MODULE 3

ACCOUNTING FOR SERVICE CONCERN

I. INTRODUCTION

A. OVERVIEW
Entity Principle, as mentioned in the previous module considers the
business as distinct and separate from its owner/s. Therefore, our concern in
accounting is the business, and not of the owner. In this module, we are going to
take up business transactions and its two-fold effects. Also discussed in this
module is the accounting values or elements: assets, liabilities, and capital which
are briefly defined in the previous module. In this module, they are defined,
classified, and examples of each classification are given. The module also shows
the effects of business transactions using the accounting equation. Finally, the
two-fold effects of business, that is, the debit and the credit will be discussed and
illustrated.

B. LEARNING OUTCOMES

At the end of the lesson, you should be able to:

1. Define business transactions

2. Identify the three accounting elements or values
3. Give examples of the three accounting elements or values
4. Discuss the classifications of assets and liabilities
5. Discuss the effects of business transactions using accounting equation
6. Illustrate each accounting equation by giving example
7. State the rules on debit and credit
8. Illustrate debit and credit by giving sample transactions

C. REQUIREMENTS

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 After reading and studying the lessons, please answer the
questions/exercises at the end of the lesson.

D. PRE-ASSESSMENT

Problem-solving/Quiz

II. CONTENTS

A. LESSON

1. BUSINESS TRANSACTIONS

The data recorded in the accounting books are called transactions. Transactions
are the economic activities of the firm. Activities that involve one enterprise and
another are called external transactions. Activities within the enterprise are called
internal transactions. When there is a transaction there is an exchange of values;
that is, there is always a value received and a value parted with. These values
received and parted with may either be money, property, or services.
Transactions also affect the accounting elements or values.

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2. THREE ACCOUNTING ELEMENTS OR VALUES

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3. ACCOUNTING EQUATION

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4. DEBIT AND CREDIT

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B. ADDITIONAL READINGS

1. Fundamentals of Accounting by Amelia M. Arganda

2. Conceptual Framework and Accounting Standards by Zeus Millan
3. Financial Accounting and Reporting For Services and Merchandisers by
Zenaida Manuel
4. Fundamentals of Accountancy, Business and Management by Rodiel C.
Ferrer

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C. EXERCISES

Direction: Answer the following exercises using yellow papers, then submit
your answers on our next face to face meeting.

1. Write down at least five (5) daily transactions of your family and give the

value received and value parted with. Use the form below:

TRANSACTION VALUE RECEIVED VALUE PARTED WITH

A.

B.

C.

D.

E.

2. Think of a service business, and then write the transactions of the

business you think of to prove the given equations below. Give your
analysis after each equation.

a. Assets = Liabilities + Capital

b. Increase in Assets = Increase in Capital
c. Increase in Assets = Increase in Capital
d. Decrease in Assets = Decrease in
Liabilities
e. Decrease in Assets = Decrease in Capital
f. Increase in one form of asset = Decrease
in another form of asset
g. Decrease in one form of liability =

Increase in another form of liability

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 3. The following are the transactions of Mang Mando owner of
”Mando’s Motor Repair Shop”. Using the form below, state the
accounts and the amounts to be debited and credited for each
transaction.

3.1. Mang Mando invested Php450,000 cash to start his business

3.2. Purchased from MBB Motors repair equipment for Php80,000 on
Credit.
3.3. Purchased repair supplies for Php25,500 cash
3.4. Completed repair work to Dencio on account Php55,000 3.5.
Completed repair work to a client and collected Php22,000
3.6. Paid one-half of the account due to MBB Motors.
3.7. Received from Dencio Php15,000 as partial payment of his

account
3.8. Paid for gas and oil used for the service car Php2000
3.9. Paid for the following: rent of the shop space Php13,000;

utilities Php7,200

3.10. Salary of the helper Php8000

3.11. Received from Dencio the remaining balance of his account
DEBIT CREDIT

ACCOUNT AMOUNT ACCOUNT AMOUNT

1.

2.

3.

4.

5.

6.

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7.

8.

9.

10.

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