SHS

Fundamentals of Accountancy,
Business and Management 1
Module 6

i
ABM • Fundamentals of Accountancy, Business and Management I
Module 6
First Edition, 2021

Copyright © 2021
La Union Schools Division
Region I

All rights reserved. No part of this module may be reproduced in any form
without written permission from the copyright owners.

Development Team of the Module

Author: Narciso A. Martin Jr., T-II

Editor: SDO La Union, Learning Resource Quality Assurance Team

Illustrator: Ernesto F. Ramos Jr., P II

Management Team:

Atty. Donato D. Balderas, Jr.

Schools Division Superintendent

Vivian Luz S. Pagatpatan, Ph.D

Assistant Schools Division Superintendent

German E. Flora, Ph.D, CID Chief

Virgilio C. Boado, Ph.D, EPS in Charge of LRMS

Lorna A. Gaspar, EPS in Charge of Accountancy Business and

Management

Michael Jason D. Morales, PDO II

Claire P. Toluyen, Librarian II

 Target

After reading these learning materials, the learner must analyze common
business transactions applying the rules of debit and credit and its significance to
ensure a balanced accounting equation in a business's life.

Every individual or business must fully understand the importance of a

balanced equation every time there are value exchanges among goods and services.
The Accounting cycle compels future Bookkeepers and Accountants in the field to
have mastery on applying the rules of debit and credit to warrant the accuracy of
financial data that will help individuals and business owners with their decision-
making.

After going through this information sheet, the learner expects to

Analyze common business transactions using the rules of debit and credit
(ABM_FABM11-IIIg-j-27) and solve simple problems and exercises in the
analyses of business transactions (ABM_FABM11-IIIg-j-28).

Subtasks
1. Discuss the concept of a double-entry bookkeeping system
2. Analyze the rules of debit and credit in business transactions
3. Apply the rules of debit and credit in solving business transactions
 Jumpstart

Pretest Activity:
Directions: From the keywords inside the main boxes, recall some basic business
transactions or personal experiences that best describe them. Put your answers
inside the connecting boxes. Use a separate sheet. (20 points)

DEBIT
(value received)

CREDIT
(value given out)

For you to understand the lesson well, let us do some

practice drills. Have fun!
Activity 1
Direction: Read the situation below then answer the questions that follow. Use a
separate sheet to show your computations. (25 points).

Situation: Supposed your parents or guardians give you P150 as your allowance for
the day and had the following transactions:

Allowance: P150

Transactions made Amount paid

Paid morning tricycle fare
Bought one (1) ballpen
Bought morning snacks
Bought lunch
Paid 5 pages photocopied papers
Bought afternoon snacks
Bought one (1) pencil
Bought 5 pcs short bond papers
Bought 5 pcs Construction papers
Paid Afternoon Tricycle Fare
Total:
Table 1. Learner’s Transaction
Provide a short answer to the following questions.
1. How much was left in your pocket?
2. What were the items or transactions that shortened your allowance for the
day?

3. From each of the transactions you had for the day, what did you exchange
with to get it?

4. Do you think you get the value of each transaction every time there are
exchanges of values? Support your answer.

5. Based on the transactions above, explain the importance of exchanging value

amounts in every transaction? Support your answer.
 Discover

The Concept of Double-Entry Bookkeeping System

The “two sides” of the Accounting equation apply the dual aspect concept,
which provides that every value received must have a corresponding value parted
with or value gave out. This concept is the basis of debit and credit in recording
economic transactions and events. The two equal sides define the foundation of the
rules of debit and credit.
A debit (Lat. Debitum, “a debt”) is a value received in a business transaction
which must record in the journal. The place of debit in the equation is on the lefthand
side.
A credit (Lat. Creditus, “a creditor”) is the value parted or value given out
within a business transaction, which must record in the journal. The place of credit
in the equation is on the right-hand side.
The Double Entry Bookkeeping is a discovery of human effort, not science,
because of the business world's evolving complexities. It is the outcome of continued
efforts to meet the changing necessities of trade. It justifies the concept "that in every
value received (debit), there is value parted with or value given out (credit)." Source:
Accounting Made Easy By Win Lu Ballada (2010)
Can you guess what will be the debit and credit entries in the transaction as
shown below?

Exchange of values

Figure 1. The Double Entry Bookkeeping System

Types of Bookkeeping Systems

1. Single Entry Method – is similar to a stand-alone checkbook. For example,

when you make a deposit, your balance increases, and when you issue a
check, your balance decreases. It gives a one-sided picture for a single-legged
entry of the transaction made.
2. Double Entry Method – involves financial data with equal and opposite effect
in every transaction. For example, when you issue a check, you decrease cash,
but at the same time, you increase the account corresponding to the reason
for the expense, such as salaries or office supplies.

Analyzing the Rules of Debit and Credit in Business Transactions

As a general rule, a Bookkeeper or an Accounting clerk must first analyze every
business transaction that happened for the period. It realizes by understanding the
nature and movement of economic transactions. Again, it is a must to have mastery
in applying the rules of debit and credit to warrant the accuracy of financial reports
at the end of the accounting period.

The Rules of Debit and Credit

The rules of debit and credit follow the normal balance of an accounting
element or account. The term "normal balance" of an account refers to an account's
usual position in the financial reports.
Asset accounts are generally in the debit balance, while the liability and
owner's equity accounts are usually in the credit balance.
The normal balance of an account provides the basis for analyzing when to
debit and credit an account. The following rules must observe when to debit or credit
an asset, liability, and capital accounts.

Basic Accounting Elements Entries (Increase/Decrease)

Assets Debit to increase the amount of asset
Credit to decrease its amount

Liabilities Credit to increase the amount of liability

Debit to decrease its amount

Owner’s Equity Credit to increase the capital account

Debit to decrease its amount

Owner’s Drawing Debit to increase withdrawal account

Credit to decrease its amount

Income Credit to increase the income account

Debit to decrease its amount

Expense Debit to increase expense account

Credit to decrease its amount

This part summarizes the rules of debit and credit in the accounting equation.

Increase or Assets, Withdrawals Liabilities, Capital

Decrease and Expenses and Income

To record increases DEBIT CREDIT

To record decreases CREDIT DEBIT

Table 2. The Rules of Debit and Credit

 Let us analyze the given examples of debit and credit entries to some common
transactions.
1. Jose is not able to attend regular classes due to the COVID-19 pandemic. He
started saving his P40 fare every day for the whole month of June 2020.
June 30, 2020 Cash P800
Jose, Savings P800
:. To record personal savings made by Jose.

2. Ben bought some supplies that he will use to answer all the activities in the
modules while studying at home that cost him P300 for July 2020. July 31,
2020 School Supplies P300
Cash P300
:. To record the expenses paid by Ben.

3. Maria paid his miscellaneous for the School Year 2020 – 2021, amounting to
P560 on August 31, 2020.
August 30, 2020 Miscellaneous P560
Cash P560
:. To record the payment of miscellaneous (tuition fees).
Applying the Rules of Debit and Credit in Business Transactions
A financial report is usually prepared and submitted to help management in
decision-making in a typical business setting. It is a prerequisite to analyze first the
business transactions and then apply the rules of debit and credit entries. In the
succeeding modules, the structures and significance of the different financial reports
will discuss.
Let us carefully examine how debit and credit rules shall apply in a service
type of business.

Given Case: Based on the Balance Sheet (BS) date as of November 2020 of Growee,
it appeared the following financial information:

Cash P 47,000.00 Loans Payable P100,000.00

A/R 28,000.00 Growee, Capital 825,000.00
Car 750,000.00
Equipment 55,000.00
Furniture 45,000.00

P925,000.00 P925,000.00

The following transactions appeared in the books of Growee for December

2020.
December 2020
3 Received payments for the rendered services amounting to P15,000.00.
8 Collected payments for the rendered services amounting to P8,000.00.
16 Paid utilities expense amounting to P3,000.00; Gas and Oil amounting
to P2,000.00 and repair amounting to P3,000.00.
18 Paid company’s loan amounting to P20,000.00.
 20 Received payments for the rendered services amounting to P7,500.00.
25 Collected payments for the rendered services amounting to P5,000.00.
27 Paid utilities expense amounting to P750.00.
30 Paid rent expense amounting to P10,000.00 and salaries expense
amounting to P9,000.00.
31 The owner withdrew P5,000.00.

Applying the rules of debit and credit entries for the foregoing transactions of
Growee for December 2020, the General Journal (GL) has the following account titles
with their corresponding balances.

General Journal Page No. 1

Date Account Titles and Explanations PR* Debit Credit

2020

Dec 3 Cash P 15,000.00

Service Income P 15,000.00
To record payment for professional fees.

8 Cash 8,000.00

Accounts Receivable 8,000.00

To record collections of receivables.

16 Utilities Expense 3,000.00

Gas and Oil 2,000.00

Repair Expense 3,000.00

Cash 8,000.00

To record payment of expenses.

18 Loans Payable 20,000.00

Cash 20,000.00

To record payment of loans.

20 Cash 7,500.00

Service Income 7,500.00

To record payment for professional fees.

25 Cash 5,000.00

Accounts Receivable 5,000.00

To record collections of receivables.

27 Utilities Expense 750.00

Cash 750.00

To record payment of expenses.

 30 Rent Expense 10,000.00

Salaries Expense 9,000.00

Cash 19,000.00

To record payment of expenses.

31 Steven, Drawings 5,000.00

Cash 5,000.00
To record owner's cash withdrawals.
P 88,250.00 P 88,250.00
*Omitted Posting Reference (PR)
Let us summarize the effects of debit and credit entries based on the foregoing
transactions in the accounting equation of Growee for December 2020.
 Explore
Activity:
Directions: Interview one (1) Sari-sari store owner (attach a photo) in your barangay
and indicate all the possible transactions which involve value receives (debt) and
value is given out (credit). Use a separate sheet and present your outputs following
the format below. (10 points)

Sari-Sari Store’s Name___________________

All Debit Transactions All Credit Transactions

1. 6.

2. 7.

3. 8.

4. 9.

5. 10.

Please attached a photo of the Sari-sari Store located at Barangay ________________

Insert photo
 Deepen

Activity 1. Increase or Decrease?

Directions: Review again the account titles of the Basic Accounting Elements
(Assets, Liabilities, Owner’s Capital, Income, Expenses). Evaluate the transactions
below and determine how their normal balances get increased or decreased. Write
the word DEBIT or CREDIT on the blank side after the account title if you think its
normal balance increases by an entry. Use a separate sheet. (20 points)

Increased by? Decreased by?

Rent Expense ___________ Loans Payable __________
Telephone Expense ___________ Notes Payable __________
Water ___________ A/R __________
Internet ___________ A/P __________
Power/light ___________ Cash __________
Salaries ___________ Supplies __________
Wages ___________ Tools __________
Commission ___________ Machineries __________
Equipment ___________ Drawings __________
Repairs ___________ Furnitures __________

Activity 2. Give and Take!

Directions: Based on the business transactions of Juan Magalang, indicate in the
appropriate column, the ACCOUNT TITLES. The Basic Accounting Elements provided
these ACCOUNT TITLES. Use a separate sheet. (10 points)

Business Transactions Value Received (Take) Value Parted With (Give)

Juan Magalang invested 150K cash. Cash Juan Magalang, Capital

Purchased laundry equipment on

1 account from SCI Corp.

Borrowed money from the bank

2 payable in 3 years with the laundry
equipment as collateral.

3 Paid salary (15th) of the store helper.

4 Paid the rent of the office space.

5 Bought laundry supplies for cash.

Bought additional laundry equipment,

6 issued a 30-day note.
 Billed Mr. Lawrence for laundry
7 services done.

Received cash from various customers

8 for laundry services.

Received the full payment from Mr.

9 Manzano on his account of previous
month.

10 Paid salary (30th) of the store helper.

Great job! You have understood the lesson well!

Are you now ready to take the final assessment?
 Gauge

Posttest. Debit and Credit Entries.

Required: Analyze the given business transactions and apply the rules of debit and
credit entries. Use a separate sheet for your answers with a General Journal format.
(15 points)

Carbs Computer and Cellphone Shop was opened by Carbs on November 01,
2020, with a cash investment of P200,000.00 and furniture worth P5,000.00.
Additional transactions for the month following;

November 2020
3 Signed Contract of Lease and deposited P15,000.00.
4 Paid for the construction of display counters, P25,000.00.
5 Bought repair supplies for cash, P7,500.00.
6 Bought and paid for furniture and fixture, P45,000.00.
8 Bought repair equipment worth P15,000.00 from XYO Co. for use in the store.
Paid 50% with the balance to be paid within 30 days.
9 Collected P1,500.00 for cellphone repair services.
10 Billed Madison Corp. P3,500.00 for computer repair services rendered.
13 Paid for salaries of clerks, P5,000.00.
14 Summary of cash received P4,000.00 and a promissory note for
P2,000.00 for computer repair services.
15 Signed a contract with Telecom System for the repair work to be done on their
computers, P15,000.00.
16 Paid for telephone, light and water, P3,800.00.
17 Collected P1,500.00 from Madison.
18 Sent a bill to Telecom System for repair work done.
22 Total Cellphone repair work collected in cash, P8,500.00.
25 Repair supplies used amounted to P2,200.00.
29 Payments for; Salaries, P5,000.00; Rent, P5,000.00.
30 Carbs made a personal cash payment of P2,500.00 to XYO Co.

Carbs used the following account titles: Cash; Accounts Receivable; Notes
Receivable; Repair Supplies; Office Furniture; Repair Equipment; Deposit for Rent;
Accounts Payable; Carbs, Capital; Carbs, Personal; Repair Fees Revenue; Repairs
and Maintenance; Repair Supplies Used; Rent Expense; Salaries Expense; and
Utilities Expense.

You’re done on this part. Great job! Congratulations!

 References
Books

Ballada, Win Lu (2010). Basic Accounting Made Easy. 15 th Edition. ISBN: 978-971-944938-6. Chapters
1-15 DomDane Publishers and Made Easy Books. Sampaloc, Manila

Department of Education Curriculum Guide (2013). Fundamentals of Accountancy, Business and

Management I for Grade 11. K to 12 Senior High School ABM Specialized Subject. Second Semester.
Pp 1-6. December 01, 2013. Pasig City, Manila.

Department of Education Teacher’s Guide (2016). Fundamentals of Accountancy, Business and

Management I. Teaching Guide for Senior High School – Academic ABM. The Commission on Higher
Education in collaboration with the Philippine Normal University. Pp 1-187. EC-TEC Commercial.
Quezon City.

Martin, Narciso Jr., A. and Nieva, Jimena Veronica T. (2019). Fundamentals of Accountancy,
Business and Management I. Specialized Subject. Department of Education ROI. La Union Schools
Division Office. Don Eulogio de Guzman Memorial National High School. Senior High School
Department. Accountancy, Business and Management Strand. Document Seq No 001. s, November
2019. Pp 1-68.

Website
https://phlconnect.ched.gov.ph/search/category/businessrelated
Key Answer