and skills to well.
the partnership.
7. Double taxation
5. Managing partner. The income of the corporation will be taxed as
One whom the partners have appointed as the “personal income” of the company. Then, any
manager of the partnership. income distributed to the shareholders as dividends will
6. Liquidating partner. be taxed again as personal income of the owners. This
One who is designated to settle the affairs of the is one disadvantage of a corporation from the other
partnership after dissolution. forms of business organizations.
7. Dormant partner. 8. Dividends
One who does not take active part in the Dividends are the income distributed to the
partnership and is not known as a partner. stockholders. It may be in the form of cash, stock, or
8. Silent partner. property. However, corporations, they are not required to
One who does not take active part in the distribute its income to the owners. The stockholders will
partnership and though may be known as a partner. only be entitled to receive dividends once the board of
9. Secret partner. directors approve the distribution.
One who takes active part in the partnership but
is not known to be a partner by outside parties. There are 2 kinds of corporation: the stock and nonstock
corporations. Stock corporations are those which have
10. Nominal partner or partner by
capital stock divided into shares and are authorized to
estoppel. distribute to the holders of such shares, dividends, or
One who is actually not a partner but represents allotments of the surplus profits on the basis of the
himself as one. shares held. All other corporations are nonstock
corporations.
CORPORATION
According to Title I, Section 2 of the Republic Act No. Corporations has at least 5 owners. Incorporators are
11232, otherwise known as the Revised Corporation those stockholders or members mentioned in the articles
Code of the Philippines, “a corporation is an artificial of incorporation as originally forming and composing the
being created by operation of law, having the right of corporation and who are the signatories thereof.
succession and the powers, attributes, and properties Corporations begin its existence once the Securities and
expressly authorized by law or incidental to its Exchange Commission (SEC) approves the Articles of
existence”. Incorporations. The word “Corporation / Incorporation /
Corp. / Inc.” appears in the name of the entity.
GENERAL FEATURES OF A CORPORATION
1. Separate legal existence CORPORATION
Just like partnership, a corporation is treated by According to Chapter I, Article 3 of the Republic Act No.
law as an artificial being separate and distinct from its 9520, otherwise known as Philippine Cooperative Code
owners. of 2008, “a cooperative is an autonomous and duly
2. Limited Liability registered association of persons, with a common bond
This characteristic is an advantage of a of interest, who have voluntarily joined together to
corporation over a partnership. The personal assets of achieve their social, economic, and cultural needs and
the owners of a corporation are protected from loses and aspirations by making equitable contributions to the
claims of the creditors. capital required, patronizing their products and services
3. Transferable ownership rights and accepting a fair share of the risks and benefits of the
Ownership rights of the corporators are undertaking in accordance with universally accepted
represented by stocks. A stock is an intangible asset cooperative principles.”
evidencing a proportionate share in the properties of a
corporation. It is represented by a stock certificate. A cooperative may be formed by at least 15 persons with
Stocks can be transferred to other persons through sale, the primary objective of helping improve the quality of life
donation, or other modes of transfer. Unlike partnership, of its members.
transfer of stocks can happen even without the consent
A cooperative may be organized and registered for any working together through local, national, regional, and
or all of the following purposes: international structures.
1. To encourage thrift and savings mobilization among 7. Concern for Community
the members -Cooperatives work for the sustainable
2. To generate funds and extend credit to the members development of their communities though policies
for productive and provident purposes approved by their members.
3. To encourage among members systematic production
and marketing
4. To provide goods and services and other
requirements to the members
5. To develop expertise and skills among its members;
6. To acquire lands and provide housing benefits for the
member
7. To insure against losses of the members
8. To promote and advance the economic, social, and
educational status of the members
9. To establish, own, lease or operate cooperative
banks, cooperative wholesale and retail complexes,
insurance and agricultural/industrial processing
enterprises, and public markets
10. To coordinate and facilitate the activities of
cooperatives
11. To advocate for the cause of the cooperative
movements
12. To ensure the viability of cooperatives through the
utilization of new technologies
13. To encourage and promote self-help or self-
employment as an engine for economic growth and
poverty alleviation
14. To undertake any and all other activities for the
effective and efficient implementation of the Cooperative
Code of the Philippines.

Every cooperative shall conduct its affairs in accordance

with Filipino culture, good values and experience and the
universally accepted principles of cooperation which
include, but not limited to, the following:

1. Voluntary and Open Membership

-Cooperatives are voluntary organizations, open
to all persons able to use their services and willing to
accept the responsibilities of membership, without
gender, social, racial, cultural, political, or religious
discrimination.
2. Democratic Member Control
-Cooperatives are democratic organizations that
are controlled by their members who actively participate
in setting their policies and making decisions. In primary
cooperatives, members have equal voting rights of one-
member, one-vote.
3. Member Economic Participation
-Members contribute equitably to, and
democratically control, the capital of their cooperatives.
At least part of that capital is the common property of the
cooperative. They shall receive limited compensation or
limited interest, if any, on capital subscribed and paid as
a condition of membership.
4. Autonomy and Independence
-Cooperatives are autonomous, self-help
organizations controlled by their members. If they enter
into agreements with other organizations, including
government, or raise capital from external sources, they
shall do so on terms that ensure democratic control of
their members and maintain their cooperative autonomy.
5. Education, Training, and Information
-Cooperatives shall provide education and
training for their members, elected and appointed
representatives, managers, and employees, so that they
can contribute effectively to the development of their
cooperatives.
6. Cooperation Among Cooperatives
-Cooperatives serve their members most
effectively and strengthen the cooperative movement by