ACCOUNTING.pdf

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Teaching Guide for Senior High School
FUNDAMENTALS OF
ACCOUNTANCY,
BUSINESS, AND
MANAGEMENT 1
SPECIALIZED SUBJECT | ACADEMIC - ABM
This Teaching Guide was collaboratively developed and reviewed by
educators from public and private schools, colleges, and universities. We
encourage teachers and other education stakeholders to email their
feedback, comments, and recommendations to the Commission on Higher
Education, K to 12 Transition Program Management Unit - Senior High School
Support Team at k12@ched.gov.ph. We value your feedback and
recommendations.
The Commission on Higher Education
in collaboration with the Philippine Normal University
This Teaching Guide is a donation by CHED to DepEd. It is for reference purposes only.

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This Teaching Guide by the
Commission on Higher Education is
licensed under a Creative
Commons Attribution-
NonCommercial-ShareAlike 4.0
International License
. This means
you are free to:
Share— copy and redistribute the
material in any medium or format
Adapt— remix, transform, and
build upon the material.
The licensor, CHED, cannot revoke
these freedoms as long as you
follow the license terms. However,
under the following terms:
Attribution— You must give
appropriate credit, provide a link to
the license, and indicate if changes
were made. You may do so in any
reasonable manner, but not in any
way that suggests the licensor
endorses you or your use.
NonCommercial
— You may not use
the material for commercial
purposes.
ShareAlike— If you remix,
transform, or build upon the
material, you must distribute your
contributions under the same license
as the srcinal.
Development Team
Team Leader:Joselito G. Florendo.
Writers: Carlsberg S. Andres, Arthur P. Barrido, Jr.,
Christopher B. Honorario
Technical Editor:Daniel Vincent H. Borja
Copy Reader: Fermin J. Villegas
Cover Artists: Paolo Kurtis N. Tan, Renan U. Ortiz
Published by the Commission on Higher Education, 2016
Chairperson:Patricia B. Licuanan, Ph.D.
Commission on Higher Education
K to 12 Transition Program Management Unit
Office Address: 4th Floor, Commission on Higher Education,
C.P. Garcia Ave., Diliman, Quezon City
Telefax: (02) 441-0927 / E-mail Address: k12@ched.gov.ph
Senior High School Support Team
CHED K to 12 Transition Program Management Unit
Program Director: Karol Mark R. Yee
Lead for Senior High School Support:
Gerson M. Abesamis
Lead for Policy Advocacy and Communications:
Averill M. Pizarro
Course Development Officers:
Danie Son D. Gonzalvo, John Carlo P. Fernando
Teacher Training Officers:
Ma. Theresa C. Carlos, Mylene E. Dones
Monitoring and Evaluation Officer:
Robert Adrian N. Daulat
AdministrativeOfficers:
Ma. Leana Paula B. Bato, Kevin Ross D. Nera,
Allison A. Danao, Ayhen Loisse B. Dalena
Printed in the Philippines by EC-TEC Commercial, No. 32 St.
Louis Compound 7, Baesa, Quezon City, ectec_com@yahoo.com
Consultants
THIS PROJECT WAS DEVELOPED WITH THE PHILIPPINE NORMAL UNIVERSITY.
UniversityPresident: Ester B. Ogena, Ph.D.
VP for Academics: Ma. Antoinette C. Montealegre, Ph.D.
VP for University Relations & Advancement:
Rosemarievic V. Diaz, Ph.D.
Ma. Cynthia Rose B. Bautista, Ph.D., CHED
Bienvenido F. Nebres, S.J., Ph.D.,
Ateneo de Manila University
Carmela C. Oracion, Ph.D.,Ateneo de Manila University
Minella C. Alarcon, Ph.D.,CHED
Gareth Price, Sheffield Hallam University
Stuart Bevins, Ph.D., Sheffield Hallam University

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Introduction
As the Commission supports DepEd’s implementation of Senior High School (SHS), it upholds the vision
and mission of the K to 12 program, stated in Section 2 of Republic Act 10533, or the Enhanced Basic
Education Act of 2013, that “every graduate of basic education be an empowered individual, through a
program rooted on...the competence to engage in work and be productive, the ability to coexist in
fruitful harmony with local and global communities, the capability to engage in creative and critical
thinking, and the capacity and willingness to transform others and oneself.”
To accomplish this, the Commission partnered with the Philippine Normal University (PNU), the National
Center for Teacher Education, to develop Teaching Guides for Courses of SHS. Together with PNU, this
Teaching Guide was studied and reviewed by education and pedagogy experts, and was enhanced with
appropriate methodologies and strategies.
Furthermore, the Commission believes that teachers are the most important partners in attaining this
goal. Incorporated in this Teaching Guide is a framework that will guide them in creating lessons and
assessment tools, support them in facilitating activities and questions, and assist them towards deeper
content areas and com etencies. Thus, the introduction of the SHS for SHS Framework.
The SHS for SHS Framework, which stands for “Saysay-Husay-Sarili for Senior High School,” is at the
core of this book. The lessons, which combine high-quality content with flexible elements to
accommodate diversity of teachers and environments, promote these three fundamental concepts:
SAYSAY:MEANING
Why is this important?
Through this Teaching Guide,
teachers will be able to facilitate
an understanding of the value
of the lessons, for each learner
to fully engage in the content
on both the cognitive and
affective levels.
HUSAY:MASTERY
How will I deeply understand this?
Given that developing mastery
goes beyond memorization,
teachers should also aim for
deep understanding of the
subject matter where they lead
learners to analyze and
synthesizeknowledge.
SARILI:OWNERSHIP
What can I do with this?
When teachers empower
learners to take ownership of
their learning, they develop
independence and self-
direction, learning about both
the subject matter and
themselves.
SHS for SHS
Framework

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This Teaching Guide is mapped and aligned to the DepEd SHS Curriculum, designed to be highly
usable for teachers. It contains classroom activities and pedagogical notes, and is integrated with
innovative pedagogies. All of these elements are presented in the following parts:
1. Introduction
• Highlight key concepts and identify the essential questions
• Show the big picture and concept maps
• Present the relevant vocabulary
• Connect and review prerequisite knowledge
• Clearly communicate learning competencies and objectives
2. Motivation
• Give local examples and applications
• Engage in a game or movement activity
• Provide a hands-on/laboratory activity
• Connect to a real-life problem
3. Instruction/Delivery
• Give a demonstration/lecture/simulation/hands-on activity
• Show step-by-step solutions to sample problems
• Use multimedia and other creative tools
• Give applications of the theory
• Focus on a specific story using the case study method
4. Practice
• Discuss worked-out examples
• Provideeasy-medium-hard questions
• Give time for hands-on unguided classroom work and discovery
• Use formative assessment to give feedback
5. Enrichment
• Provide additional examples and applications
• Introduce extensions or generalisations of concepts
• Encourage analysis through higher order thinking prompts and reflection questions
• Allow pair/small group discussions to summarize and synthesize the learnings
6. Evaluation
• Supply a diverse question bank for written work and exercises
• Provide alternative formats for student work: written homework, journal, portfolio, group/individual
projects, student-directed research project
Parts of the
Teaching Guide

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As Higher Education Institutions (HEIs) welcome the graduates of
the Senior High School program, it is of paramount importance to
align Functional Skills set by DepEd with the College Readiness
Standards stated by CHED.
The DepEd articulated a set of 21st century skills that should be
embedded in the SHS curriculum across various subjects and tracks.
These skills are desired outcomes that K to 12 graduates should
possess in order to proceed to either higher education,
employment, entrepreneurship, or middle-level skills development.
On the other hand, the Commission declared the College
Readiness Standards that consist of the combination of knowledge,
skills, and reflective thinking necessary to participate and succeed -
without remediation - in entry-level undergraduate courses in
college.
The alignment of both standards, shown below, is also presented in
this Teaching Guide - prepares Senior High School graduates to the
revised college curriculum which will initially be implemented by AY
2018-2019.
College Readiness Standards Foundational Skills DepEd Functional Skills
Produce all forms of texts (written, oral, visual, digital) based on:
1. Solid grounding on Philippine experience and culture;
2. An understanding of the self, community, and nation;
3. Application of critical and creative thinking and doing processes;
4. Competency in formulating ideas/arguments logically, scientifically, and creatively; and
5. Clear appreciation of one’s responsibility as a citizen of a multicultural Philippines and a
diverse world;
Visual and information literacies, media literacy, critical thinking
and problem solving skills, creativity, initiative and self-direction
Systematically apply knowledge, understanding, theory, and skills for the development of
the self, local, and global communities using prior learning, inquiry, and experimentation
Global awareness, scientific and economic literacy, curiosity,
critical thinking and problem solving skills, risk taking, flexibility
and adaptability, initiative and self-direction
Work comfortably with relevant technologies and develop adaptations and innovations for
significant use in local and global communities
Global awareness, media literacy, technological literacy,
creativity, flexibility and adaptability, productivity and
accountability
Communicate with local and global communities with proficiency, orally, in writing, and
through new technologies of communication
Global awareness, multicultural literacy, collaboration and
interpersonal skills, social and cross-cultural skills, leadership
and responsibility
Interact meaningfully in a social setting and contribute to the fulfilment of individual and
shared goals, respecting the fundamental humanity of all persons and the diversity of
groups and communities
Media literacy, multicultural literacy, global awareness,
collaboration and interpersonal skills, social and cross-cultural
skills, leadership and responsibility, ethical, moral, and spiritual
values
On DepEd Functional Skills and CHED College Readiness Standards

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TABLE OF CONTENTS
Lesson 1: Introduction to Accounting 1
Lesson 2: Branches of Accounting 7
Lesson 3: Users of Accounting Information 12
Lesson 4: Forms of Business Organizations 20
Lesson 5: Types of Business According to Activities 28
Lesson 6: Accounting Concepts and Principles 32
Lesson 7: The Accounting Equation 41
Lesson 8: Types of Major Accounts 52
Lesson 9: Books of Accounts 65
Lesson 10: Business Transactions and Their Analysis as Applied to the
Accounting Cycle of a Service Business Pt.1
80
Lesson 11: Business Transactions and Their Analysis as Applied to the
Accounting Cycle of a Service Business Pt.2
97
Lesson 12: Accounting Cycle of a Merchandising Business 119

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Fundamentals of Accountancy, Business, and Management 1
Introduction to Accounting
Content Standards
The learners demonstrate an understanding of the definition, nature, function,
and history of accounting
Performance Standards
The learners shall be able to cite specific examples in which accounting is used
in making business decisions.
Learning Competencies
The learners shall be able to
• define accounting (ABM_FABM11-IIIa-1)
• describe the nature of accounting (ABM_FABM11-IIIa-2)
• explain the functions of accounting in business (ABM_FABM11-IIIa-3)
• narrate the history/srcin of accounting (ABM_FABM11-IIIa-4)
Specific Learning Objectives
At the end of this lesson, the learners will be able to define accounting and
describe its nature; explain the functions of accounting in business; give
examples of business transactions and decisions requiring the need for
accounting; and narrate the history of accounting
1
60 MINS
LESSON OUTLINE
Introduction Communicating learning objectives
Review types of businesses
3
Motivation Examples of Service Businesses 2
Instruction Discussion 30
Practice Problem Sets 10
Enrichment Group Discussions 5
Evaluation Quizzes 10
Materials
manila paper, colored markers
• Accounting Theory (n.d.) Retrieved from http://
accountingtheory.weebly.com/nature-and-scope-of--
accouting
• Valencia, E. and Roxas, G. (2009). Basic Accounting, 3rd
ed. Valencia Education Supply
• Valix, Conrado T. et.al. (2015). Financial Accounting, Vol.
1, First part. GIC Enterprises & Co. Inc.
• Weygandt, J. et. al. (2012) Accounting Principles 10th ed.
John Wiley & Sons (Asia) Pte. Ltd.

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INTRODUCTION (3 MINS)
Communicating learning objectives
1. Introduce the following learning objectives:
a. I will be able to define accounting.
b. I will be able to describe the nature of accounting.
c. I will be able to explain the functions of accounting in business.
d. I will be able to narrate the history/srcin of accounting.
2. Ask the learners the following questions:
a. Do your parents ask how you spend your allowance every day?
b. When deciding between buying a bottle of soft drinks or fruit juice, what is the basis of your decision?
Do you compare the prices of both and then decide?
c. When going home, do you sometimes choose to walk from school rather than riding a jeepney because
you want to save?
3. Acknowledge all the answers of the learners and make a conclusion that accounting is involved in all of
these.
4. Relate the connection of accounting to our daily activities.
MOTIVA
TION (2 MINS)
Ask the learners “Is accounting important to you?”. Leave this question unanswered. Remind the learners that you will ask this question again
after you discuss the introduction to accounting.
INSTRUCTION (30 MINS)
Define accounting
“Accounting is the process of IDENTIFYING, RECORDING, and
COMMUNICATING economic events of an organization to interested
users.” (Weygandt, J. et. al)
Explain the three highlighted words in the graphic:
IDENTIFYING– this involves selecting economic events that are
relevant to a particular business transaction
The economic events of an organization are referred to as transactions.
Examples of economic events or transactions - In a bakery business:
• sales of bread and other bakery products
2
Teacher tip
Acknowledge the answers of the
learners. As an alternative, ask
the learners to write anything
they know about accounting on
the board.

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• purchases of flour that will be used for baking
• purchases of trucks needed to deliver the products
RECORDING– this involves keeping a chronological diary of events that are measured in pesos. The diary referred to in the definition are the
journals and ledgers which will be discussed in future chapters.
COMMUNICATING
– occurs through the preparation and distribution of financial and other accounting reports.
Discuss the nature of accounting
According to Accounting Theory(http://accountingtheory.weebly.com/nature-and-
scope-of-accounting.html): “Accounting isa systematic
recording of financial transactions and the presentation of the related information to appropriate persons.” Based on this definition we can
derive the following basic features of accounting:
• Accounting is a service activity. Accounting provides assistance to decision makers by providing them financial reports that will guide them in
coming up with sound decisions.
• Accounting is a process: A process refers to the method of performing any specific job step by step according to the objectives or targets.
Accounting is identified as a process, as it performs the specific task of collecting, processing and communicating financial information. In
doing so, it follows some definite steps like the collection, recording, classification, summarization, finalization, and reporting of financial
data.
• Accounting is both an art and a discipline. Accounting is the art of recording, classifying, summarizing and finalizing financial data. The word
‘art’ refers to the way something is performed. It is behavioral knowledge involving a certain creativity and skill to help us attain some specific
objectives. Accounting is a systematic method consisting of definite techniques and its proper application requires skill and expertise. So by
nature, accounting is an art. And because it follows certain standards and professional ethics, it is also a discipline.
• Accounting deals with financial information and transactions: Accounting records financial transactions and data, classifies these and finalizes
their results given for a specified period of time, as needed by their users. At every stage, from start to finish, accounting deals with financial
information and financial information only. It does not deal with non-monetary or non-financial aspects of such information.
• Accounting is an information system: Accounting is recognized and characterized as a storehouse of information. As a service function, it
collects processes and communicates financial information of any entity. This discipline of knowledge has evolved to meet the need for
financial information as required by various interested groups.
Discuss the function of accounting in business
Ask the learners to comment on why accounting is considered as the language of business.
Accounting is the means by which business information is communicated to business owners and stakeholders. The role of accounting in
business is to provide information for managers and owners to use in operating the business. In addition, accounting information allows
business owners to assess the efficiency and effectiveness of their business operations. Prepared accounting reports can be compared with
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industry standards or to a leading competitor to determine how the business is doing. Business owners may also use historical financial
accounting statements to create trends for analyzing and forecasting future sales.
Accounting helps the users of these financial reports to see the true picture of the business in financial terms. In order for a business to survive,
it is important that a business owner or manager be well-informed.
Let us now discuss the function of accounting in business.
Mr. Juan is a retired government employee who is good at baking.One day he decides to put upa bakery shop in your barangay
. He
renovates a portion of his house to serve as the area for the production of bread. He purchases baking equipment and raw materials to
produce five different types of bread. Mr. Juan also hires Jose to help him with the baking and, at the same time, to be in-charge of
sales. Mr. Juan pays Jose on aweekly basis. Every day, Mr. Juan’s wife deposits the daily cash sales in their bank account at XY Savings
Bank. With the help of accounting, what possible decisions or questions of Mr. Juan can accounting provide an answer to?
Possible Answers:
• Is my business earning? (profitability)
• How much daily or monthly sales do I need in order to recover my fixed cost? (break-even)
• Do I need to hire additional workers to help me with my production?
• Can I affordto set up a newstore in another place? Where do I get the funds?
• Can I afford to pay a bank loan?
Discuss the history of accounting
Accounting is as old as civilization itself. It has evolved in response to various social and economic needs of men. Accounting started as a
simple recording of repetitive exchanges. The history of accounting is often seen as indistinguishable from the history of finance and business.
Following is the evolution of accounting:
• The Cradle of Civilization
Around 3600 B.C., record-keeping was already common
from Mesopotamia, China and India to
Central and South America. The oldest
evidence of this practice was the “clay tablet” of Mesopotamia which dealt with commercial transactions at the time such as listing of
accounts receivable and accounts payable.
• 14th Century - Double-Entry Bookkeeping
The most important event in accounting history is generally considered to be the dissemination of double entry bookkeeping by Luca Pacioli
(‘The Father of Accounting’) in 14th century Italy. Pacioli was much revered in his day, and was a friend and contemporary of Leonardo da
Vinci. The Italians of the 14th to 16th centuries are widely acknowledged as the fathers of modern accounting and were the first to commonly
use Arabic numerals, rather than Roman, for tracking business accounts. Luca Pacioli wrote Summa de Arithmetica, the first book published
that contained a detailed chapter on double-entry bookkeeping.
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• French Revolution (1700s)
The thorough study of accounting and development of accounting theory began during this period. Social upheavals affecting government,
finances, laws, customs and business had greatly influenced the development of accounting.
• The Industrial Revolution (1760-1830)
Mass production and the great importance of fixed assets were given attention during this period.
• 19th Century – The Beginnings of Modern Accounting in Europe and America
The modern, formal accounting profession emerged in Scotland in 1854 when Queen Victoria granted a Royal Charter to the Institute of
Accountants in Glasgow, creating the profession of the Chartered Accountant (CA).
In the late 1800s, chartered accountants from Scotland and Britain came to the U.S. to audit British investments. Some of these accountants
stayed in the U.S., setting up accounting practices and becoming the srcins of several U.S. accounting firms. The first national U.S.
accounting society was set up in 1887. The American Association of Public Accountants was the forerunner to the current American Institute
of Certified Public Accountants (AICPA).
In this period rapid changes in accounting practice and reports were made. Accounting standards to be observed by accounting
professionals were promulgated. Notable practices such as mergers, acquisitions and growth of multinational corporations were developed.
A merger is when one company takes over all the operations of another business entity resulting in the dissolution of another business.
Businesses expanded by acquiring other companies. These types of transactions have challenged accounting professionals to develop new
standards that will address accounting issues related to these business combinations.
• The Present - The Development of Modern Accounting Standards and Commerce
The accounting profession in the 20th century developed around state requirements for financial statement audits. Beyond the industry's
self-regulation, the government also sets accounting standards, through laws and agencies such as the Securities and Exchange Commission
(SEC). As economies worldwide continued to globalize, accounting regulatory bodies required accounting practitioners to observe
International Accounting Standards. This is to assure transparency and reliability, and to obtain greater confidence on accounting information
used by global investors.
Nowadays, investors seek investment opportunities all over the world. To remain competitive, businesses everywhere feel the need to
operate globally. The trend now for accounting professionals is to observe one single set of global accounting standards in order to have
greater transparency and comparability of financial data across borders.
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PRACTICE (10 MINS)
Divide the class into 2 groups. The first group will act out the definition of accounting while the second
group will act out the evolution/history of accounting.
ENRICHMENT (5 MINS)
Go back to the unanswered question during your introduction of this topic.
Ask the learners the following questions: Is accounting important to you? Does it affect your daily
activities? How?
EVALUA
TION (10 MINS)
Give a short quiz. Ask the following questions:
1. Define accounting
Answer: Accounting is the process of IDENTIFYING, RECORDING and COMMUNICATING
economic events of an organization for interested users.
2. Give examples of decisions or questions that can be supported by accounting information.
Suggested Answers:
• Is my business earning? (profitability)
• How much daily or monthly sales do I need in order to recover my fixed cost? (break-even)
• Do I need to hire additional workers to help me with my production?
• Can I afford to set up a new store in another place? Where do I get the funds? (financing
decisions)
• Can I afford to pay a bank loan?
6
Teacher tip
Offer a reward system for the best group or
to learners who show outstanding
performance.

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Branches of Accounting
Content Standards
The learners demonstrate an understanding of the varied branches and areas
of accounting, particularly:
• FinancialAccounting
• ManagementAccounting
• Government Accounting
• Auditing
• Tax Accounting
• Cost Accounting
• AccountingEducation
• AccountingResearch
• make a list of business within the community on the types of accounting
services they require.
• solve exercises in the identification of the branches of accounting described
through the types of services rendered.
• Differentiate the branches of accounting. (ABM_FABM11-IIIa-5)
• Explain the kinds/types of services rendered in each of these branches.
(ABM_FABM11-IIIa-5)
7
60 MINS
LESSON OUTLINE
Introduction Introduce the learning objectives 5
Motivation Trees and branches 5
Instruction Branches of Accounting 30
Practice Boardwork 10
Enrichment One question 10
Materials
manila paper, colored markers
Resources
Accounting Basics: Branches of Accounting (n.d.) Retrieved
from http://www.investopedia.com/university/accounting/
accounting2.asp

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INTRODUCTION ( 5 MINUTES)
Introduce the following learning objectives:
• I will be able to differentiate the different branches of accounting
• I will be able to explain the types of services rendered on the different branches.
MOTIVA
TION (5 MINUTES)
Draw a big tree with eight branches. As you discuss the topic, write the particular branch of accounting you are discussing on each branch.
Label the root of the tree as ’Accounting’.
INSTRUCTION (30 MINUTES)
Discuss the branches of accounting: According to Investopedia, (http://www.investopedia.com/university/accounting/accounting2.asp:
“Accounting is divided into several branches to better serve the needs of different users with varying information needs. These branches
sometimes overlap and they are often closely intertwined.”
Financial Accounting
Financial accounting is the broadest branch and is focused on the needs of external users. Financial accounting is primarily concerned with the
recognition, measurement and communication of economic activities. This information is communicated in a complete set of financial
statements. It is assumed under this branch that the users have one common information need. Financial accounting conforms with accounting
standards developed by standard-setting bodies. In the Philippines, there is a Council created to set these standards.
Examples of these financial reports include:
• the balance sheet (statement of financial condition)
• income statement (the profit and loss statement, or P&L)
• statement of cash flows
Financial accounting is primarily concerned with processing historical data. Although financial accounting generally meets the needs of external
users, internal users of accounting information also use these information for their decision-making needs.
Management (or Managerial) Accounting
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Management accounting emphasizes the preparation and analysis of accounting information within the organization. The objective of
managerial accounting is to provide timely and relevant information for those internal users of accounting information, such as the managers
and employees in their decision-making needs. Oftentimes, these are sensitive information and is not distributed to those outside the business
- for example, prices, plans to open up branches, customer list, etc.
Managerial accounting involves financial analysis, budgeting and forecasting, cost analysis, evaluation of business decisions, and similar areas.
Government Accounting
Government accounting is the process of recording, analyzing, classifying, summarizing, communicating and
interpreting financial information about the government in aggregate and in detail reflecting transactions and other
economic events involving the receipt, spending, transfer, usability and disposition of assets and liabilities. This
branch of accounting deals with how the funds of the government are recorded and reported.
Ask the learners the following questions:
• What are the sources of income of the government? Possible Answer: Taxes paid by Filipinos
• Where do these taxes go? Possible Answer: Roads, Hospitals, for education and others
Government accounting deals with these transactions, the recording of inflow and outflow of funds of the
government.
Auditing
There are two types of auditing: external and internal auditing. External auditing refers to the examination of financial statements by an
independent CPA (Certified Public Accountant) with the purpose of expressing an opinion as to fairness of presentation and compliance with
the generally accepted accounting principles (GAAP). The audit does not cover 100% of the accounting records but the CPA reviews a
selected sample of these records and issues an audit report.
Internal auditing deals with determining the operational efficiency of the company regarding the protection of the company’s assets, accuracy
and reliability of the accounting data, and adherence to certain management policies. It focuses on evaluating the adequacy of a company's
internal control structure by testing segregation of duties, policies and procedures, degrees of authorization, and other controls implemented
by management.
Tax Accounting
Tax accounting helps clients follow rules set by tax authorities. It includes tax planning and preparation of tax returns. It also involves
determination of income tax and other taxes, tax advisory services such as ways to minimize taxes legally, evaluation of the consequences of tax
decisions, and other tax-related matters.
9
Teacher tip
Introduce the the Bureau
of Internal Revenue and its
role in the administration
and implementation of our
tax laws.

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Cost Accounting
Sometimes considered as a subset of management accounting, cost accounting refers to the recording, presentation, and analysis of
manufacturing costs. Cost accounting is very useful in manufacturing businesses since they have the most complicated costing process.
Cost accountants also analyze actual and standard costs to help managers determine future courses of action regarding the company's
operations.
Cost accounting will also help the owner set the selling price of his products. For example, if the cost accounting records shows that the total
cost to produce one can of sardines is PHP50, then the owner can set the selling price at PHP60.
Accounting Education
This branch of accounting deals with developing future accountants by creating relevant accounting curriculum. Accounting professionals can
become faculty members of educational institutions. Accounting educators contribute to the development of the profession through their
effective teaching, publications of their research and influencing students to pursue careers in accounting. Accounting teachers share their
knowledge on accounting so that students are informed of the importance of accounting and its use in our daily lives.
Accounting Research
Accounting research focuses on the search for new knowledge on the effects of economic events on the process of summarizing, analyzing,
verifying, and reporting standardized financial information, and on the effects of reported information on economic events. Researchers
typically choose a subject area and a methodology on which to focus their efforts. The subject matter of accounting research may include
information systems, auditing and assurance, corporate governance, financials, managerial, and tax. Accounting research plays an essential
part in creating new knowledge. Academic accounting research "addresses all aspects of the accounting profession" using a scientific
method. Practicing accountants also conduct accounting research that focuses on solving problems for a client or group of clients. The
Accounting research helps standard-setting bodies around the world to develop new standards that will address recent issues or trend in global
business.
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PRACTICE (10 MINUTES)
Boardwork
Prepare eight flashcards with the branches of accounting written in every card.
Write the following on a sheet of Manila paper and ask a learner to identify what branch of accounting renders this service:
1. Preparation of general-purpose financial statements Answer: Financial
2. Evaluation of the performance of a sales department Answer : Managerial
3. Develop standards to address a new business set up Answer: Accounting Research
4. Review tax compliance of the business Answer: Tax Accounting
5. Evaluate whether a branch of the business complies with the collection and deposit policy of the company Answer: Auditing (Internal)
6. Review whether the financial statements are presented fairly and in compliance with accounting standards Answer: Auditing (External)
7. Report on the spending of government funds Answer: Government Accounting
8. Report on the total cost of materials and labor used in the production Answer: Cost Accounting
9. Conducting lectures on accounting topics Answer: Accounting Education
ENRICHMENT (10 MINUTES)
Ask the learners what branch of accounting do you want to focus on and why?
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Users of Accounting Information
Content Standards
The learners demonstrate an understanding of the external and internal users
of financial information.
• Solve exercises and problems on the identification of users of information,
types of decisions to be made, and types of information needed by the
users.
• Cite users of financial information and identify whether they are external or
internal users.
The learners shall be able to:
• define external users and gives examples ABM_FABM11-IIIa-7
• define internal users and give examples ABM_FABM11-IIIa-8
• identify the type of decisions made by each group of users ABM_FABM11-
IIIa-9
• describe the type of information needed by each group of users
ABM_FABM11-IIIa-10
12
60 MINS
LESSON OUTLINE
Introduction Introduce the learning objectives 5
Motivation Dream Business 5
Practice Role playing users 20
Enrichment Dream Business continued 5
Evaluation Quiz 5
Materials
school supplies
Resources

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INTRODUCTION (5 MINUTES)
Introduce the following learning objectives:
• I will be able to define external users of accounting information and give examples
• I will be able to define internal users of accounting information and give examples
• I will be able to identify the types of decisions made by each group of users
• I will be able to identify the types of information needed by each group of users
MOTIVA
TION (5 MINUTES)
1. Ask the learners to recall the definition of accounting and why accounting is considered as the language of business.
Accounting information helps users to make better financial decisions.
2. By emphasizing on the communicating part of the definition of accounting, ask the learners what business they would want to enter into.
Possible answers:
• buying and selling of cars
• boutique
• gasoline station
• bakery
3. From the businesses enumerated, choose one business and use this as your example.
Ask the learners: “If you are the owner, what do you want to know about the business? What possible decisions can accounting support?”
Possible answers on information needs:
• How much income have I earned for a certain period?
• How much receivables do I have?
• How much do I owe my suppliers?
• How much is the value of my inventory?
Possible answers on decision support
• Will I be able to pay my liabilities if I earn this much?
• Can I expand my business? Will I be able to afford buying new equipment?
• Do I need to adjust my selling price?
• Do I need to cut costs?
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4. “What if you are from a Local Government Unit (City/Municipality)? Do you think the Local Government ( City/Municipality) will be interested
with your accounting reports/records?” Leave this question hanging and introduce to the topic for this lecture. Emphasize to the learners
that the focus of your discussions are the users of accounting information and their information needs.
Discuss the internal users of accounting information.
“Who uses accounting data or information?”
There are two broad categories of users of financial information: internal and external users.
INTERNAL USERS
Internal users of accounting information are those individuals inside a company who plan, organize, and run the business. These users are
directly involved in managing and operating the business. These include marketing managers, production supervisors, finance directors,
company officers and owners
Engage the learners in a question-and-answer type lecture.
Ask the learners to give examples of internal users and follow up with a question: “what information will that user need that can be answered by
accounting?”
Internal users (Primary Users) of accounting information include the following:
Management
Information need: income/earnings for the period, sales, available cash, production cost
Decisions supported: analyze the organization's performance and position and take appropriate measures to improve the company
results. sufficiency of cash to pay dividends to stockholders; pricing decisions
Employees
Information need: profit for the period, salaries paid to employees
Decisions supported: job security, consider staying in the employ of the company or look for other employment opportunities
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Owners
Information need: profit or income for the period, resources or assets of the business, liabilities of the business
Decisions supported : considerations regarding additional investment, expanding the business, borrowing funds to support any
expansion plans.
Accounting information is presented to internal users usually in the form of management accounts, budgets, forecasts and financial
statements. This information will support whatever decision of the internal users.
Discuss the external users of accounting information
EXTERNAL USERS
External users are individuals and organizations outside a company who want financial information about the company. These users are not
directly involved in managing and operating the business. The two most common types of external users are potential investors and creditors.
Potential Investors use accounting information to make decisions to buy shares of a company . Creditors (such as suppliers and bankers) use
accounting information to evaluate the risks of granting credit or lending money. Also included as external users are government regulatory
agencies such as Securities and Exchange Commission (SEC), Bureau of Internal Revenue (BIR), Department of Labor and Employment (DOLE),
Social Security System (SSS), and Local Government Units (LGUs).
External users (Secondary Users) of accounting information include the following:
Creditors: for determining the credit worthiness of an organization. Terms of credit are set by creditors according to the assessment of their
customers' financial health. Creditors include suppliers as well as lenders of finance such as banks.
Tax Authorities (BIR): for determining the credibility of the tax returns filed on behalf of a company.
Investors: for analyzing the feasibility of investing in a company. Investors want to make sure they can earn a reasonable return on their
investment before they commit any financial resources to a company.
Customers: for assessing the financial position of its suppliers which is necessary for them to maintain a stable source of supply in the long term.
Regulatory Authorities (SEC, DOLE): for ensuring that a company's disclosure of accounting information is in accordance with the rules and
regulations set in order to protect the interests of the stakeholders who rely on such information in forming their decisions.
Engage the learners in a question-and-answer type lecture:
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Ask the learners to give examples of external users. Follow up with a question: “what kind of information do users need that can be answered
by accounting?”.
Possible answers on examples of External Users:
potential investors –
banks
suppliers
BIR
DOLE
Possible answers on information provided by Accounting:
Income or profit of the business
resources or assets of the business
liabilities or amount owed by the business to its suppliers
taxes paid by the business
salaries and other benefits paid to employees
Possible answers on the decisions of external users that are supported by accounting information:
Potential Investors – Is it profitable for me to invest in this business?
Banks – If extend a loan to this company, will it be able to pay this loan? Does this company have sufficient resources to pay its loan?
Suppliers – Do I extend credit to this company? For how long?
BIR – Is the owner paying the correct taxes?
DOLE – Are the employees paid according to what the law states? Do they get the benefits required?
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SUMMARY OF THE DIFFERENCES BETWEEN INTERNAL AND EXTERNAL USERS
Internal users of accounting information are those who are involved in planning, organizing and running the business. They need more detailed
information on a timely basis in order to support their decisions. Examples of these internal users are managers, employees and owners.
The external users of accounting information are those individuals or organizations outside a company who are interested in its financial
information. Examples of these external users are potential investors, suppliers and government agencies.
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Boardwork
Divide the class into two groups. Require them to act out internal and external users of accounting information. Give them five to ten minutes
to meet and prepare for their presentation. Each group should be able to present the information needs of the different users and relate these
information to their decision-making process.
Go back to the unanswered question in the first part of your introduction. Is the Local Government Unit (LGU) interested in your accounting
reports?
Possible Answer:
Yes. The LGU will check whether you are paying your local taxes. As required, businesses must have a business permit before they are allowed
to operate in the city or municipality. This is renewed every year, with appropriate taxes paid. The local government may review your
accounting records to check whether you are declaring or paying the correct taxes.
Ask this follow-up question: “Are the officers of the Local Government Unit internal or external users? Why?
Answer: External. They are not directly involved in the operation or management of the business.
EVALUA
TION (5 MINUTES)
Give at least 3 internal users of accounting information.
Give at least 3 external users of accounting information.
Differentiate internal users from external users of accounting information.
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Forms of Business Organizations
Content Standards
The learners demonstrate an understanding of the various forms of business
organizations, as follows:
• Sole /Single Proprietorship
• Partnership
• Corporation
Cooperatives
• differentiate the forms of business organizations in terms of nature of
ownership
• make a list of existing business entities in their community and identify the
form of business organization
• differentiate the forms of business organizations. (ABM_FABM11-IIIb-11)
• identify the advantages and disadvantages of each form. (ABM_FABM11-
IIIb-12)
At the end of this lesson, the learners will be able to:
• identify the forms of business organizations by nature of ownership.
• give examples of businesses in their respective communities and identify
the form
• identify the advantages and disadvantages of the four forms of business
organization
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60 MINS
LESSON OUTLINE
Introduction Sharing Dream Businesses 5
Motivation Allowance 5
Instruction Discussion and Interactive Recitation 30
Practice Group work 10
Enrichment Matrix 5
Evaluation Quiz 5
Materials
sample stock certificate, sample articles of incorporation,
Manila paper, permanent marker
Resources
• Partnerships (Title IX). Civil Code of the Philippines.
Articles 1767 to 1867
• Corporation Code of the Philippines. (n.d) Retrieved from
http://www.sec.gov.ph/laws/pdf/Corporation Code of the
Philippines.pdf
• Republic Act 9520 (2008). Philippine Cooperative Code of
2008. Retrieved from http//www.cda.gov.ph/resources/
issuances/philippine-cooperative-code-of-2008/republic-
act-9520

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INTRODUCTION ( 5 MINS)
1. Ask the learners whether they want to be in business. Then ask what business they want to put up and why.
2. Introduce the following learning objectives:
• I will be able to identify the forms of business organizations by nature of ownership.
• will be able to give examples of businesses in my community and identify their form.
• I will be able to identify the advantages and disadvantages of the four forms of business organizations.
MOTIVA
TION (5 MINUTES)
1. Ask them the following questions:
How much is your daily allowance?
• How much is your daily allowance?
• Do you know that with your daily allowance you can own a company?
2. Link the answers of the learners.
Tell them their daily allowance can be used to buy shares of stock of a corporation and that they
will become the owner of such a company”.
3. Inform them of the subject matter of your lecture.
1. Discuss sole/single proprietorship.
“Suppose you want to open your own sari-sari store that will need PHP10,000 to start and you used your PHP10,000 savings to start the said
business. You are the sole owner of the said sari-sari store. This type of business is called sole/single proprietorship.”
a. Ask what is their idea of a sole/single proprietorship.
Possibleresponses:
• A form of business is owned by one person; the simplest, and the most common form of business organization
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Teacher tip
• Acknowledge the answers of the learners
and use the amounts as your basis in asking
the second question.
• Inform the learners that size of capital is not
the only basis of owning a corporation.

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• It is notseparate from the owner. The business and the owner are inseparable
b. Discuss the advantages of sole/single proprietorship.
Possibleresponses:
• The owner keeps all the profits.
• The owner makes all the decisions.
• It is easy to form and operate.
c. Discuss the disadvantages of sole/single proprietorship.
• The life of the business is limited to the life of the owner. Once the owner dies,
the business will cease to operate under the name of the proprietor.
• The amount of capital is limited only by
the wealth of the proprietor.
2. Introduce the concept of partnership by asking the following suggested questions:
“What if the needed amount to start your dream sari-sari store is PHP50,000 and you only have
PHP25,000 cash savings. You ask Juan, your friend if he is willing to invest his PHP25,000 and
become part owner of the sari-sari store. Assuming he agrees, what form of business organization
was created?”
a. Discuss partnerships
• A form of business owned by two or more persons. The details of the
arrangement between the partners are outlined in a written document called
articles of partnership.
• Profits are divided among partners based on their agreed sharing.
• The owner is called a partner.
b. Discuss the advantages of a partnership
• Higher capital because two or more persons will contribute to the common fund.
• It is easy to operate like a sole/single proprietorship
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Teacher tip
Inform the class how the Department of Trade
and Industry is the government agency that
regulates the trade names of sole/single
proprietorship businesses.
Misconception:
Some learners may ask that in their community,
once a person dies the business is continued
by his relatives. Emphasize that upon death of
the old owner, the business legally ceases. The
one taking over is considered as the new
owner.
Ask learners to use actual names of their
friends. Other types of businesses other than a
sari-sari store may be used by asking the
learners.
Read the Civil Code of the Philippines Articles
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c. Discuss the disadvantages of a partnership
• The profits are divided among the partners.
• A partner can be held liable for the acts of the other partners.
• In a lawsuit, the personal properties of the partners can be held beyond their
contributions and may be used to answer for any liability of the partnership.
3. Introduce the concept of a corporation by asking the following suggested questions:
“Assuming your dream is to open a grocery store and not just a sari-sari store but you will need
PHP1,000,000 to start the said business. You have only PHP25,000, your friend Juan has
PHP25,000, and your mother is willing to invest her PHP50,000, but still these are not enough to
start your dream grocery store. Where will youget the moneyto raise thePHP1 million? You may
consider setting up a corporation?”
a. Discuss corporations
• A corporation is a business organized as a separate legal entity (artificial person) under the corporation law with ownership
divided into transferable shares of stocks
• Emphasize that it is the law (Corporation Code of the Philippines) that creates a corporation.
• The corporation begins its existence from the date the Articles of Incorporation is approved by the Securities and Exchange
Commission (SEC).
• The SEC (Securities and Exchange Commission) is the government agency primarily tasked to regulate private corporations in
the Philippines.
• The owners are called stockholders or shareholders.
• The word ‘Corporation/Incorporation/Corp./Inc.’ appears in the name of the entity.
• The voting rights of a shareholder is generally based on the percentage of ownership.
• The management of the business is delegated by the shareholders to the Board of Directors
• The ownership is divided into shares and the value of one share may be denominated at a smaller amount, for example at
PHP10 per share.
• The proof of ownership is evidenced by a stock certificate.
At this point, the teacher will share a sample of a stock certificate and articles of incorporation.
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Teacher tip
Visit the Securities and Exchange Commission
(SEC) website or download the Corporation
Code of the Philippines to supplement your
readings.
Cite names of corporations in their locality or
ask the learners if they have any idea what a
corporation is before discussing the topic.
Download sample Articles of Incorporation to
be shown during the discussion.

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b. Discuss the advantages of a corporation
• Can easily raise additional funds by selling shares of stocks to the public.
• Shareholders are not personally liable for the debts of the corporation. The extent of their liability is limited to their equity
(ownership) in the corporation.
c. Discuss the disadvantages of a corporation
• It is relatively complicated to set up.
• Subject to several legal restrictions as listed in the Corporation Code of the Philippines
4. Discuss the nature of cooperatives by asking the following suggested questions:
“Assuming all the mothers in your barangay decided to open a sari-sari store where all the members can buy in cash or in credit. Some
mothers were also taught how to sew dresses and bags as part of the project of the group. These bags are then sold to a certain company.
Aside from that, the organization provides seminars to the members on various topics involving mothers and their roles. At the end of the year,
the profits are distributed among the members based on their capital contribution. The amount of their purchases in the sari-sari store during
the year is also computed and they receive something out of the profit/surplus based on their purchases. This form of business organization is
called a cooperative.
a. Discuss cooperatives
• A cooperative is a duly registered association of persons with a common bond of interest, voluntarily joining together to
achieve their social, economic and cultural needs.
• The owners are called members who contribute equitably to the capital of the cooperative.
• The members are expected to patronize their products and services.
• The word ‘cooperative’ appears in the name of the entity.
• This form of business organization is regulated by the Cooperative Development Authority (CDA).
The teacher may introduce the role of CDA as a government agency regulating the cooperatives.
b. Discuss the advantages of a cooperative
• Enjoys certain tax exemption privilege
• Promotes the concept of sharing resources
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c. Discuss the disadvantages of a Cooperative
• Limited distribution of surplus
• Requires continuous education programs for members.
• The members have active and direct participation in the business of the cooperative.
5. Summarize all the forms of business organizations by asking a learner to write on the board all the forms.
Possible Answers:
1. Sole / Single Proprietorship
2. Partnership
3. Corporation
4. Cooperatives
Ask the learner to give a brief description of each form and the advantage of creating such forms.
End your discussion by referring to the questions posed in the introduction/motivation .
“Your PHP10 daily allowance may be used to buy shares of stocks, thus making you an owner of a Corporation.”
Divide the class into four groups.
1. Assign each group a form of business organization.
2. Assign a group leader/reporter for every group.
3. Ask each group to list down at least three businesses in their locality or in the country
• For every business, the learner will identify the business activities, products or services offered by each business.
• The group may be asked to identify the owners of every businesses listed.
4. Ask the group leader or reporter to present the output of each group.
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1. Post the blank matrix on the board. (see teaching materials below)
2. Ask a learner to fill-out the blank matrix on the board. Assign one learner per cell.
EVALUA
TION (5 MINUTES)
1. Enumerate all the forms of business organizations by nature of ownership.
2. Differentiate a corporation from a partnership according to number of owners and their liabilities.
3. Differentiate a corporation from cooperative.
4. Give two example of corporations in the Philippines.
5. Give two examples of cooperatives in the Philippines.
ITEM Sole
Proprietorship Partnership Corporations Cooperatives
1. Number of Possible
Owners
2. Management (who
manages the business)
3. Terminationof the
Business
4. Government agency
assigned primarily to regulate
5. Transferof
Ownership
6. Liability of Owners
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ITEM Sole
Proprietorship Partnership Corporations Cooperatives
1. Number of Possible
Owners
1 2
or
more At
least
5 15
or
more
2. Management (who
manages the business)
Owner (but he may hire
somebody)
Partners (or they may hire
managers)
Board of Directors and
operating management
Board of Directors and
operating management
3. Terminationof the
Business
Death of the owner Death of any partner or
withdrawal of a partner
As stated in the Articles of
Incorporation, not to exceed
50 years.
As stated in the Articles of
Cooperation, not to exceed
50 years.
4. Government agency
assigned primarily to regulate
Inlimitedcapacity,DTI Inlimitedcapacity,DTI SEC CDA
5. Transferof
Ownership
Sell the business (it’s a new
entity under a new owner)
Sell the business or interest
of a partner (consent of other
partners is necessary)
Sellstocks Cannottransfernorsellhis
membership
6. Liability of Owners Unlimited ; other properties
not used in the business may
be held liable for the
obligations of the business
Generally unlimited; the
other properties of the
partners may be held liable
for the obligations of the
partnership.
There are types of
partnerships that limit the
liability of the partners
Limited to the stock
investment of the
shareholder
Limited to the capital
contribution of the member
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Types of Business According to Activities
Content Standards
The learners demonstrate an understanding of the types of business according
to activities, particularly:
• service business
• merchandisingbusiness
• manufacturing business
The learners shall be able to differentiate the types of business according to
activities and make a list of businesses in their community according to their
activities.
The learners should compare and contrast the types of business according to
activities (ABM_FABM11-IIIb-13)
identify the advantages and business requirements of each type
(ABM_FABM11-IIIb-14)
At the end of this lesson, the learners will be able to:
• review the types of business according to activities
• describe a service entity and give examples
• describe a merchandising entity and give examples
• describe a manufacturing entity and give examples
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60 MINS
LESSON OUTLINE
Introduction Review previous discussion 5
Motivation Local Examples and Application 10
Instruction Discussion of the subject matter 20
Practice Easy-medium-hard questions 10
Enrichment More local examples 5
Evaluation Quiz 5
Materials
writing materials, school pads, projector and slides
Resources
Wild, J. (2009). Principles of Accounting 19th ed. McGraw Hill
Publishing
Haddock, M., Price, J., & Farina, M. (2012). College
Accounting: A Contemporary Approach 2nd Ed., New York:
McGraw-Hill/Irwin

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INTRODUCTION ( 5 MINS)
Connect and/or review prerequisite knowledge:
• Review the types of business organizations
• Sole / Single proprietorship – owned by one person
• Partnership – owned by partners (two or more persons)
• Corporation – owned by shareholders
• Emphasize that the types of business organizations differ on the presentation of the equity side but the accounting for assets and liabilities
are essentially the same
• Tell the learners that this topic, types of business operations, differs in terms of the presentation of the statement of comprehensive income
(income statement) and the content statement of financial position (balance sheet)
MOTIVATION (10 MINS)
1. Give Local Example and Application
• Ask the learners how the following earn profits:
• Bruno’s Barber Shop
• Clean Ko Place Mo Cleaning Services
• Tutorial Services
• Manila Hotel
• Cynthia’s Food Vendor
• Susan’s Roses Flower Shop
• Wash Your Problem Laundry Shop
• Bread Pit Bakery
• Cut and Face Parlor
• Fish Be With You Fish Shop
2. After checking their answers, emphasize that because of the nature of their operations, the presentation of their statement of
comprehensive income and the content of the statement of financial position may differ from each other ossible Answers
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• by providing services
• by selling goods
Lecture
3 types of business organizations:
• Service Business
This type of business offers professional skills, advice and consultations.
Examples: barber shops and beauty parlors, repair shops, banks, accounting and law firms
• Merchandising Business
This type of business buys at wholesale and later sells the products at retail. They make a profit by selling the merchandise or products at
prices that are higher than their purchase costs. This type of business is also known as "buy and sell".
Examples are: book stores, sari-sari stores, hardware stores
• Manufacturing Business
This type of business buys raw materials and uses them in making a new product, therefore combining raw materials, labour and expenses into
a product for sale later on.
Examples are: shoe manufacturing businesses, car manufacturing plants
Additionalinformation:
There are businesses that may be classified under more than one type of business. A bakery, for example, combines raw materials in making
loaves of bread (manufacturing), sells hot pan de sal (merchandising), and caters customers’ orders in small coffee table servings of ensaymada
and hot coffee (service).
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PRACTICE (10 MINS)
Group work
Ask them to identify if it is a service, merchandising, manufacturing business or hybrid:
1. Provides services to customers
2. Sells goods to customers
3. Raw materials are available
4. Goods to be sold are purchased from a supplier
5. Goods to be sold are produced by the company itself
6. Supplies are used, no goods to be sold
7. Bakery
8. Barber shop
9. Cellphone store
10. Abensonappliances
Key Answers (1) service (2) either merchandising or manufacturing (3) manufacturing (4) merchandising (5) manufacturing (6) service (7)
manufacturing (8) service (9) merchandising (10) merchandising
Provide local examples. You can use the activity below.
1. Ask the learners to think of five companies/stores who do service, merchandising and manufacturing
2. Call on a learner and ask why those businesses were categorized as service, merchandising or manufacturing
EVALUA
TION (5 MINUTES)
Homework activity:
Ask the learners to look for a business that is either a service, merchandising or manufacturing business. Ask them to interview the owner by
asking the following questions. Pick someone from the class to discuss his findings.
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Accounting Concepts and Principles
Content Standards
The learners demonstrate an understanding of accounting Concepts and
Principles
The learners shall be able to identify generally accepted accounting principles
The learners shall be able to explain the varied accounting concepts and
principles (ABM_FABM11-IIIb c-15)
; solve exercises on accounting principles
as applied in various cases (ABM_FABM11-IIIb-c-16)
At the end of this lesson, the learners will be able to enumerate the principles
of accounting; differentiate each principle; and, apply the accounting principle
in a business setting
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120 MINS
LESSON OUTLINE
Introduction Communicate learning objectives 10
Motivation Real life situation 15
Practice Exercises 40
Evaluation Homework 5
Materials
school supplies
Resources
Wild, J. (2009). Principles of Accounting 19th Ed. McGraw Hill
Publishing.
Haddocl, M., Proce, J., & Farina, M. (2012). College
Accounting: A Contemporary Approach, 2nd ed. New York:
McGraw-Hill/Irvin
Valencia, E.G. & Roxas, G.F. (2010). Basic Accounting 3rd ed.
Mandaluyong City, Philippines: Valencia Educational Supply.

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Introduce the lesson by starting with a review of the last topic. You can use the suggested concept map and
statement below.
MOTIVATION (15 MINS)
Connect to a real life situation
1. Remind the learners that the topic revolves on possible violations of the principles and that
they need to be aware of it.
2. Hand out a copy of an article made specifically for this lesson
3. Let them read and answer the text quietly for 10 minutes.
33
Teacher tip
You may use your own way to
introduce the topic.
Suggested Introductory Statement :
Last time, we were able to learn that
Accounting is considered the
language of business. In order for
business entities to determine their
financial performance, accounting is
needed. There are different forms of
business entities according to its
organization and operations. A
business can be organized as a sole
proprietorship, a partnership or
corporation. A business can be
operated as a service, merchandising
and manufacturing entity. Sometimes
we want to determine our
performance compared to similar
companies, however, since there are a
lot of ways and assumptions to
present financial reports, we need to
have a generally accepted rule for
accounting.
The purpose of our lesson for this
session is for you to be able to
identify the different concepts and
principles of accounting and identify if
a specific situation follows or violates
an accounting principle.

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Petness First Petshop
Juan dela Cruz opened his pet shop business called Petness First Petshop. He opened a bank account for his business and deposited
PHP500,000. The business earned PHP50,000 but he had doubts with the recorded expense of PHP60,000. He is not sure if he should include
the following items as expenses:
Salary expense 20,000
Rent expense 10,000
Utilities expense (at home) 15,000
Utilities expense (at the store) 10,000
Insurance expense 5,000
Withdrawals 10,000
TOTAL 60,000
4. Ask the students what they think should not be included as expenses. Then explain why.
Possible Responses :
Salary expense – it should be included since it is related to the operations of the business
Rent expense – it should be included since the rent is for the business
Utilities expense (home) – should not be included; it is a personal expense
Utilities expense (store) – should be included; it is an expense of the business
Insurance expense – should be included since the insurance is for the business
Withdrawals – should not be included since the withdrawal is for personal use
Follow up statement :
The activity is an application of the Business Entity Principle which is one of the most important principles in accounting. Other principles of
accounting will be discussed in the next section.
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Give a lecture.
The following principles should be discussed. After each principle, give a practical example. Suggested examples are given below.
• Business entity principle – a business enterprise is separate and distinct from its owner or investor.
Examples :
o If the owner has a barber shop, the cash of the barber shop should be reported separately from personal cash.
o The owner had a business meeting with a prospective client. The expenses that come with that meeting should be part of the company’s
expenses. If the owner paid for gas for his personal use, it should not be included as part of the company’s expenses.
• Going concern principle – business is expected to continue indefinitely.
Example: When preparing financial statements, you should assume that the entity will continue indefinitely.
• Time period principle – financial statements are to be divided into specific time intervals.
Example :
o Philippine companies are required to report financial statements annually.
o The salary expenses from January to December 2015 should only be reported in 2015.
• Monetary unit principle – amounts are stated into a single monetary unit
Example :
o Jollibee should report financial statements in pesos even if they have a store in the United States.
o IHOP should report financial statements in dollars even if they have a branch here in the Philippines
• Objectivity principle – financial statements must be presented with supporting evidence.
Example :
o When the customer paid Jollibee for their order, Jollibee should have a copy of the receipt to represent as evidence.
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o When a company incurred a transportation expense, a voucher should be prepared as evidence.
• Cost principle – accounts should be recorded initially at cost.
Example :
o When Jollibee buys a cash register, it should record the cash register at its price when they bought it.
o When a company purchases a laptop, it should be recorded at the price it was purchased.
• Accrual Accounting Principle – revenue should be recognized when earned regardless of collection and expenses should be recognized when
incurred regardless of payment. On the other hand, the cash basis principle in which revenue is recorded when collected and expenses should
be recorded when paid. Cash basis is not the generally accepted principle today.
Example:
When a barber finishes performing his services he should record it as revenue. When the barber shop receives an electricity bill, it should
record it as an expense even if it is unpaid.
• Matching principle – cost should be matched with the revenue generated.
Example:
When you provide tutorial services to a customer and there is a transportation cost incurred related to the tutorial services, it should be
recorded as an expense for that period.
• Disclosure principle – all relevant and material information should be reported.
Example:
The company should report all relevant information.
• Conservatism principle – also known as prudence. In case of doubt, assets and income should not be overstated while liabilities and expenses
should not be understated.
Example: In case of doubt, expenses should be recorded at a higher amount. Revenue should be recorded at a lower amount.
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• Materiality principle – in case of assets that are immaterial to make a difference in the financial statements, the company should instead record
it as an expense.
Example:
A school purchased an eraser with an estimated useful life of three years. Since an eraser is immaterial relative to assets, it should be recorded
as an expense.
PRACTICE (40 MINS)
A. Concept check. Use the following multiple choice questions for practice. Ask the students to answer the following multiple choice questions:
1. The accounting guideline that requires financial statement information to be supported by independent, unbiased evidence other than
someone's belief or opinion is the:
a. Business entity principle
b. Monetary unit principle
c. Going-concern principle
d. Cost principle
e. Objectivity principle
2. The principle that requires every business to be accounted for separately and distinctly from its owner or owners is known as the:
a. Objectivity principle
b. Business entity principle
c. Going-concern principle
d. Revenue recognition principle
e. Cost principle
3. The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold,
unless evidence shows that it will not continue, is the:
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a. Going-concern principle
b. Business entity principle
c. Objectivity principle
d. Cost Principle
e. Monetary unit principle
4. To include the personal assets and transactions of a business's owner in the records and reports of the business would be in conflict with the:
a. Objectivity principle
b. Realization principle
c. Business entity principle
d. Going-concern principle
e. Revenue recognition principle
5. The objectivity principle:
a. means that information is supported by independent, unbiased evidence
b. means that information can be based on what the preparer thinks is true
c. means that financial statements should contain information that is optimistic
d. means that a business may not re-organize revenue until cash is received
6. Marian Mosely is the owner of Mosely Accounting Services. Which accounting principle requires Marian to keep her personal financial
information separate from the financial information of Mosely Accounting Services?
a. Monetary unit principle
b. Going-concern principle
c. Cost principle
d. Business entity principle
7. Which of the following accounting principles would require that all goods and services purchased be recorded at cost?
a. Going-concern principle
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b. Continuing-concern principle
c. Cost principle
d. Business entity principle
Answers : E, B, A, B, A, D, C
B. Matching. Match the following words with their definition:
a. Going concern principle e. Time period principle h. Monetary unit principle
b. Objectivity principle f. Cost principle i. Accrual accounting principle
c. Matching principle g. Disclosure principle j. Conservatism principle
d. Materiality principle
___________________ 1. All relevant information should be included in the financial reports
___________________ 2. In case of doubt, assets and income should not be overstated.
___________________ 3. Assume that the company will continue indefinitely.
___________________ 4. All transactions should be supported by unbiased evidence.
___________________ 5. Expenses should be recorded in the period when the revenue is generated.
___________________ 6. Minimal costs incurred should be recorded as an expense.
___________________ 7. A Philippine company should report financial statements in pesos.
___________________ 8. A barber who performs services for a client should record revenue.
___________________ 9. Statement of Financial position should be recorded as of December 31, 2015.
___________________ 10. A company that purchases furniture should record it at its acquisition price.
Answers:
1. G 2. J 3. A 4. B 5. C 6. D 7. H 8. I 9. E 10. F
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ENRICHMENT (10 MINS)
Provide local examples. You can use the activity below.
Accounting principles. Indicate which principles are violated
1. The owner-manager bought a computer for personal use. The invoice was given to the accountant who recorded it as an asset of the
business.
2. The statement of financial position of a company included an equipment purchased from Japan for 350,000 yen. It was reported at that
amount in the statement of financial position while all the other assets were reported in Philippine pesos.
3. No financial statements were prepared by Michael Go for his business. He explained that he will prepare the statements when he closes the
business, which he predicts to take place after 20 years.
4. Aside from owning a shoe store, Albert operates a canteen. The assets of the canteen are reported in the statement of financial position of
the shoe store.
5. Purchased a hammer at a cost of PHP500. This was recorded as an asset and expense to decrease its value by PHP50 per year for 10 years.
6. A food company ordered a machine needed in the assembly line of its production department. Upon order, the machine was immediately
listed as one of its assets.
Answers : (1) Business entity (2) Monetary unit (3) Time period (4) Business entity (5) Materiality (6) Objectivity
EVALUA
TION (5 MINS)
Homework activity:
1. Ask the learners to think of two real life examples for each principle discussed.
2. Ask the learners to interview a business owner and ask them about their accounting practices. The students should identify if there has been
any violation of the accounting principles.
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The Accounting Equation
Content Standards
The learners demonstrate an understanding of the accounting equation.
The learners shall be able to solve problems by applying the accounting
equation.
The learners shall be able to illustrate the accounting equation
(ABM_FABM11-IIIb-c-17)
; perform operations involving simple cases with the
use of the accounting equation (ABM_FABM11-IIIb-c-18)
At the end of this lesson, the learners will be able to equate assets with
liabilities and equity solve problems using the accounting equation
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60 MINS
LESSON OUTLINE
Introduction Communicate learning objectives 10
Motivation Real life situation 20
Practice Exercises 20
Evaluation Homework 5
Materials
school supplies
Resources
Wild, J. (2009). Principles of Accounting 19th ed. McGraw Hill
Publishing
Haddock, M., Price, J., & Farina, M. (2012). College
Accounting: A Contemporary Approach, 2nd ed. New York:
McGraw-Hill/Irvin
Valencia, E.G.& Roxas, G.F. (2010). Basic Accounting 3rd ed.,
Mandaluyong City, Philippines: Valencia Educational Supply.

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Communicate learning objectives
• Tell the learners the learning objectives of this chapter
• Understand the elements of the accounting equation
• Use the accounting equation to solve problems
• Give them an overview regarding the accounting equation
• That the accounting equation is Assets = Liabilities + Equity
• That for every transaction, the accounting equation should always be balanced.
• That Assets are resources owned by the business. Ask them to enumerate or give an example of Assets
• That Liabilities are obligations by the business. Ask them to enumerate or give an example of Liabilities
• Explain that Equity is the residual interest of the owner of the business. Meaning, any assets left after paying liabilities is the right of the
owner of the business.
• Explain that there are four elements that affect equity: (1) Investment; (2) Withdrawal; (3) Revenue, and; (4) Expenses.
MOTIVA
TION (20 MINS)
Connect to a real life situation.
1. Place the accounting equation at the board.
2. Ask the learners for tenexamples of business transactions
3. Prove that for every transaction the accounting equation should always balance.
Give a lecture. Illustrate how each transaction affects the accounting equation.
Illustration of the effects of the transaction in the accounting elements
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Assets invested by the owner
July 1 - Paolo Reyes started a delivery service on July 1, 2013. The following transactions occurred during the month of July. He invested
PHP800,000 cash and Cars amounting to PHP200,000
Borrowings from the bank
July 2 – Reyes borrowed PHP100,000 cash from PNB for use in his business.
Asset purchased for cash
July 7 – Bought tables and chairs from Orocan and paid PHP45,000 cash
Assets purchased on account
July 15 – Various equipment were purchased on account from Fortune for PHP55,000
Cash withdrawal by the owner
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July 18 – Reyes made a cash withdrawal of PHP5,000 for personal use
Payment of liability
July 20 – The account due to Fortune was paid in cash
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The following table summarizes the effects of these transactions on the accounting equation
Determining proﬁt through operation
• Accrual basis of accounting vs Cash basis of accounting – accrual basis recognizes revenue when earned and recognizes expenses when
incurred
• Under the expense recognition principle, expenses can be recognized either as: (1) matching; (2) systematic allocation, or; (3) direct
association.
• Profit measures the performance of the company. If the revenue exceeds expenses, then it is a net profit; otherwise, it is a net loss.
Received cash for revenue earned
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July 21 – A customer hired the services of Reyes. Cash of PHP15,000 was received from the customers.
Paid cash for expenses incurred
July 22 – Cash was paid for the following : gas and oil, PHP500 and car repairs, PHP1,000.
Revenue rendered on account
July 24 – Another customer hired the services of Reyes and promised to pay PHP16,000 on July 31.
Paid for expenses incurred
July 25 – Paid PHP500 for telephone bill.
Revenue earned with a downpayment, balance on account
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July 27 – Another customer hired the services of Reyes. A bill was issued to them for PHP20,000, 50% of which was collected
Customer’s account collected in cash
July 30 – The customer on July 24 paid 50% of his account in cash.
Paid cash for expenses incurred
July 31 – Paid PHP10,000 for rental of office space, and salaries of PHP9,000
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Concept check. Use the following question set for practice.
For each transaction, tell whether the assets, liabilities and equity will increase (I), decrease (D) or is not affected (NE).
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Possible Answers:
ENRICHMENT (5 minutes)
Provide local examples. Use the activity below. Instead of giving the transaction, the activity below is in reverse. Let them describe the given
transaction.
Describe each transaction.
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Answer Key:
1. The owner invested cash of PHP150,000 or the business earned PHP150,000 cash from providing services.
2. Purchased equipment at PHP20,000 for cash.
3. The owner withdrew cash of PHP112,500 or the business incurred PHP112,500 expenses and paid in cash.
4. The company purchased supplies on account.
5. The owner withdrew cash of PHP15,000 or the business incurred PHP15,000 expenses and paid in cash.
6. Paid liabilities worth PHP53,000.
7. The owner withdrew supplies worth PHP8,000 or the business used supplies worth PHP8,000.
EVALUA
TION (15 MINS)
Give the following questions as their assignment
Jerome Garcia started a new business and completed these transactions during August:
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