Expanding The Accounting Equation To S How Operating Res Ults

Fundamentals of Accounting ACTG 1 - LESSON 4
L E S SON 4
EXPANDING THE
ACCOUN TI N G EQUATI ON TO
S H OW OP E R ATI N G R ES ULTS
AC TG 1 – F U N D A M E N TA L S O F A C C O U N TI N G
ACTG1-LESSON 4
1
INTRODUCTION
iPhone 12 ProMax
12,298,851 pcs
SOURCE: BUSINESSWORLD TOP 200CORPORATIONS
ACTG1-LESSON 4
2
1
OPERATING RESULTS OF A B US I N ES S
The OPERATING or OPERATIVE RESULT, arising from the REVENUE and EXPENSES,
shows what the company has earned in connection with its business activities
INCOME STATEMENT
• Revenue
• Expenses
• Net Income or Net Loss
ACTG1-LESSON 4
3
OPERATING RESULTS OF A B US I N ES S
REVENUE: P1,000
EXPENSES:
• Flour – P70
• Eggs – P50
• Sugar – P20
• Cream – P100
• Mangoes – P200
• TOTAL – P440
NET INCOME: P560
ACTG1-LESSON 4
4
2
EXPANDED ACCOUNTING EQUATION
ASSETS = LIABILITIES + OWNER’S EQUITY
INCREASES DUE TO: DECREASES DUETO:
• Capital • Drawings
• REVENUES • EXPENSES
ACTG1-LESSON 4
5
ACCRUAL PRI N C I PL E
Transactions are recorded at the time they took place regardless of when cash is paid or
collected.
Examples:
David’s Online Selling Business sold P5,000 worth of shirts to a customer. The
customer did not pay yet.
• Account Receivable
• Note Receivable
David’s Online Selling Business received its electricity bill for the month of May 2021
reflecting P1,500 of amount due. The business did not pay the electricity yet.
• Utilities Payable
• Rent Payable
ACTG1-LESSON 4
6
3
REVENUES
REVENUES represent amounts coming from a client or customer for service rendered or
for goods sold.
Account Titles:
Medical Fees Revenue Income received by a hospital.

Transportation Fare Revenue Income received by a bus company.
Professional Fees Revenue Income received by an accountant, engineer, IT
professional,or a chef.
ACTG1-LESSON 4
7
David’s Online Selling Business sold P5,000 worth of shirts to a customer. The customer
paid the amount accordingly.
ASSETS LIABILITIES OWNER’S EQUITY
CASH ACCOUNT RECEIVABLE FURNITURE EQUIPMENT ACCOUNT PAYABLE LOAN PAYABLE REVENUE EXPENSES
5,000 5,000
Increase in ASSETS – Cash, P5,000; Increase in OWNER’S EQUITY – Revenue, P5,000.
David’s Online Selling Business sold P5,000 worth of shirts to a customer. The
customer did not pay yet.
CASH ACCOUNT RECEIVABLE FURNITURE EQUIPMENT ACCOUNT PAYABLE LOAN PAYABLE REVENUE EXPENSES
5,000 5,000
Increase in ASSETS – Account Receivable, P5,000; Increase in OWNER’S EQUITY – Revenue, P5,000.
ACTG1-LESSON 4
8
4
EX PEN S ES
EXPENSES are the consumption of asset/s or using up of service to generate revenues.
Account Titles:
Salaries Expense Amount paid to employees.

Rent Expense Amount paid to the owner of a leased property.
Utilities Expense Amount paid for electricity, water, internet, and
telephone bills.
Transportation Expense Amount paid for fares paid to public utility vehicles.
ACTG1-LESSON 4
9
reflecting P1,500 of amount due. The business paid the electricity accordingly.
CASH ACCOUNT RECEIVABLE SALARIES PAYABLE RENT PAYABLE UTILITIES PAYABLE REVENUE EXPENSES
(1,500) (1,500)
Decrease in ASSETS – Cash, P1,500; Decrease in OWNER’S EQUITY – Utilities Expense, P1,500.
reflecting P1,500 of amount due. The business did not pay the electricity yet.
1,500 (1,500)
Increase in LIABILITIES – Utilities Payable, P1,500; Decrease in OWNER’S EQUITY – Utilities Expense, P1,500.
ACTG1-LESSON 4
10
5
What if the business bought a vehicle? Isn’t it an EXPENSE? Why did we

not classify it as an expense on Lesson 3?
MOCHA USON bought a car for P2,000,000 cash for business use.
CASH CARS FURNITURE EQUIPMENT ACCOUNTSPAYABLE LOAN PAYABLE CAPITAL DRAWING
(2,000,000) 2,000,000
ACTG1-LESSON 4
11
DEPRECIATION EX PEN S E
DEPRECIATION EXPENSE is an allocated portion of the cost of a company's fixed assets
appropriate for a certain period.
COST: P2,000,000
USEFUL LIFE: 10 years
P2,000,000 ÷ 10 years = P200,000
Depreciation expense per year: P200,000
ACTG1-LESSON 4
12
6
ILLUSTRATION ( E X PA ND ED A C C O U NT IN G E Q U A T I O N ) :
A tourist hired the services of the agency for a tour in Baguio. Cash of P15,000 was received from the
tourist.
15,000 15,000
Increase in ASSETS – Cash, P15,000; Increase in OWNER’S EQUITY – Revenue, P15,000.
Cash was paid for the repair of the business car, P1,500.

(1,500) (1,500)
Decrease in ASSETS – Cash, P1,500; Decrease in OWNER’S EQUITY – Repairs Expense, P1,500.
ACTG1-LESSON 4
13
Mr. Gray hired the services of the agency for his visitors and promised to pay P16,000 on March 31.

16,000 16,000
Increase in ASSETS – Account Receivable, P16,000; Increase in OWNER’S EQUITY – Revenue, P16,000.
Paid P500 cash for the telephone bill.

(500) (500)
Decrease in ASSETS – Cash, P500; Decrease in OWNER’S EQUITY – Utilities Expense, P500.
ACTG1-LESSON 4
14
7
The Faculty Club of Angelicum Academy hired the services of the agency for a tour in Manila for
P20,000. A 50% down payment was paid and the balance on account.

10,000 10,000 20,000
Increase in ASSETS – Cash, P10,000; Increase in ASSETS – Account Receivable, P10,000; Increase in
OWNER’S EQUITY – Revenue, P20,000.
Received electricity bill from Meralco P5,000 to be paid 2 weeks from today.

5,000 (5,000)
Increase in LIABILITIES – Utilities Payable, P5,000; Decrease in OWNER’S EQUITY – Utilities Expense, P5,000.
ACTG1-LESSON 4
15
Received the amount due from Mr. Gray, P16,000.

16,000 (16,000)
Increase in ASSETS – Cash, P16,000; Decrease in ASSETS – Account Receivable
Paid the electricity bill from Meralco P5,000

(5,000) (5,000)
Decrease in ASSETS – Cash, P5,000; Decrease in LIABILITIES– Utilities Payable, P5,000.
ACTG1-LESSON 4
16
8
AC TG 1 – F U N D A M E N TA L S O F A C C O U N TI N G
ACTG1-LESSON 4
17
“Whatever you do, work at it with all your

heart, as working for the Lord, not for
human masters.”
COLOSSIANS 3:23
18
9
ACTG1-LESSON 4
19
20
10
LES SON 5
TR ANSACTI ON ANALYS I S ,
JOURNALIZING, AND
POSTING
AC TG 1 – F U N DAM E N TA LS O F AC C O U N TI N G
ACTG1-LESSON 5
1
INTRODUCTION
WHO WAS THE FIRST NAMED PERSON IN HISTORY?
“A total of 29,086 measures of barley were received over the course of 37 months. Signed, Kushim”
ACTG1-LESSON 5
2
11
TRANSACTION ANALYSIS
1. Identify the transactions from source documents.
2. Indicate the accounts affected by the transaction – either assets, liabilities, owner’s equity, income,
or expenses.
3. Ascertain whether each account is increased or decreased by the transaction.
4. Using the rules of debit and credit, determine whether the accounts affected are debited or
credited.
ACTG1-LESSON 5
3
SOURCE DOCUMENTS
A SOURCE DOCUMENT is the original document that contains the details of a business
transaction.
1. Names of the partiesinvolved.
2. Amounts received or paid (if any) or amounts to be received or paid.
3. Date of thetransaction.
4. Substance of thetransaction.
ACTG1-LESSON 5
4
12
OFFICIAL RECEIPT
An OFFICIAL RECEIPT is a document that provides evidence of a sale of a service by or to
a business.
ACTG1-LESSON 5
5
INVOICE
An INVOICE is a time-stamped commercial document that itemizes and records a
transaction between a buyer and a seller.
ACTG1-LESSON 5
6
13
DEPOSIT SLIP
A DEPOSIT SLIP is a small paper form that a bank customer includes when depositing
funds into a bankaccount.
ACTG1-LESSON 5
7
TIME CARD
A TIME CARD, also called a timesheet, is a method for recording and tracking the
amount of an employee's time spent on each job.
ACTG1-LESSON 5
8
14
STATEMENT OF ACCOUNTS
A STATEMENT OF ACCOUNTS is a document that reflects all transactions that took place
between you and a particular customer for a given period of time.
ACTG1-LESSON 5
9
or expenses.

credited.
ACTG1-LESSON 5
10
15
JOURNAL
An ACCOUNTING JOURNAL is a detailed account of all the financial transactions of a
business. It is also known as the book of original entry as it is the document used
where transactions are first recorded.
Accounting triggered the

invention ofcomputers.
ACTG1-LESSON 5
11
EXAMPLE OF AJOURNAL
ACTG1-LESSON 5
12
16
LEDGER
A LEDGER is a document containing accounts in which the classified and summarized
information from the journals are posted as debits and credits. It is also called the
book of final entry as its data are required to prepare financial statements.
Source Document Journal Ledger Financial Statements
ACTG1-LESSON 5
13
EXAMPLE OF A LEDGER
ACTG1-LESSON 5
14
17
WHAT THEN IS DEBIT AND CREDIT?
WHEN IS AN ACCOUNT DEBITED OR CREDITED?
HOW ARE JOURNALS AND LEDGERS USED?
ACTG1-LESSON5
15
ACTG1-LESSON 5
16
18
“A wise youth harvests in the summer,

but one who sleeps during harvest is a
disgrace.”
PROVERBS 10:5
17
ACTG1-LESSON 5
18
19
19
20
LES SON 6
DOUBLE ENTRY
BOOKKEEPING
ACTG1-LESSON 6
1
INTRODUCTION
• Luca Pacioli – The Father of Accounting

• ‘’Summa de arithmetica, geometria. Proportioni et proportionalita’’ (1494)
ACTG1-LESSON6
2
1
1
HOW ARE JOURNALS AND LEDGERS USED?
ACTG1-LESSON 6
3
or expenses.

credited.
ACTG1-LESSON 6
4
1
2
EXAMPLE OF AJOURNAL
ACTG1-LESSON 6
5
EXAMPLE OF A LEDGER
Debit Credit
Debit Credit
ACTG1-LESSON 6
6
1
3
ANALYZING TRANSACTIONS USING T- ACCOUNTS

ACCOUNT NAME
LEFT SIDE RIGHT SIDE
DEBIT CREDIT

ACTG1-LESSON 6
7
ASSETS = LIABILITIES + OWNER’S EQUITY

DEBIT CREDIT
Normal balance of an account (the side where it increases):

• ASSETS – Debit side
• LIABILITIES – Credit Side
• OWNER’S EQUITY – Credit Side
ACTG1-LESSON 6
8
1
4
ASSETS LIABILITIES
DEBIT CREDIT DEBIT CREDIT
Increase Decrease Decrease Increase

(+) (-) (-) (+)
OWNER’S EQUITY
DEBIT CREDIT
Decrease Increase
(-) (+)
ACTG1-LESSON 6
9
ILLUSTRATION
A businessman opened a travel agency by investing P2,000,000 in the business.

CASH ACCOUNTSRECEIVABLE ACCOUNTSPAYABLE LOANS PAYABLE UTILITIESPAYABLE CAPITAL DRAWING
2,000,0 00 2,000,000
Increase (+) in ASSETS = Cash, P2,000,000; Increase (+) in OWNER’S EQUITY = Capital, P2,000,000.
ASSETS LIABILITIES OWNER’SEQUITY
DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT
Increase Decrease Decrease Increase Decrease Increase

(+) ( -) ( -) (+) ( -) (+)
DEBIT – Cash, P2,000,000; CREDIT – Capital,P2,000,000

ACTG1-LESSON 6
10
1
5
A tourist hired the services of the agency for a tour in Baguio. Cash of P15,000 was received from the
tourist.
CASH ACCOUNTSRECEIVABLE ACCOUNTSPAYABLE LOANS PAYABLE UTILITIESPAYABLE REVENUE EXPENSES
15,000 15,000
Increase (+) in ASSETS = Cash, P15,000; Increase (+) in OWNER’S EQUITY = Revenue, P15,000.

(+) ( -) ( -) (+) ( -) (+)
DEBIT – Cash, P15,000; CREDIT – Revenue,P15,000

ACTG1-LESSON 6
11
The business borrowed P500,000 from a bank to be paid 1year from now.

500,000 500,000
Increase (+) in ASSETS = Cash, P500,000; Increase (+) in LIABILITIES = Loans Payable, P500,000.

(+) ( -) ( -) (+) ( -) (+)
DEBIT – Cash, P500,000; CREDIT – Loans Payable,P500,000
ACTG1-LESSON 6
12
1
6
The business paid the amount it borrowed from the bank.

(500,00 ) (500,000)
0
Decrease (-) in ASSETS = Cash, P500,000; Decrease (-) in LIABILITIES = Loans Payable, P500,000.

(+) (-) (-) (+) (-) (+)
DEBIT – Loans Payable, P500,000; CREDIT – Cash, P500,000
ACTG1-LESSON 6
13
Received electricity bill from Meralco P5,000 to be paid 2 weeks from today.

5,000 (5,000)
Increase (+) in LIABILITIES = Utilities Payable, P5,000; Decrease (-) in OWNER’S EQUITY = Utilities Expense, P5,000.

(+) (-) (-) (+) (-) (+)
DEBIT – Utilities Expense, P5,000; CREDIT – Utilities Payable,P5,000
ACTG1-LESSON 6
14
1
7
LET’ S TRY!
Paid the electricity bill from Meralco P5,000

CASH ACCOUNTSRECEIVABLE SALARIESPAYABLE RENT PAYABLE UTILITIESPAYABLE REVENUE EXPENSES
(5,000) (5,000)
Decrease (-) in ASSETS = Cash, P5,000; Decrease (-) in LIABILITIES = Utilities Payable, P5,000.

(+) (-) (-) (+) (-) (+)
DEBIT – Utilities Payable, P5,000; CREDIT – Cash,P5,000

ACTG1-LESSON 6
15
LET’ S TRY!
Cash was paid for the repair of the business car, P1,500.
(1,500) (1,500)
Decrease (-) in ASSETS = Cash, P1,500; Decrease (-) in OWNER’S EQUITY = Repairs Expense, P1,500.

(+) (-) (-) (+) (-) (+)
DEBIT – Repairs Expense, P1,500; CREDIT – Cash,P1,500

ACTG1-LESSON 6
16
1
8
LET’S TRY!
The owner withdrew P20,000 from the business for personal use.

CASH ACCOUNTSRECEIVABLE SALARIESPAYABLE RENT PAYABLE UTILITIESPAYABLE CAPITAL DRAWINGS
(20,000) (20,000)
Decrease (-) in ASSETS = Cash, P20,000; Decrease (-) in OWNER’S EQUITY = Drawings, P20,000.

(+) ( -) ( -) (+) ( -) (+)
DEBIT – Drawings, P20,000; CREDIT – Cash,P20,000

ACTG1-LESSON 6
17
LET’S TRY!
The business gave its services to a group of customers for P300,000. The customers did not pay yet.

300,000 300,000
Increase (+) in ASSETS = Accounts Receivable, P300; Increase (+) in OWNER’S EQUITY = Revenue,P300,000.

(+) ( -) ( -) (+) ( -) (+)
DEBIT – Accounts Receivable, P300,000; CREDIT – Revenue,P300,000

ACTG1-LESSON 6
18
1
9
LET’ S TRY!
The business received the P300,000 from the customers who previously received its services .
300,000 (300,000)
Increase (+) in ASSETS = Cash, P300,000; Decrease (-) in ASSETS = Accounts Receivable, P300,000.

(+) (-) (-) (+) (-) (+)
DEBIT – Cash, P300,000; CREDIT – Accounts Receivable,P300,000
ACTG1-LESSON 6
19
THE JOURNAL
HOW ARE JOURNALS USED?
DATE ACCOUNTTITLE DEBIT CREDIT
March 3: Paid the electricity bill from Meralco P5,000

DEBIT – Utilities Payable, P5,000; CREDIT – Cash,P5,000
March3 Utilities Payable P5,000
Cash P5,000
ACTG1-LESSON 6
20
10
March 4: Cash was paid for the repair of the business car, P1,500.
DEBIT – Repairs Expense, P1,500; CREDIT – Cash,P1,500

March 3 Utilities Payable P5,000
Cash P5,000
4 Repairs Expense 1,500
Cash 1,500
ACTG1-LESSON 6
21
March 6: The owner withdrew P20,000 from the business for personal use.
DEBIT – Drawings, P20,000; CREDIT – Cash,P20,000
March 3 Utilities Payable P5,000
Cash P5,000
4 Repairs Expense 1,500
Cash 1,500
6 Drawings 20,000
Cash 20,000
ACTG1-LESSON 6
22
11
March7: The business gave its services to a group of customers for P300,000. The customers did not
pay yet.
DEBIT – Accounts Receivable, P300,000; CREDIT – Revenue, P300,000
March7 Accounts Receivable P300,000
Revenue P300,000
March 8: The business received the P300,000 from the customers who previously received its services .
DEBIT – Cash, P300,000; CREDIT – Accounts Receivable,P300,000

March 7 Accounts Receivable P300,000
Revenue P300,000
8 Cash 300,000
Accounts Receivable 300,000
ACTG1-LESSON 6
23
HOW ARE LEDGERS USED?
WHAT IS THE PURPOSE OF USING LEDGERS?
ACTG1-LESSON6
24
12
ACTG1-LESSON 6
25
“Don't worry about tomorrow, because

tomorrow will have its own worries.Each
day has enough trouble of its own.”
MATTHEW 6:34
26
13
ACTG1-LESSON 6
27
28
14
LES SON 7
ACTG1-LESSON 7
1
INTRODUCTION
ACTG1-LESSON 7
2
2
5
HOW ARE LEDGERS USED?
WHAT IS THE PURPOSE OF USING LEDGERS?
WHAT’S NEXT AFTER LEDGERS?
ACTG1-LESSON 7
3
LEDGER
A LEDGER is a collection of accounts in which account transactions are recorded. Each
account has an opening or carry-forward balance, would record transactions as either
a debit or credit in separate columns and the ending or closing balance.
• Collection oftransactions
• Each account hasa ledger
• Has a debit and a credit column
• Updated everytransaction
ACTG1-LESSON 7
4
2
6
EXAMPLE OF A LEDGER
Debit Credit
Debit Credit
ACTG1-LESSON 7
5
ILLUSTRATION
January 3 - Invested in the business painting equipment valued at P12,300.
1 DATE ACCOUNTTITLE DEBIT CREDIT

January 3 Painting Equipment P12,300
Capital P12,300
2 PAINTING EQUIPMENT
DATE DESCRIPTION DEBIT CREDIT BALANCE
January 3 Invested painting equipment. P12,300 P12,300
3 CAPITAL
ACTG1-LESSON 7
6
2
7
January 4 - Invested P71,000 in the business for use in start-up operations.

4 Cash 71,000
Capital 71,000
2 CASH
January 4 Invested cash. P71,000 P71,000
3 CAPITAL
4 Invested cash. 71,000 83,300
ACTG1-LESSON 7
7
January 5 - Acquired a service vehicle costing P80,000 and signed a note for the amount.

5 Service Vehicle 80,000
Notes Payable 80,000
2 SERVICE VEHICLE
January 5 Acquired service vehicle. P80,000 P80,000
3 NOTES PAYABLE
ACTG1-LESSON 7
8
2
8
January 6 - Purchased painting supplies on account for P3,200.

6 Painting Supplies 3,200
Accounts Payable 3,200
2 PAINTING SUPPLIES
January 6 Purchased painting supplies. P3,200 P3,200
3 ACCOUNTSPAYABLE
ACTG1-LESSON 7
9
January 7 - Completed a painting job and billed the customer P4,800. The customer did not pay her yet.

7 Accounts Receivable 4,800
Revenue 4,800
2 ACCOUNTSRECEIVABLE
January 7 Completed a painting job. P4,800 P4,800
3 REVENUE
ACTG1-LESSON 7
10
2
9
January 8 - Received P1,500 cash for painting an apartment room.

8 Cash 1,500
Revenue 1,500
2 CASH
8 Painted an apartment room. 1,500 72,500
3 REVENUE
ACTG1-LESSON 7
11
January 9 - Received P4,800 from the customer billed on January 7.

9 Cash 4,800
Accounts Receivable 4,800
2 CASH
9 Received from the customer on Jan 7. 4,800 77,300
3 ACCOUNTSRECEIVABLE
9 Received from the customer on Jan 7. P4,800 0
ACTG1-LESSON 7
12
3
0
January 10 - Paid P4,000 for an insurance policy for a one-year coverage.

10 Insurance Expense 4,000
Cash 4,000
2 INSURANCE EXPENSE
January 10 Insurance policy for aone-year. P4,000 P4,000
3 CASH
10 Insurance policy for aone-year. P4,000 73,300
ACTG1-LESSON 7
13
January 11-Paid the assistant P1,500 for twenty-five-hour work.

11 Salaries Expense 1,500
Cash 1,500
2 SALARIES EXPENSE
January 11 Paid the assistant for 25-hour work. P1,500 P1,500
3 CASH
11 Paid the assistant for 25-hour work. 1,500 71,800
ACTG1-LESSON 7
14
3
1
January 13 - Paid P400 for a tune-up of the service vehicle.

13 Maintenance Expense 400
Cash 400
2 MAINTENANCEEXPENSE
January 13 Tune-up for the service vehicle. P400 P400
3 CASH
13 Tune-up for the service vehicle. 400 71,400
ACTG1-LESSON 7
15
January 14 - Paid for the painting supplies purchased on January6.

14 Accounts Payable 3,200
Cash 3,200
2 ACCOUNTSPAYABLE
14 Paid painting supplies. P3,200 0
3 CASH
10 Insurance policy for a one-year. P4,000 73,300
14 Paid painting supplies. 3,200 68,200
ACTG1-LESSON 7
16
3
2
January 15 - Withdrew P10,000 for personaluse.

15 Drawings 10,000
Cash 10,000
2 DRAWINGS
January 15 Withdrew for personal use. P10,000 P10,000
3 CASH
10 Insurance policy for a one-year. P4,000 73,300
15 Withdrew for personal use. 10,000 58,200
ACTG1-LESSON 7
17
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS are reports that summarize important financial accounting
information about your business. They are often audited by government agencies,
accountants, firms, etc. to ensure accuracy and for tax, financing, or investing
purposes.
• Income Statement
• Statement of Changes in Equity
• Balance Sheet
ACTG1-LESSON 7
18
3
3
INCOME STATEMENT
The INCOME STATEMENT is a report of a summary of a business’ revenues, expenses,
and the resulting net income or net loss that occurred during a period of time.
• Revenue
• Expenses
ACTG1-LESSON 7
19
I LLUSTRATI ON
REVENUE
INSURANCE EXPENSE
January 10 Insurance policy for aone-year. P4,000 P4,000
SALARIES EXPENSE
January 11 Paid the assistant for 25-hour work. P1,500 P1,500
MAINTENANCEEXPENSE
January 13 Tune-up for the service vehicle. P400 P400
ACTG1-LESSON 7
20
10
ILLUSTRATION
Winnie Villanueva’s PaintingServices
Income Statement
For the Month Ended January 30, 2021

Revenue P 6,300
Less:
Insurance Expense P4,000
Salaries Expense 1,500
Maintenance Expense 400 (5,900)
Net Income P 400
ACTG1-LESSON 7
21
STATEMENT OF CHANGES IN EQUITY

The STATEMENT OF CHANGES IN EQUITY is a report that summarizes the changes in
owner’s equity during a course of time.
• Beginning Capital
• Additional Investments
• Drawings
• Ending Capital
ACTG1-LESSON 7
22
11
ILLUSTRATION
CAPITAL
4 Invested cash. 71,000 83,300
DRAWINGS
January 15 Withdrew for personal use. P10,000 P10,000
INCOME STATEMENT
Revenue P 6,300
Less:
Insurance Expense P 4,000
Salaries Expense 1,500
Maintenance Expense 400 (5, 900)
Net Income P 400
ACTG1-LESSON 7
23
ILLUSTRATION
Winnie Villanueva’s PaintingServices
Statement of Changes inEquity
For the Month Ended January 30, 2021
Beginning Capital P 12,300
Add:
Additional Investment 71,000
Net Income 400
Less:
Drawings (10,000)
Ending Capital P 73,700
ACTG1-LESSON 7
24
12
BALANCE SHEET
The BALANCE SHEET, also known as the Statement of Financial Position, lists the
assets, liabilities, and equity of an organization as of the reporting date.
• Assets
• Liabilities
• Equity (Ending Capital)
ACTG1-LESSON 7
25
ILLUSTRATION
ASSETS
CASH
15 Withdrew for personal use. 10,000 58,200
ACCOUNTSRECEIVABLE
9 Received from the customer on Jan 7. P4,800 0
ACTG1-LESSON 7
26
13
I LLUSTRATI ON
PAINTING SUPPLIES
PAINTING EQUIPMENT
SERVICE VEHICLE
ACTG1-LESSON 7
27
I LLUSTRATI ON
LIABILITIES
ACCOUNTSPAYABLE
14 Paid painting supplies. P3,200 0
NOTES PAYABLE
EQUITY
STATEMENTOF CHANGES INEQUITY
Ending Capital P73,700
ACTG1-LESSON 7
28
14
ILLUSTRATION
Winnie Villanueva’s Painting Services
Balance Sheet
As of the Month Ended January 30, 2021
ASSETS
Cash P 58,200
Painting Supplies 3,200
Painting Equipment 12,300
Service Vehicle 80,000
Total Assets P 153,700
LIABILITIES ANDEQUITY
Notes Payable P 80,000
Total Liabilities P 80,000
Equity P 73,700
Total Liabilities andEquity P 153,700
ACTG1-LESSON 7
29
WHAT’S NEXT AFTER FINANCIAL STATEMENTS?
Source Document Journal Ledger Financial Statements
IDENTIFYING CLASSIFYING RECORDING SUMMARIZING INTERPRETING
ACTG1-LESSON 7
30
15
ACTG1-LESSON 7
31
“No discipline is enjoyable while it is

happening—it’s painful! But afterward
there will be a peaceful harvest of right
living for those who are trained in this way.”
HEBREWS 12:11
32
16
ACTG1-LESSON 7
33
34
17

Expanding The Accounting Equation To S How Operating Res Ults

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Expanding The Accounting Equation To S How Operating Res Ults

Uploaded by

Copyright:

Available Formats

Fundamentals of Accounting ACTG 1 - LESSON 4

SOURCE: BUSINESSWORLD TOP 200CORPORATIONS

EXPANDED ACCOUNTING EQUATION

ASSETS = LIABILITIES + OWNER’S EQUITY

INCREASES DUE TO: DECREASES DUETO:

Medical Fees Revenue Income received by a hospital.

Increase in ASSETS – Cash, P5,000; Increase in OWNER’S EQUITY – Revenue, P5,000.

Salaries Expense Amount paid to employees.

What if the business bought a vehicle? Isn’t it an EXPENSE? Why did we

Depreciation expense per year: P200,000

Increase in ASSETS – Cash, P15,000; Increase in OWNER’S EQUITY – Revenue, P15,000.

ASSETS LIABILITIES OWNER’S EQUITY

ASSETS LIABILITIES OWNER’S EQUITY

Paid P500 cash for the telephone bill.

ASSETS LIABILITIES OWNER’S EQUITY

ASSETS LIABILITIES OWNER’S EQUITY

ASSETS LIABILITIES OWNER’S EQUITY

Received the amount due from Mr. Gray, P16,000.

ASSETS LIABILITIES OWNER’S EQUITY

Increase in ASSETS – Cash, P16,000; Decrease in ASSETS – Account Receivable

Paid the electricity bill from Meralco P5,000

ASSETS LIABILITIES OWNER’S EQUITY

“Whatever you do, work at it with all your

1. Names of the partiesinvolved.

2. Amounts received or paid (if any) or amounts to be received or paid.

3. Ascertain whether each account is increased or decreased by the transaction.

Accounting triggered the

Source Document Journal Ledger Financial Statements

WHAT THEN IS DEBIT AND CREDIT?

WHEN IS AN ACCOUNT DEBITED OR CREDITED?

HOW ARE JOURNALS AND LEDGERS USED?

“A wise youth harvests in the summer,

• Luca Pacioli – The Father of Accounting

WHAT THEN IS DEBIT AND CREDIT?

WHEN IS AN ACCOUNT DEBITED OR CREDITED?

HOW ARE JOURNALS AND LEDGERS USED?

3. Ascertain whether each account is increased or decreased by the transaction.

ANALYZING TRANSACTIONS USING T- ACCOUNTS

WHAT THEN IS DEBIT AND CREDIT?

WHEN IS AN ACCOUNT DEBITED OR CREDITED?

ASSETS = LIABILITIES + OWNER’S EQUITY

Normal balance of an account (the side where it increases):

Increase Decrease Decrease Increase

ASSETS LIABILITIES OWNER’S EQUITY

ASSETS LIABILITIES OWNER’SEQUITY

DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT

Increase Decrease Decrease Increase Decrease Increase

DEBIT – Cash, P2,000,000; CREDIT – Capital,P2,000,000

DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT

Increase Decrease Decrease Increase Decrease Increase

DEBIT – Cash, P15,000; CREDIT – Revenue,P15,000

ASSETS LIABILITIES OWNER’S EQUITY

ASSETS LIABILITIES OWNER’SEQUITY

DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT

Increase Decrease Decrease Increase Decrease Increase

DEBIT – Cash, P500,000; CREDIT – Loans Payable,P500,000

The business paid the amount it borrowed from the bank.

ASSETS LIABILITIES OWNER’S EQUITY

ASSETS LIABILITIES OWNER’S EQUITY

DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT

Increase Decrease Decrease Increase Decrease Increase

DEBIT – Loans Payable, P500,000; CREDIT – Cash, P500,000