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ACCOUNTANCY,
BUSINESS, AND
MANAGEMENT 1
1
ACCOUNTING
EQUATION
At the end of the lesson, you should be able to;
✔ explain the elements of accounting equation;
✔ solve exercises on accounting principles as applied in
various transactions;
✔ illustrate the accounting equation; and
✔ perform operations involving simple transactions
using the accounting equation.
ASSETS = LIABILITIES + OWNER’S EQUITY
In accounting, it is understood that every
business activity always has a two-sided effect
on the business. This two-sided effect is best
illustrated in the accounting equation.
Transaction 5 :
March 26: Mr. A paid ₱10,000 to the computer technician who set
up the network connection for his business operation.
Transaction 6:
On the same day, he also paid the Internet service provider the
amount of ₱15,000 for the internet connection.
DATE TRANSACTION ASSETS (₱) = LIABILITIES + OWNER’S
(₱) EQUITY (₱)
March 21 Owner’s Initial 500,000 = 500,000
investment
23 Purchased office =
equipment (computer 200,000 200,000
units) on account
Paid a down =
payment for the (50,000) (50,000)
office equipment
24 Payment of rent +10,000; = (10,000)
-10,000
25 Payment of
balance from (150,000) (150,000)
purchasing office =
equipment
Transaction 7 :
March 27: Mr. A purchased office supplies amounting to ₱5,450.
DATE TRANSACTION ASSETS (₱) = LIABILITIES (₱) + OWNER’S
EQUITY (₱)
March 21 Owner’s Initial 500,000 = 500,000
investment
23 Purchased office =
equipment (computer 200,000 200,000
units) on account
Paid a down =
payment for the (50,000) (50,000)
office equipment
24 Payment of rent +10,000; - = (10,000)
10,000
25 Payment of balance =
from purchasing (150,000) (150,000)
office equipment