Fundamentals of Accountancy

Learning Area Grade Level 11

W3 Quarter
Business and Management 1
3rd Quarter Date

I. LESSON TITLE Accounting Equation

II. MOST ESSENTIAL LEARNING The learners illustrate the Accounting Equation.
COMPETENCIES (MELCs) ABM_FABM11- IIIb-c-17

The learners perform operations involving simple cases with the use of
accounting equations.
ABM_FABM11-IIIb-c-18

III. CONTENT/CORE CONTENT The Accounting Equation

Suggested
IV. LEARNING PHASES Learning Activities
Timeframe
A. Introduction 20 mins DAY 1
Panimula Good day learners. At the end of this lesson you should be able to:
1. illustrate accounting equation
2. perform operations involving simple cases with the use of accounting
equation

As you go along with our lesson, consider the following essential question
● How is the equation related to accounting and vice versa?

Let us check your knowledge in Math

What does = mean?

If your answer is EQUALITY, you are correct. An equal sign symbolizes equality
of a given value. An equation shows equality of values on the left and right
sides of an equal sign.

In your junior high and elementary days, you have learned concepts of
equations. In algebra, you were taught simple algebraic expressions such as
X = Y, where X and Y represent value.

Accounting equation has a concept similar to algebraic expression X = Y but

the variables X and Y are represented by a different letter such as.
A = L + E, where A stands for Asset, L stands for Liability, and E stands for Equity.

B. Development 40 mins Weighing scale and the concept of Accounting Equation

Pagpapaunlad

Do you know that to maintain the equilibrium of a weighing scale the two
suspended plates on both sides must be in their normal state always or else
they will topple? Accounting, on the other hand, like the weighing scale
must ALWAYS be balanced.

Let us recall the definition of accounting

Accounting is a systematic and comprehensive way of recording the

business’ financial transactions. It is the process of recording, classifying,
summarizing, reporting, and interpreting information about the economic
activities of an organization.

The recording phase of accounting requires you to know the five Major
accounts that are used to record a transaction. First, you need to analyze
what kind of transactions will affect the Assets (A), Liabilities (L), and Equity (E)
in the accounting equation. Accounting has its business language. The
following are some terminologies distinct from accounting.
Let us first define what an asset is.

ASSETS are resources controlled by the business as a result of past transactions

and events and from which future economic benefits are expected to flow
to the business. These are resources that a business OWNS.

Take for instance a coffee shop. These may include but not limited to the
following:
1. automatic drip coffee makers
2. high-quality espresso machine
3. industrial coffee grinder
4. POS System and website
5. curbside pickup supplies
6. milk and water
7. industrial blenders
Aside from the listings above, the building or shop where the business is
located, vehicles, the supply of coffee, and sugar are all examples of assets.
On the other hand, everything that a business rents will not form part of its
assets accounts.

Sometimes business runs out of cash during its operation. The business owner
borrows money to provide for the needs of the business. Everything that the
company borrows for its consumption and utilization is called LIABILITIES.
Liability is everything that a business OWES.

The value of all resources that was placed by the owners to its business is
called CAPITAL. This will form part of the EQUITY.

All businesses operate for a profit. The results of its operation may be
recognized REVENUE but may incur EXPENSES as well. Revenue and Expenses
form part of the expanded accounting equation.
Assets = Liabilities + Equity + Revenue – Expenses

To aid you in learning this new concept, you should be able to distinguish
which will be debited and which will be credited as this will be your guide in
solving the accounting equation problem. What makes the accounts
debited or credited is the result of a business transaction, that there is always
something that you received and something that you parted with.

Five major accounts will be affected when you increase or decrease the
account. An increase or decrease signifies a debit or a credit. To give you
a clearer view of Debit and Credit Transactions and their effect on the
accounting equation, please see the table below presenting the Rules of
Debit and Credit.

When When When When When

Asset…. Liability…. Equity…. Revenue…. Expenses….
Increases = Increases (+) Increases = Increases = Increases =
Debit = Credit Credit Credit Debit
Decreases = Decreases (-) Decreases = Decreases = Decreases =
Credit = Debit Debit Debit Credit
 Debits = Credits
Assets has a normal debit Whereas Liabilities and Equity have a
balances normal credit balances

Reading for meaning:

To have a clearer understanding of our lesson please read pages 44-51 of
your textbook Fundamentals of Accountancy, Business and Management 1
by Tugas et al.
C. Engagement 20 mins DAY 2
Pakikipagpalihan Welcome back to our lesson. I hope you were able to read your book
before proceeding to this day’s lesson.

Activity 1
Suppose you want to put up a mini sari-sari store to augment the budget for
your family. Identify at least five (5) possible business transactions that you will
do in order for you to put up a mini sari-sari store. Write it in your notebook.

From your answer put a check mark on the column showing the effect of the
increase or decrease of each account.
Assets Liabilities Equity Revenue Expenses
Transactions
+ - + - + - + - + -
1
2
3
4
5

With this activity, you were able to identify each transaction and classify
what accounts will be affected. You are now ready to analyze the effect of
each transaction in our Accounting equation.

D. Assimilation 30 mins Activity 2

Paglalapat In your book on pages 51 to 55, there is a discussion on the computation of
the missing amounts. Drills are provided for you to make you understand the
effect of each transaction on the accounting equation. After reading the
book you are tasked to answer Exercises 6-9 number.

Activity 3
Let us deepen your understanding of the lesson. For each transaction
indicate whether the assets, liabilities, and equity will be increased,
decreased, or no effect.
Transaction Assets Liability Equity
1 Purchased supply on a cash
2 Borrowed cash from a bank
3 Sold merchandise for cash
4 Paid utility expense
5 Received cash from a customer

Activity 4
Problem Solving
Below is a situation to show how the accounting equation will be affected.
You are tasked to determine the assets, liabilities, equity, revenue, and
expenses.

The initial investment of the owner in his business is cash of ₱100,000.00. At

the end of each year, the total assets of the business amounted to
₱125,000.00 this consists of ₱75,000.00 cash. On the first month of its
operations, the owner purchased an equipment worth ₱50,000 she paid
₱30,000 as a down payment and the rest will be paid in the succeeding
 month. She received ₱10,000.00 cash from its client and paid an expense of
₱4,000.00. Show how the transactions affect the accounting equation.

Assets = Liability + Equity + Revenue - Expenses

V. ASSESSMENT 10 mins Answer Exercises 6-9 number 2 on page 60 of your Textbook. Write your
(Learning Activity Sheets for answer in your notebook.
Enrichment, Remediation or
Assessment to be given on Weeks
3 and 6)
VI. REFLECTION 5 mins ● You will communicate the explanation of your personal assessment
as indicated in the Learner’s Assessment Card.
● You will write your personal insights about the lesson using the
prompts below.
I understand that ___________________.
I realize that ________________________.
I need to learn more about __________.
Prepared by: Eva C. Topacio, SDO Imus City Checked by: Dr. Josephine Canlas, Adora G. del Mundo,
Cherrie Logatoc