SACRED HEART OF JESUS MONTESSORI SCHOOL

J.R. Borja Extension, Gusa, Cagayan de Oro City

Montessori-Based Learning
Learning Instructional Packets (LIPs)

OFFLINE-PICK-UP

Accounting ( 1 hour/week)
First Quarter

Week-2

Basic Principles of Accounting -1

 Double Entry System
 Values Affected by Business Transactions
- Assets
- Liabilities
- Proprietorship

Teacher: Liezl A. Deloso

_________________________________________________
SACRED HEART OF JESUS MONTESSORI SCHOOL
J.R. Borja Extension, Gusa, Cagayan de Oro City
 Montessori-Based Learning
Learning Instructional Packets (LIPs)
Accounting
S.Y 2021-22 (September 11, 2021)

Name: ________________________________________________ Date submitted: ________________

Grade & Section: ______________________________________ Teacher: _______________________
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Content Standard:
• The students will understand the double entry system and the values affected by business transactions.

Performance Standard:
• The students can explain the double entry system and the values affected by business transactions.

I. LEARNING COMPETENCY
• The students will be able to describe the double entry system and the values affected by business transactions.
Objectives:
1. Give an example of how the double entry system works.
2. Identify the different values affected by business transactions.

II. LEARNING CONTENT

Lesson 1: Basic Principles of Accounting

 Double Entry System
 Values Affected by Business Transactions
- Assets
- Liabilities
- Proprietorship
Materials:
1. LIPs
2. Powerpoint presentation

References:
1. K to 12 Curriculum Guide
2. Accounting
By: Atty. Graciano B. Neri, Jr.
Second Edition
3. Accounting for Non-Accountants
By: Michael P. Cañares, CPA
2018 Edition

III. LESSON PRESENTATION

The Double Entry System

Accounting as a science may be said to have had its origins
with the introduction of the double entry system of bookkeeping. It is
not known when the double entry system of bookkeeping was first
used. However, the first printed article in the double entry book
entitled “Summa de Arithmetica, Geometria, Proportioni et
Proportionalita” (Everything about Arithmetic, Geometry and
Proportion) written by Fra. Luca Pacioli. The double entry system
because of its origin in Italy became known as the “Italian System of
Bookkeeping”.

The double entry system of bookkeeping is based upon the

theory that every business transaction represents an exchange of
value. In accounting this exchange of values is represented by debits
(what we receive) and credits (what we part) in equal amounts for all
Fra. Luca Pacioli
transactions.
 To illustrate the exchange of values theory of the double entry system of bookkeeping, below is a list of business
transactions of a cellphone repair shop from July 1-30, 20x1, showing analysis on the values received and values parted
with.

July 3 Mr. Wu invested cash of P 30,000.00 in the business.

July 7, He purchased shop supplies worth P 500.00 and paid in cash.
July 10 Rendered repair services to customers on account, P 1,500.
July 11 Bought additional equipment for the shop on account worth P 4,000.
July 17 Paid P 3,500 for shop furniture.
July 20 Rendered repair services to customers, paid in cash, P 2,000.00.
July 30 Paid shop rental worth P 5,000.00.
July 30 Paid electric bill amounting to P 1,800.00.

Date Values Received Values Parted With

1. July 3 Cash (30,000) Capital
2. July 7 Shop Supplies Cash (500)
3. July 10 Cash (1,500) Service
4. July 11 Shop equipment Cash (4,000)
5. July 17 Shop furniture Cash (3,500)
6. July 20 Cash (2,000) Service
7. July 30 Rental (space) Cash (5,000)
8. July 30 Electricity Cash (1,800)

In the transaction 1 above, the business received cash (P 30,000) from Mr. Wu. The amount was the value parted with by Mr.
Wu for the capital of the business. In transaction 2, the business received shop supplies worth P 500 and parted with a cash amount of
P 500 used to pay for the supplies.

Transactions 3 and 6 shows that the business received cash values of P 1,500 and P 2,000 as payment for the services
rendered by Mr. Wu to the customers. Service was the value parted with for the cash that was received by the business.

In transactions 4 and 5, the business received equipment and furniture and paid for it in cash. The cash value parted with was
the exchange of the equipment and furniture received by the business.

For transaction 7, Mr. Wu paid for the rental of the office space he used for the business operation and so gave out cash to
pay it, amounting to P 5,000. The same also applies to transaction 8, where the business received (or used) electricity and also paid out
for it in cash, in the amount of P 1,800.

Values Affected by Business Transactions

The double entry system of bookkeeping is based upon the theory that every business transaction represents an
exchange of value for value. The values that are exchanged and affected by business transactions are:

• Assets - properties or rights which in general have a realizable value and which are owned by
the business.
Examples are cash, accounts receivables from persons, merchandise for sale, land, buildings,
furniture and fixtures, automobiles and other service cars owned by the business.

• Liabilities – are debts or obligations incurred by the business in acquiring assets, which must
eventually be paid-out of assets.
Examples are accounts payable to sellers from whom the business might have bought merchandise on credit,
money borrowed by the business from banks or other persons and all other
debts of the business.

• Proprietorship – represents the capital or equity of the owner or owners in the assets of the
business after the liabilities have been deducted.
If the business owns assets in the amount of P 10,000 and has liabilities in the amount of P 4,000 then the excess
of P 6,000 is the capital.

As a result of business transactions, the assets, liabilities and proprietorship are increased or decrease from time to
time. These changes in values are reflected in a form or record called Account.