Professional Documents
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ACCOUNTS
THE THREE MAJOR ACCOUNT
OWNERS
ASSETS LIABILITIES EQUITY
• The word equation comes from the word equal. For any equation, one side always equals
another
• These equations may also be used:
• The equation shows that assets or properties of the business are owing to outsiders
(Liabilities) and to owner’s (proprietor)
ACCOUNTING EQUATION
• Examples:
Let us assume that on July 1, 1991 Orlando Reyes engaged in business with a cash capital
investment of P100,000.00. On this date, the accounting equation is:
Cash = = Capital
100,000 0 100,000
GROUP ACTIVITY
Transactions:
• Orlando deposited P750,000 in the bank in the name of D & W Enterprise.
• Orlando purchased land amounting to P500,000, paid in cash.
• Orlando Reyes purchased P20,000 supplies paying in the near future.
• During the month, P15,000 is paid to creditors on account.
• Received P55,000 from services rendered.
• Paid the following expenses: Salaries P10,000; Rent P5,000; Utilities P4,000 and
Miscellaneous Expense P2,000
INDIVIDUAL ACTIVITY:
• Using the given data accomplish the accounting equation by applying necessary operations.
b. 860,000 ? 592,000
c. ? 108,000 760,000
d. 626,600 376,240 ?
e. ? 800,000 (100,000)
ASSIGNMENT
For your Assignment I want you to illustrate and perform the following transaction.
Carl has the following transaction, prepare the following equation.
• a. Business started with cash P175,000
• b. Purchased goods from Jam P50,000
• c. Sold goods on credit to Mike (Costing P17,500) P20,000
• d. Purchased furniture for office use P10,000
• e. Cash paid to Jam in full settlement P48,500
• f. Cash received from Mike P20,000
• g. Rent Paid P1,000
• h. Cash withdrew for personal use P3,000.
END