Professional Documents
Culture Documents
Accountancy,
Business and
Management 1
Quarter 3 – Module 3:
Accounting Equation
What I Need to Know
This module was designed and written so that you will learn the basic tool of
accounting equation. It will also help you learn to solve problems by applying the
basic accounting equation (ABM_FABM11-IIIc-17-18).
1
What I Know
Directions: Read the statement carefully and write TRUE if the statement is correct
and FALS E if not. Write your answers on a separate sheet of paper.
2
Lesson
Accounting Equation
1
Formulas and equations are important to solve a
certain mathematical problem not only in the fields of
Mathematics and Science but also in Accounting. Its
equation has two sides - the left and the right side. The
left side of the equation is the company’s assets and the
liabilities and equity are shown on the right side.
What’s In
Directions: Analyze the problem carefully and answer the questions that follow.
Write your answers on a separate sheet of paper.
Hannah Mae Vista graduated as summa cum laude with the degree of B . S .
Accountancy and got her job through her brother’s recommendation. She has served
as an accountant on Vista Accounting Firm for three years. She has been very
passionate about her work since it was her dream to be an accountant. One day,
when she was doing the financial reports of the company, she noticed that the debit
and the credit sides were not balanced. She kept finding the errors but found none.
Unexpectedly, Hannah’s boss approached and told her that he got cash amounting
to Php 100,000.00 for personal use but he refused to record it as drawings or
withdrawals. Her boss wanted to record the Php 100,000.00 as expenses even though
it was used for his personal obligations.
3
Questions:
Rubrics
4
What’s New
Directions: Compute the missing amount in the equation. Write your answers on
a separate sheet of paper.
What Is It
A = L + OE
5
2. Liabilities are the financial obligation of a company that results in the company’s
future sacrifices of economic benefits to other businesses. Some of its
examples are loans and accounts payable.
3. Equity is the money that is bought by owners of the company for running the
business. It is the residual interest of the owners which means any asset
left after paying liabilities is the right of the owner of the business.
b. Withdrawal occurs when funds are removed from an account for personal
use.
c. Revenue is the total amount of income generated by the sale of goods or
services related to the company’s primary operations.
6
Here are the examples where you will see the effects of every transaction to the
major accounts.
7
Cash withdrawal by the owner
J u ly 18 – Sandy Dela Cruz made a withdrawal of Php 5,000 for her personal use.
Assets Liabilities Owner's Equity
Cash Dela Cruz,
Php 5,000.00 Drawings
(-) Php (5,000.00)
(-)
Payment of liability
J u ly 20 – The account due to Masigasig Trucking Services was paid in cash.
The table summarizes the effects of these transactions on the accounting equation:
Date Assets
20 Php (55,000)
Balances Php 795,000.00 Php 200,000.00 Php 45,000.00 Php 55,000.00
Total Php 1,095,000.00
Balance
Accounts
July Payable Loans Payable Dela Cruz Capital Other Account Title
1 Php 1,000,000.00
2 Php 100,000.00
7
15 Php 55,000.00
18 (Php5,000.00) Dela Cruz Drawings
20 (Php 55,000.00)
Balances Php 100,000.00 Php 0.00 Php 995,000.00
Total Balance Php 1,095,000.00
8
Received cash for revenue earned
J u ly 21 – Sandy Dela Cruz’s catering service was hired and Php 15,000.00 cash
was received from the customers.
J u ly 22 – G a s and oil worth Php 500.00, and car repairs worth Php 1,000.00
were paid in a cash transaction.
J u ly 24 – Dela Cruz’s catering service was hired again by a customer but this time,
the customer was not able to pay Dela Cruz on that day. Instead, she made a
promise to pay Php 16,000.00 on J u ly 31 and August 15.
Accounts
Service Revenue
Receivable
Php 16,000.00
Php 16,000.00
+
+
Cash Telephone
Php expense
(500.00) Php
(-) (500.00)
(-)
9
Revenue earned with a down payment, balance on the account
J u ly 27 – Another customer hired the catering service of Dela Cruz and received a
bill amounting to Php 20,000.00 and 50% of it was collected.
J u ly 31 – Sandy Dela Cruz paid Php 10,000.00 for rental of office space, and
salaries of Php 9,000.00.
Assets Liabilities Owner's Equity
Cash
Php Salaries Expense
(19,000.00) Php (9,000.00)
(-) (-)
10
The table summarizes the effects of these transactions on the accounting
equation, (increase or decrease in each account).
2 P 100,000.00 P 100,000.00
7 P (45,000.00) P 45,000.00
15 P 55,000.00 P 55,000.00
18 P (5,000.00) P (5,000.00)
Dela Cruz,
Drawings
20 P (55,000.00) P (55,000.00)
Service
21 P 15,000.00 P 15,000.00 Revenue
22 P (500.00) P (500.00)
Gas and Oil
Repair
P (1,000.00) P (1,000.00) Expense
P 16,000.00 Service
24 P 16,000.00 Revenue
25 P (500.00) P (500.00)
Telephone
Expense
27 P 10,000.00
P 10,000.00
P 20,000.00
Service
Revenue
30 P 8,000.00 (8,000.00)
31 P (10,000.00) P (10,000.00)
Rent Expense
Salaries
P (9,000.00) P (9,000.00) Expense
11
What’s More
Directions: For each transaction, tell whether the assets, liabilities, and equity will
increase, decrease, or have no effect. Write + for increase, (-) for
decrease, and N E for no effect. Write your answers on a separate sheet
of paper.
3. The company
received cash from a
bank loan.
4. The company paid
the bank loan.
5. The company
purchased supplies on
a cash basis.
6. The owner
contributed her
personal computer to
the business.
7. The company
purchased equipment
on account.
8. The company
purchased a piece of
land with a down
payment and signed
note.
12
What I Have Learned
10. Pearl Trading Enterprise has assets of Php 800,500.00 and liabilities
of Php 450,000.00.
13
What I Can Do
Directions: Analyze the transactions of Kim as the owner of Chinita Girl Spa
Services. Record the transactions using a financial transaction
worksheet indicated on the next page. Write your answers on a
separate sheet of paper.
30 She paid Php 5,000.00 for the office rental space and Php
4,000.00 for employees’ salaries.
14
Chinita Girl Spa Services
Financial Transaction Worksheet
Month of J u n e, 2020
1
2
7
15
18
20
21
22
24
25
27
30
30
Bal.
Total
Balances
15
Assessment
Directions: Answer the questions that follow. Write the letter of your answers on
a separate sheet of paper.
4. Which refers to the remaining amount of the assets after paying all the
company’s liabilities?
A. revenues
B. owner’s equity
C. expenses
D. net profits
8. What would be the effect to the liabilities of the business after availing
loan from Panata Bank?
A. It remains the same.
B. It decreases.
C. It increases.
D. None of the above
10. The liabilities of Senshin’s Shop are Php 450,000 and his equity is
Php 780,000. What is the business' total assets?
A. Php 1,032,000
B. Php 1,320,000
C. Php 1,023,000
D. Php 1,230,000
17
Additional Activities
August1 – Mr. Cabiling invested Php 1, 000,000.00 cash for his business.
18
19
Assessment
1. A 6. A
2. D 7. A
3. A 8. C
4. B 9. A
5. A 10. D
Additional Activities
Ronal d Cabilin g House keepin g Servic e
Finan cial Transa ction Worksheet
Month of Au g u s t , 2020
Date ASSET S LIA BILITIES OWNE R’S E Q U I T Y
Accounts Other
Receivable Cabiling,
August Cas h Equipment Account
Capit al Title
1
P 1,000,000 P 1,000,000
2 (100,000) P 100,000
4 Service
5,000 5,000 Revenue
5 Salaries
(3,000) (3,000) Expense
7 P 1,000 Servic e
9,000 10,000 Revenue
Telephone
13
(2,000) (2,000) Expense
21 50,000 50,000
25 (1,000)
1,000
28 15,000 Servic e
5,000 20,000 Revenue
30 (15,000)
15,000
Bal. P 980,000 P 100,000 0 0 P 1,080,000
TOTAL B A L A N C E S P 1,080,000
P 1,080,000
Answer Key
20
What I Have Learned
1. L= Php 160,000 6 . O E = Php 10 0,000
2. A= Php 720,000 7. A= Php 20,000
3. O E = Php 134,000 8. L= Php 109,500
4 . A = Ph p 410, 300 9. A= Php 330,000
5 . O E = Php 70 2,000 10. O E = Php 350,500
What Can I Do
Chinit a Gi rl S p a Service s
Financ ial Transa ction Worksh eet
Month of J u n e , 2020
OWNE R’S
Date ASSET S LIABIL ITIES
EQUIT Y
Accounts Accoun Other
Receivable Loans Kim,
Jun e Cas h Furnitures Equipment ts Acco unt
Payable Capit al Title
Payable
1 P 500,000 P 100,000 P 600,000
2 50,000 P 50,000
7 (20,000) P 20,000
15 P 50,000 P 50,000
18 Kim,
(10,000) (10,000)
Drawings
20 (50,000) (50,000)
Service
21 10,000 10,000
Revenue
22 Gas and
(1,000) (1,000)
Oil
Repair
(1,000) (1,000)
Expens e
24 P 7,500 Service
7,500 15,000
Revenue
Telephone
25 (1,000) (1,000)
Expens e
27 15,000 Service
15,000 30,000
Revenue
30 7,500 (7,500)
31 Rent
(5,000) (5,000)
Expens e
Salaries
(4,000) (4,000)
Expens e
Bal. P P 15,000
P 498,000 P 20,000 P 50,000 0 P 633,000
150,000
TOTAL B A L A N C E S P 683,000 P 683,000
What’s New
21
(In Php )
ASSET S LIABIL ITIES OWNE R'S E Q U I T Y
1. 150,0 00
2. 30,00 0
3. 100,0 00
4. 150,0 00
5. 790,0 00
6. 389,0 00
7. 987,2 17
8. 562,8 79
9. 912,5 56
10. 1,896
What’s More
AS S E T S LIA BILITIES OW NER'S
EQU I TY
1 . The owner invested c a s h in the
+ NE +
busine ss.
2 . The owner withdrew c a s h for
person al u s e .
- NE -
3 . The c o m p a n y received c a s h from a
bank loan.
+ + NE
4. The c o m p a n y paid the b a n k l oan. - - NE
5 . The c o m p a n y purch ased su ppl i es on
a cash bas is.
-+ NE NE
6 . The owner contri buted her person al
c omput er to the b u s i n e s s .
+ NE +
7 . The c o m p a n y purch ased equipment
on a c c o u n t .
+ + NE
8. The c o m p a n y p u r c h a s e d a piece of
l a n d with a down payme nt a n d signed +- + NE
note.
9 . The owner bough t furnitu re for the
busine ss on a c c o u n t .
+ + NE
1 0 . The c o m p a n y repaid its supplie rs. - - NE
22
What I Know
1. True 2. True 3. True 4. False 5. True
6. False 7. True 8. True 9. True 10. True
What’ s In
1 . Busine ss Entity Principle
2. Yes, Answer m ay vary