DEPARTMENT OF ACCOUNTANCY

SCHOOL OF BUSINESS AND ACCOUNTANCY

HOLY ANGEL UNIVERSITY
 CHAPTER 3
The Accounting equation
 Transactions Asset Liabilities Capital
1. Owner invests cash Increase NC Increase
2. Purchase supplies on credit Increase Increase NC
3. Owner invest equipment Increase NC Increase
4. Buys land paying cash Inc/Dec NC NC
Effects in the 5. Borrows cash with note Increase Increase NC

Accounting 6. Rendered service for cash

7. Paid utilities expense for the
Increase
Decrease
NC
NC
Increase
Decrease
Equation month
8. Paid the supplies bought on Decrease Decrease NC
credit
9. Rendered service on credit Increase NC Increase
10. Collected the account in Inc/Dec NC NC
transaction 9
1. Owner invests cash

• Mr. Sy invests P800,000

Assets Liabilities Capital

Increase in Cash NO CHANGE Increase in Sy,
By P800,000 Capital
By P800,000
2. Purchase supplies on credit

• Purchase P5,000 supplies on credit

Assets Liabilities Capital

Increase in Increase in Accounts NO
Supplies Payable CHANGE
By P5,000 By P5,000
3. Owner invest equipment

• Owner invests P60,000 equipment

Assets Liabilities Capital

Increase in NO CHANGE Increase in Sy,
Equipment Capital
By P60,000 By P60,000
4. Buys land paying cash

• Buys land P600,000 paying cash

Assets Liabilities Capital

Increase in Land NO CHANGE NO CHANGE
By P600,000
Decrease in Cash
By P600,000
5. Borrows cash with note

• Borrows cash P20,000 with note

Assets Liabilities Capital

Increase in Cash Increase in Notes NO
By P20,000 Payable CHANGE
By P20,000
6. Rendered service for cash

• Rendered P10,000 services for cash

Assets Liabilities Capital

Increase in Cash NO Increase in Service
By P10,000 CHANGE Income
By P10,000
7. Paid utilities expense for the month

• Paid P700 for utilities

Assets Liabilities Capital

Decrease in Cash NO Decrease in capital thru
By P700 CHANGE Utilities Expense
By P700
8. Paid the supplies bought on credit

• Paid the supplies bought on credit

Assets Liabilities Capital

Decrease in Cash Decrease in Accounts NO
By P5,000 Payable CHANGE
By P5,000
9. Rendered service on credit

• Rendered P2,000 service on credit

Assets Liabilities Capital

Increase in Accounts NO CHANGE Increase in
Receivable Capital thru
By P2,000 Service Income
By P2,000
10. Collected the account in transaction 9

• Collected the account in transaction 9

Assets Liabilities Capital

Increase in Cash NO NO
By P2,000 CHANGE CHANGE
Decrease in Accounts
Receivable
By P2,000
 Transactions Asset Liabilities Capital
1. Owner invests cash P800,000 - P800,000
2. Purchase supplies on credit 5,000 5,000 -
3. Owner invest equipment 60,000 - 60,000
4. Buys land paying cash 600,000 - -
(600,000)

Summary 5. Borrows cash with note

6. Rendered service for cash
20,000
10,000
20,000
-
-
10,000
7. Paid utilities expense for the 700 - 700
month
8. Paid the supplies bought on (5,000) (5,000) -
credit
9. Rendered service on credit 2,000 - 2,000
10. Collected the account in 2,000 - -
transaction 9 (2,000)