Republika ng Pilipinas

Kagawaran ng Edukasyon
Rehiyon IV-A CALABARZON
SANGAY NG BATANGAS

Grade: 11 Activity 2
Course Title: Fundamentals of Accountancy, Business
and Management 1 You have now some ideas about the three major
accounts of a financial make up. Assets, Liabilities and
Content: The Accounting Equation Owner’s Equity. Let me first define these three
Content Standards: The Accounting Equation accounts.
Performance Standards: Solve problems applying the Assets are a company's resources—things the company
accounting Equation owns. Examples of assets include cash, accounts
receivable, inventory, prepaid insurance, investments,
Time Section Date land, buildings and equipment.
Liabilities are a company's obligations—amounts the
company owes. Examples of liabilities include notes or
loans payable, accounts payable, salaries and wages
Learning Competencies: payable, interest payable, and income taxes payable (if
the company is a regular corporation). Liabilities can be
viewed in two ways:
ABM_FABM11- IIIb-c-17
(1) as claims by creditors against the company's assets,
Illustrate the accounting equation.
and
(2) a source—along with owner or stockholder equity—of
ABM_FABM11- IIIb-c-18
the company's assets.
Perform operations involving simple cases with the use
Owner's or stockholders' equity also reports the
of accounting equation.
amounts invested into the company by the owners plus
Subject Matter: The Accounting Equation the cumulative net income of the company that has not
References: K to 12 Basic Education Curriculum – SHS been withdrawn or distributed to the owners.
Owner's equity or stockholders' equity is the amount
–Accountancy, Business and Management (ABM),
left over after liabilities are deducted from assets:
pages 2-3
Textbook: Basic Accounting Theory and Practices – Assets - Liabilities = Owner's (or Stockholders') Equity
Ma. Luisa Witty Ramirez – Reyes, pages 16-21

Procedure These three accounts have the same relationship to

each other. We call this relationship the Accounting
Activity I Equation.
Motivation
Assets Liabilities Owner’s
Take a look on this picture that I have paste in the board. Equity

What can you notice or what can you say about the
picture?
The word equation comes from the word equal. For any
equation, one side always equals another.

The equation shows that assets or properties of the

business are owing to outsiders (Liabilities) and to
owner’s (proprietor)

The equation may also be expressed as:

Assets Liabilities Owner’s

I have here some cut pictures were I got from the Equity
internet. What you are going to do is to put or paste
that picture on its proper places inside the stall. I will call
some of you to do the task. The equation means that out of the properties of the
business will first be paid the debts to outsiders and
Analysis 1 any amount remaining thereafter should go to the
owner.
1. What is the nature of the business then?
2. Who owns these things? Analysis 2
3. Assuming that your parent is the owner of the
business, how do think your parent was able to 1. Using your prior knowledge about financial
acquire those things inside the stall? statement, here are list of assets, liabilities and
4. Supposedly that before acquiring some of those owner’s equity. Put them in their proper column.
things your parent money is not enough to buy, Follow the format.
where do you think your parent gets the money? Cash Supplies Income
5. What can you say about those things or those Land Building Expenses
asset? Accounts Salaries Drawing
Payable Payable
Capital Notes Equipment
Receivable
 Republika ng Pilipinas
Kagawaran ng Edukasyon
Rehiyon IV-A CALABARZON
SANGAY NG BATANGAS

6. Paid the following expenses: Salaries P10,000;

Asset Liabilities Owner’s Rent P5,000; Utilities P4,000 and
Equity Miscellanous Expense P2,000

.
2. What things fall under assets, liabilities and Assessment
owner’s equity?
3. What did you found out? Individual Activity:
Using the given data accomplish the accounting
Let us assume that on July 1, 1991 Orlando Reyes equation by applying necessary operations.
engaged in business with a cash capital investment
of P100,000.00. On this date, the accounting Assets Liabilities Owner’s
equation is: Equity
a. 760,000 360,000 ?
Assets = Liabilities + Owner’s b. 860,000 ? 592,000
Equity c. ? 108,000 760,000
Cash = Capital d. 626,600 376,240 ?
P100,000.00 = 0 + P100,000.00 e. ? 800,000 (100,000)

The accounting equation could also apply to

personal situation. Suppose you buy a car for
P5000, borrow P4,000 from the bank, and pay the Prepared by:
rest yourself. Try to illustrate the accounting
equation.
ESTELITA M. MARASIGAN
Assets = Liabilities + Equity
Car = Accounts + Capital
Payable-
Bank
P5,000.00 = P4,000.00 + P1,000.00
P5,000.00 = P5,000.00

Abstraction

Why Assets is always equal to Liabilities and Owner’s

Equity?

Application:

Work Together:
I will group you into five groups. Review the
Accounting Equation and examine each of the
transactions and perform necessary operation with
the use of Accounting Equation.

I will ask one group to share the solution with the

class. If that group’s solution is wrong, another group
will be asked to share, and so on.

For the group activity I will illustrate and perform the

operation for transaction No. 1 and each group will
do the rest

Transactions:
1. Orlando deposited P750,000 in the bank in the
name of D & W Enterprise.
2. Orlando purchased land amounting to P500,000,
paid in cash.
3. Orlando Reyes purchased P20,000 supplies
paying in the near future.
4. During the month, P15,000 is paid to creditors
on account.
5. Received P55,000 from services rendered.