GOODMORNING!

Learning Objectives:
At the end of the discussion, the
students will be able to:

•define the accounting equation.

●solve basic problems applying
the accounting equation.
 The
Accounting
Equation
 BASIC ACCOUNTING
EQUATION

ASSETS = LIABILITIES+EQUITY
Elements of Accounting
Equation
1.Assets
2. Liabilities
3. Equity
 ASSETS
-represents what the
company owns.
 CASH
ACCOUNTS
RECEIVABLE
EQUIPMENTS

ASSETS LAND
SUPPLIES
NOTES
BUILDINGS RECEIVABLE
EXAMPLES:
•Cash
•Accounts receivable
•Inventories
•Equipment
1. Cash - money use in
everyday life.
- Also considered cash as
the money that is deposited
in the banks and even
undeposited checks from
customers.
2. Accounts receivable
- represents amounts
that are collectible
from customers.
3. Inventories -
products being offered
to be sold.
4. Equipments
 LIABILITIES
- debts of entity to
external creditors.
ACCOUNTS WAGES
PAYABLE PAYABLE

LIABILITIES

NOTES
TAXES PAYABLE
PAYABLE
 Example:
The most common
liability is a loan.
 Example:
Another common liability is
called creditors.
-A creditor, also known as
a payable, is any business
or person (apart from the
bank) that you owe.
 Example:
Accounts Payable -
composed of depts
payable with days,
weeks, or month.
 EQUITY
-this is similar to the net
worth or the interest of
the owner.
Examples:
1. Capital
2. Expenses
3. Revenues
4. Withdrawals
1. Capital - represents the
net investments of the
business.
2. Expenses - monetary
values of the goods services
used in the production of
the business.
3. Revenues - money
or paid to a
business. Other term
used are sales, rent,
fee, etc.
4. Withdrawals -
what the owner
takes out of the
business
IDENTIFYING CHANGES
IN THE ACCOUNTING
EQUATION
1. The company purchases
equipment with its cash.
ASSETS INCREASE DECREASE NO EFFECT
LIABILITIES INCREASE DECREASE NO EFFECT
EQUITY INCREASE DECREASE NO EFFECT
2. The owner invests personal
cash in the business.
ASSETS INCREASE DECREASE NO EFFECT
LIABILITIES INCREASE DECREASE NO EFFECT
EQUITY INCREASE DECREASE NO EFFECT
3. The company receives cash
from a bank loan.
ASSETS INCREASE DECREASE NO EFFECT
LIABILITIES INCREASE DECREASE NO EFFECT
EQUITY INCREASE DECREASE NO EFFECT
3. The company receives cash
from a bank loan.
ASSETS INCREASE DECREASE NO EFFECT
LIABILITIES INCREASE DECREASE NO EFFECT
EQUITY INCREASE DECREASE NO EFFECT
 MANANG ROSA'S FAMOUS BBQ
1. Manang Rosa has been well known for
her delicious variety of barbeque. As
such, she decided to open up a bbq store
in her neighborhood. In order to do so,
she invested P25,000.
2.To actually create her
famous bbq, she would need
the proper equipment to cook
it. Thus, she went to the local
hardware store and bought
the necessary equipment such
as grills and utensils for
P20,000.
3.Manang Rosa's bbq require only the
fresh meat which can be bought from
Ate Shay's store in the market.
Since, they cost P10,000, Manang
Rosie does not have enough money to
purchas this. So Ate Shay decided to
give the meat to Manang Rosie on the
condition that she will have to pay
her in 30 days.
4.To actually set up a
business, one of her friends
told her that she has to
obtain business and other
permits from the local
government. As such, she
paid P1,000 to obtain such
permits.
5.With everything in place, Manang
Rosie can now sell her famous
bbqs. During the first day of her
new business venture, she was able
to sell 1,000 bbqs with a selling
price of P20,000. Half of which
was paid cash. The other half was
to be paid in 5 days.
Example. Kuya Joel decided to open an ice cream store on January
1. In order to do so, he invested P300,000 for the establishment
of his business. On the month of January, Kuya Joel also incurred
the following transactions:
January 5 - Bought the necessary equipment for the ice cream
shop. The pruchase price was P200,000.
January 7 - Bought goods on credit. The goods were bought from
Ryan store at a cost of P50,000. The goods are to be paid in
15days.
January 15 - The ice cream store opened. During this day, Joel
sold P25, 000 worth of ice cream. Half was paid in cash and the
other was to be paid in 15 days.
January 22 - Paid Ryan store.
January 30 - Received payment for the goods sold in January 15.
GROUP ACTIVITY:
Quiz:
In a 1 whole sheet
of paper, solve basic
problem applying the
accounting equation.
Listed below are business transactions of the
company for the first month:
a. Owner invested cash in the business
amounting to P300,000.
b. Purchased equipment for cash amounting to
P50,000.
c. Purchased inventories through credit
amounting P35,000.
d. Purchased furniture amounting to P30,000.
Made partial payment with cash P10,000
and incurred an accounts payable for the
balance P20,000.
e. Paid P9,000 cash to the local government
for the business permit.
f. Paid the accounts payable in (d)
g. Paid employees for P12,000.
Assignment:
Study : The Types
of Major Accounts
THANKYOU.