FUNDAMENTALS OF

ACCOUNTANCY, BUSINESS
AND MANAGEMENT 1
PRETEST
ANSWER ACTIVITY 1 & 2
 ACCOUNTING EQUATION
- also called the basic accounting equation, forms
the foundation for all accounting systems.
- the entire double-entry accounting concept is
based on the basic accounting equation.
- this simple equation illustrates two facts about a
company: what it owns and what it owes.
you can write the accounting equation with the liabilities by
itself:

Liabilities = Assets – Owner’s Equity

Or, you can write the accounting equation with equity by
itself:

Owner’s Equity = Assets – Liabilities

Assets

• are the economic resources of the entity

• entail probable future economic benefits to the
owner
 Assets
It includes such items as:
• Cash
• Accounts receivable (amounts owed to a firm by its
customers)
• Inventories
• Land
• Buildings
• Equipment
Liabilities
• are amounts owed to others relating to loans,
extensions of credit, and other obligations
arising in the course of business.
• implicit to the notion of a liability is the idea of
an "existing" obligation to pay or perform some
duty.
Liabilities
It includes such items as:
• Accounts Payable
• Notes Payable
• Unearned Revenue
Owner’s Equity
• is the owner's stake in the business.
• sometimes called net assets because it is equivalent to
assets minus liabilities for a particular business. Who
are the "owners?" Examples of business types include
Sole Proprietorships, Partnerships, and
Corporations.
 Owner’s Equity
• comes from two sources, the first one comes directly
from the owners in the form of investment of capital.
The other comes from the income of business from its
normal operations.
• the net income or net loss of the business from its
operations can be determined by using the following
equation:
ACCOUNTING EQUATION EXAMPLES:
ACCOUNTING EQUATION EXAMPLES:
ACCOUNTING EQUATION EXAMPLES:
 Example II. Using the Accounting Equation, determine
the missing amounts in the following scenarios.
1. Assuming you are starting a printed t-shirt business. you
contributed your savings amounting to ₱10,000.00 to the
business.
Answer:
A=L+OE
₱10, 000 = LIABILITIES + ₱10,000
 Example II. Using the Accounting Equation, determine
the missing amounts in the following scenarios.
2. You need to purchase equipment to print the t-shirt. You
purchase ₱5,000.00 of the equipment on credit.
Answer:
A=L+OE
₱5,000.00 = ₱5,000.00 + OWNER’S EQUITY
 Example II. Using the Accounting Equation, determine
the missing amounts in the following scenarios.
3. As the business grows, a customer orders 20 shirts. The
customer pays ₱200.00 per shirt for a total of ₱4,000.00.
Answer:
A=L+OE
₱4, 000.00 = LIABILITIES + ₱4,000.00
APPLICATION
Answer Activity 3
Part I And II
 ACTIVITY 1. DEAL OR NO DEAL

Determine whether there is a transaction that took

place in the Ofelia’s Garden in each item. If there
is, “ DEAL” else “NO DEAL.”
1. Ofelia invested cash, ₱100, 000.00 to put up a
garden using the business name “Ofelia’s
Garden”.
 ACTIVITY 1. DEAL OR NO DEAL

2. She hired two helpers with a monthly salary of

₱8,000.00 each.
3. Bought gardening tools to berting’s supplies
amounting to ₱1,500.00
4. She borrowed ₱50,000.00 to Bayabas rural
bank for her personal use.
 ACTIVITY 1. DEAL OR NO DEAL

5. Purchased gardening supplies to Juan’s

gardens on credit.
6. Received a phone call from Martha inquiring
for the availability of the 50 pcs of small size
adenium worth ₱250.00 each.
7. Received bill from Meralco worth p 1,500.00.
 ACTIVITY 1. DEAL OR NO DEAL

8. Sold 30 pcs of variegated anthurium to various

customers, ₱6,000.00.
9. Martha confirmed her order of 50 pcs of small
size adeniums.
10. Paid the rent for the venue of the garden with
₱10,000.00.
 Revenue Increases Owner’s Equity
 Expenses Decrease Owner’s Equity
 Owner’s Draw Decreases Owner’s Equity
 Two Sides Of The Equation Must Equal Each Other
Transactions of Joy’s Spa
Services of Miss Ligaya
Borillo
 ASSETS INVESTED BY THE OWNER
May 1 Ligaya Borillo open a Spa business by investing
cash ₱100, 000.00 and two beds, ₱7,500.00 each

Analysis: The assets of the business increased in the

form of the cash ₱100,000.00 and beds, which are
₱7,500.00, each with a corresponding increase in
owner’s equity. There is no effect on the liabilities.
 ASSETS INVESTED BY THE OWNER
May 1 Ligaya Borillo open a Spa business by
investing cash ₱100, 000.00 and two beds, ₱7,500.00
each

115, 000.00
 CASH BORROWED FROM THE BANK

May 5 Borillo borrowed ₱150,000.00 from

Rural Bank of Libtong for her business.
Analysis: The assets of the business increased
again in cash by ₱150,000.00 with a
corresponding increase in liabilities in the
form of loan payable.
 CASH BORROWED FROM THE BANK

May 5 Borillo borrowed ₱150,000.00 from

Rural Bank of Libtong for her business.
 ASSETS PURCHASED FOR CASH

May 7 Bought tables and chairs from

Melencio’s Furniture and paid cash, ₱50,000.00.
Analysis: The assets of the business increased in
the form of furniture and decreased in
the form of cash. Total assets will still be
the same since there was only a change in its
form.
 ASSETS PURCHASED FOR CASH

May 7 Bought tables and chairs from

Melencio’s Furniture and paid cash, ₱50,000.00.
 ASSETS PURCHASED ON ACCOUNT

May 15 Various equipment was purchased in

the account, from Nataraki’s Supplies, for
₱70,000.00.
Analysis: The assets of the business increased in
the form of equipment with a corresponding
increase in its liability in the form of accounts
payable.
 ASSETS PURCHASED ON ACCOUNT

May 15 Various equipment was purchased in

the account, from Nataraki’s Supplies, for
₱70,000.00.
 CASH WITHDRAWN BY OWNER

May 17 Borillo made a cash withdrawal of

₱30,000.00 for personal use.
Analysis: The assets of the business decreased in
the form of cash ₱30, 000.00 with a
corresponding decrease in the owner’s equity
since the owner exercised part of the claim by
withdrawing cash.
 CASH WITHDRAWN BY OWNER

May 17 Borillo made a cash withdrawal of

₱30,000.00 for personal use.
 PAYMENT OF LIABILITY

May 19 The account due to Nataraki’s Supplies

was paid in cash.

Analysis: Assets of the business in the form of

cash decreased with a corresponding decrease
in liability.
 PAYMENT OF LIABILITY

May 19 The account due to Nataraki’s Supplies

was paid in cash.
RENDERED SERVICE TO CUSTOMERS IN CASH

May 21 Borillo rendered service to various

customers in cash, ₱50,000.00.
Analysis: The assets of the business increased
in the form of cash and a corresponding
increase in the form of equity in the form of
income.
RENDERED SERVICE TO CUSTOMERS IN CASH

May 21 Borillo rendered service to various

customers in cash, ₱50,000.00.
 RENDERED SERVICE TO CUSTOMERS ON
ACCOUNT
May 23 Borillo rendered service to Mara’s
modelling services on account, ₱30,000.00.

Analysis: Assets of business increased in the

form of accounts receivable and increased in
the owner’s equity in the form of income.
 RENDERED SERVICE TO CUSTOMERS ON
ACCOUNT
May 23 Borillo rendered service to Mara’s
modelling services on account, ₱30,000.00.
 PAYMENT OF EXPENSES
May 25 Paid the electric bill of the business,
₱3, 000.00.
Analysis: The assets of the business decreased
with a corresponding decreased in the equity in
the form of the utilities expenses.
 PAYMENT OF EXPENSES
May 25 Paid the electric bill of the business,
₱ 3, 000.00.
 RECEIVED CUSTOMER’S PAYMENT FOR
THEIR ACCOUNT DUE
May 30 Mara’s modeling settled its account,
₱30,000.00.
Analysis: The assets of the business decreased in
the form of the accounts receivable and
increased in the form of cash. the total assets
will still be the same since there was only a
change in its form.
 RECEIVED CUSTOMER’S PAYMENT FOR
THEIR ACCOUNT DUE
May 30 Mara’s modeling settled its account,
₱30,000.00.
 SANIATA’S XEROX
(refer to your hand outs)
ANSWER DEEPEN AND
GAUGE