DEPARTMENT OF ACCOUNTANCY

SCHOOL OF BUSINESS AND ACCOUNTANCY

HOLY ANGEL UNIVERSITY

Fundamentals of Accounting
LEANDRO S. SANCHEZ CPA,JD
 CHAPTER 3
THE ACCOUNTING EQUATION
 Transactions Asset Liabilities Capital

1. Owner invests cash Increase NC Increase

2. Purchase supplies on credit Increase Increase NC

3. Owner invest equipment Increase NC Increase

Effects in 4. Buys land paying cash Inc/Dec NC NC

the
5. Borrows cash with note Increase Increase NC

6. Rendered service for cash Increase NC Increase

Accounting 7. Paid utilities expense for the month Decrease NC Decrease

Equation
8. Paid the supplies bought on credit Decrease Decrease NC
9. Rendered service on credit Increase NC Increase

10. Collected the account in transaction 9 Inc/Dec NC NC

1. Owner invests cash

• Mr. Sy invests P800,000

Assets Liabilities Capital

Increase in Cash NO CHANGE Increase in Sy,
By P800,000 Capital
By P800,000
2. Purchase supplies on credit

• Purchase P5,000 supplies on credit

Assets Liabilities Capital

Increase in Increase in Accounts NO CHANGE
Supplies Payable
By P5,000 By P5,000
3. Owner invest equipment

• Owner invests P60,000 equipment

Assets Liabilities Capital

Increase in NO CHANGE Increase in Sy,
Equipment Capital
By P60,000 By P60,000
4. Buys land paying cash

• Buys land P600,000 paying cash

Assets Liabilities Capital

Increase in Land NO CHANGE NO CHANGE
By P600,000
Decrease in Cash
By P600,000
5. Borrows cash with note

• Borrows cash P20,000 with note

Assets Liabilities Capital

Increase in Cash Increase in Notes NO CHANGE
By P20,000 Payable
By P20,000
6. Rendered service for cash

• Rendered P10,000 services for cash

Assets Liabilities Capital

Increase in Cash NO Increase in Service
By P10,000 CHANGE Income
By P10,000
7. Paid utilities expense for the month

• Paid P700 for utilities

Assets Liabilities Capital

Decrease in Cash NO Decrease in capital thru
By P700 CHANGE Utilities Expense
By P700
8. Paid the supplies bought on credit

• Paid the supplies bought on credit

Assets Liabilities Capital

Decrease in Cash Decrease in Accounts NO CHANGE
By P5,000 Payable
By P5,000
9. Rendered service on credit

• Rendered P2,000 service on credit

Assets Liabilities Capital

Increase in Accounts NO CHANGE Increase in Capital
Receivable thru Service
By P2,000 Income
By P2,000
10. Collected the account in transaction 9

• Collected the account in transaction 9

Assets Liabilities Capital

Increase in Cash NO CHANGE NO CHANGE
By P2,000
Decrease in Accounts
Receivable
By P2,000
 Transactions Asset Liabilities Capital

1. Owner invests cash P800,000 - P800,000

2. Purchase supplies on credit 5,000 5,000 -
3. Owner invest equipment 60,000 - 60,000
4. Buys land paying cash 600,000 - -
(600,000)

Summary 5. Borrows cash with note

6. Rendered service for cash
20,000
10,000
20,000
-
-
10,000
7. Paid utilities expense for the 700 - 700
month
8. Paid the supplies bought on credit (5,000) (5,000) -
9. Rendered service on credit 2,000 - 2,000
10. Collected the account in 2,000 - -
transaction 9 (2,000)
Total 892,700 20,000 872,700