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    The document provides examples of transactions and their impact on the accounting equation. It illustrates how the accounting equation is affected when: 1) An owner invests assets into the business 2) The business takes out a bank loan, increasing assets and liabilities 3) Equipment is purchased for cash, decreasing cash assets and increasing equipment assets 4) Equipment is purchased on credit, increasing assets and liabilities 5) The owner withdraws cash, decreasing assets and capital 6) A credit purchase is paid off in cash, decreasing assets and liabilities The transactions are used to demonstrate that the accounting equation (Assets = Liabilities + Capital) remains balanced as assets, liabilities and capital accounts change.

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    The document provides examples of transactions and their impact on the accounting equation. It illustrates how the accounting equation is affected when: 1) An owner invests assets into the business 2) The business takes out a bank loan, increasing assets and liabilities 3) Equipment is purchased for cash, decreasing cash assets and increasing equipment assets 4) Equipment is purchased on credit, increasing assets and liabilities 5) The owner withdraws cash, decreasing assets and capital 6) A credit purchase is paid off in cash, decreasing assets and liabilities The transactions are used to demonstrate that the accounting equation (Assets = Liabilities + Capital) remains balanced as assets, liabilities and capital accounts change.

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    © All Rights Reserved
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    51 views3 pages

    Accounting Equation Worksheet

    Uploaded by

    cln
    The document provides examples of transactions and their impact on the accounting equation. It illustrates how the accounting equation is affected when: 1) An owner invests assets into the business 2) The business takes out a bank loan, increasing assets and liabilities 3) Equipment is purchased for cash, decreasing cash assets and increasing equipment assets 4) Equipment is purchased on credit, increasing assets and liabilities 5) The owner withdraws cash, decreasing assets and capital 6) A credit purchase is paid off in cash, decreasing assets and liabilities The transactions are used to demonstrate that the accounting equation (Assets = Liabilities + Capital) remains balanced as assets, liabilities and capital accounts change.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 3

    Elizabeth Seton School

    Las Piñas Campus


    Senior High School Division
    SY 2019-2020

    FUNDAMENTALS OF ACCOUNTING AND BUSINESS MANAGEMENT 1


    Written Output No. 6

    NAME: Cielene Marie C. Catad_________ Year and Strand: 11-ABM___ Date: April 29, 2020_____

    CONCEPTS OF ACCOUNTING EQUATION

    Illustrate how each transaction affects the accounting equation. 

    A. Assets invested by the owner 

    EXAMPLE:
    July 1 - Paolo Reyes started a delivery service on July 1, 2013. The following transactions occurred during the
    month of July. He invested PHP800,000 cash and Cars amounting to PHP200,000 

    ASSETS = LIABILITIES + CAPITAL


    PHP800,000
    PHP1,000,000
    PHP200,000

    Explanation: The cash PHP800,000 and the car amounting to PHP200,000 are both asset accounts. The
    total capital is PHP1,000,000 (sum of the cash and car) which is the assets invested by the owner. With this,
    the accounting equation is correct: ASSETS = LIABILITIES + CAPITAL

    B. Borrowings from the bank

    July 2 – Reyes borrowed PHP100,000 cash from PNB for use in his business.

    ASSETS = LIABILITIES + CAPITAL


    PHP100,000 PHP100,000

    Explanation: The owner borrowed cash therefore PHP100,000 will be in assets and since it is a borrowings,
    PHP100,000 is in liabilities. With this, the accounting equation is correct: ASSETS = LIABILITIES + CAPITAL
    TASK 1:

    For the next accounting transactions, kindly fill out the boxes with appropriate amounts and write an
    explanation for your answer. Use parenthesis symbol ( ) for negative numbers in case that amounts
    need to be deducted.

    C. Asset purchased for cash

    July 7 – Bought tables and chairs from Orocan and paid PHP45,000 cash

    ASSETS = LIABILITIES + CAPITAL

    (PHP45,000)

    PHP45,000

    Explanation: The owner purchased new assets (chairs and tables) for PHP45,000 cash so the asset will
    increase by PHP45,000 but since the owner paid in cash, the asset Cash will decrease by PHP45,000. The
    accounting equation will be Asset PHP0 (Cash (PHP45,000) + PHP45,000) = Liabilities PHP0 + Capital
    PHP0. This transaction only affects the Assets of the equation; therefore there is no corresponding effect in
    liabilities or capital. With this, the accounting equation is correct.

    D. Assets purchased on account

    July 15 – Various equipment were purchased on account from Fortune for PHP55,000

    ASSETS = LIABILITIES + CAPITAL

    PHP55,000 PHP55,000

    Explanation: The owner purchased new assets (equipment) but will pay Fortune later. The owner owes
    PHP55,000 to Fortune so the amount will be put in liabilities but there will be an additional of PHP55,000 in
    assets. The accounting equation will be Assets PHP55,000 = Liabilities PHP55,000 + Capital PHP0. With this,
    the accounting equation is correct.

    E. Cash withdrawal by the owner

    July 18 – Reyes made a cash withdrawal of PHP5,000 for personal use

    ASSETS = LIABILITIES + CAPITAL

    (PHP5, 000) (PHP5,000)

    Explanation: The owner withdrew PHP5,000 cash. Cash is decreased by PHP5,000 therefore decreasing
    total assets. Withdrawals decrease capital. The accounting equation will be Assets (PHP5,000) = Liabilities
    PHP0 + Capital (PHP5,000). With this, the accounting equation is correct.
    F. Payment of liability

    July 20 – The account due to Fortune was paid in cash

    ASSETS = LIABILITIES + CAPITAL

    (PHP55,000) (PHP55,000)

    Explanation: The due amount of PHP55,000 to Fortune was paid in cash so liabilities will decrease by
    PHP55,000 and the cash from assets will also decrease by PHP55,000 since they are not buying new assets
    but paying for the previous purchase. The accounting equation will be Assets (PHP55,000) = Liabilities
    (PHP55,000) + Capital PHP0. With this, the accounting equation is correct.

    Task 2:
    Calculate the total assets, liabilities and capital. Be sure upon getting the total, the accounting
    equations should be maintained.

    ASSETS = LIABILITIES + CAPITAL


    PHP800,000 PHP1,000,000
    PHP200,000

    PHP100,000 PHP100,000

    (PHP45,000)
    PHP45,000

    PHP55,000 PHP55,000

    (PHP5,000) (PHP5,000)

    (PHP55,000) (PHP55,000)
    PHP1,095,000 PHP100,000 PHP995,000

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