* Assets = Php 500,000 * Owner's Equity = Php 340,000 * Using the accounting equation: A = L + OE * So: Php 500,000 = L + Php 340,000 * Php 500,000 - Php 340,000 = L * Php 160,000 = L Therefore, the amount of liabilities is Php 160,000 2. Ramos Enterprise has liabilities of Php 200,000 and total assets of Php 600,000

1. Prepared by
Rubyrosa Nazal
QUARTER 3

2. Opening Prayer

4. What was the
last topic we
discussed?

5. Give one example of
Accounting Concepts and
Principles.

6. After the students gave all the
Accounting Concepts and
Principle, one or more student
must enumerate them all.

7. Accounting
Equation
Lesson 1

8. Lesson Objectives
Illustrate the accounting equation
At the end of this module, you are expected to:
Perform operations involving simple cases with
the use of accounting equation.

9. 4Pics1Word

10. A T

11. I A
LOAN
L Y

12. Q U T

13. Q U T I N

14. Accounting
Equation
Lesson 1

15. Accounting Equation
LESSON
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.
The accounting equation is composed of asset, liabilities, and
owner's equity. The asset is the sum of liabilities and owner's equity, while
liability is the difference after the owner’s equity is deducted to asset. Equity
is the money that is bought by owners of the company for running the
business. There is also an extended accounting equation where revenue and
expenses are added.

16. Accounting equation is the foundation of other
accounting formulas. This helps one avoid confusions
on computing assets, liabilities, or owner's equity.
Take note!
Remember that accounting equation
must be balanced for each transaction.
It means that the asset should be equal
to the total of liabilities and owner's
equity. The formula at the left shows
that the asset is the sum of liabilities
and owner's equity.
A = L + OE

17. The accounting equation consists of three (3) major accounts:
1. Assets are the items that a company owns that can provide future
economic benefit. Assets are valuable resources controlled by the company.
Examples of assets are cash, supplies, accounts receivable, and more.
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.

18. Four elements that affect equity:
 Withdrawal
 occurs when funds are removed from an account for personal use.
 Investment
 is an asset or item acquired with the goal of generating income or
appreciation.
 Expenses
 is the cost of operations that a company incurs to generate revenue.
 Revenue
 is the total amount of income generated by the sale of goods or services
related to the company’s primary operations.

19. To maintain this equation, transactions affecting financial position
accounts may have the following effects:
 Increase in Assets = Increase in Owner’s Equity
Example: Calma started his new business by depositing Php
350,000.00 in a bank account in the name of Calma Graphics
Design at Masa Bank.
 Increase in Assets = Increase in Liabilities
Example: Calma acquired computer equipment by issuing a Php
40,000.00 note payable to Microsoft Office Systems. The note is
due in six months.

20.  Increase in one Asset = Decrease in another Asset
Example: Calma paid Php 10,000.00 to El Grande Suites for rent on the
office studio for the months of June, July, and August.
 Decrease in Assets = Decrease in Liabilities
Example: Calma partially paid Php 15,000.00 for the purchase of computer
supplies on account.
 Decrease in Assets = Decrease in Owner’s Equity
Example: Calma paid Php 5,000.00 to Bills Express for the semi-monthly
utilities.
 Increase in Liabilities = Decrease in Owner’s Equity
Example: Yola Company billed Calma for Php 25,000.00 for the ads. Calma
will pay next month.

21. Here are the examples where you will see the effects of every
transaction to the major accounts.
 Assets invested by the owner
 July 1 – Sandy Dela Cruz started a catering service on July 1,
2020. She invested Php 800,000.00 cash and car amounting
to Php 200,000.00 which both happened in the month of July.
Assets Liabilities Owner's Equity
Cash
Php 800,000.00
+
Dela Cruz, Capital Php
1,000,000.00
+
Car
Php 200,000.00
+

22. Here are the examples where you will see the effects of every
transaction to the major accounts.
 Borrowings from the bank
 July 2 – Sandy Dela Cruz borrowed Php 100,000.00 cash from
Matagumpay Bank for her business.
Assets Liabilities Owner's Equity
Cash
Php 100,000.00
+
Loans Payable
Php 100,000.00
+

23. Here are the examples where you will see the effects of every
transaction to the major accounts.
 The asset purchased for cash
 July 7 – Sandy bought tables and chairs from Matibay
Furnitures and paid Php 45,000.00 cash.
Assets Liabilities Owner's Equity
Cash
Php 45,000.00
(-)
Furniture
Php 45,000.00
+

24. Here are the examples where you will see the effects of every
transaction to the major accounts.
 Assets purchased on account
 July 15 – Various equipment were purchased on account from
Masigasig Trucking Services for Php 55,000.00.
Assets Liabilities Owner's Equity
Equipment Php
55,000.00
+
Accounts
Payable
Php
55,000.00
+

25. Here are the examples where you will see the effects of every
transaction to the major accounts.
 Cash withdrawal by the owner
 July 18 – Sandy Dela Cruz made a withdrawal of Php 5,000 for
her personal use.
Assets Liabilities Owner's Equity
Cash
Php 5,000.00
(-)
Dela Cruz,
Drawings
Php (5,000.00)
(-)

26. Here are the examples where you will see the effects of every
transaction to the major accounts.
 Payment of liability
 July 20 – The account due to Masigasig Trucking Services was
paid in cash
Assets Liabilities Owner's Equity
Cash
Php 55,000.00
(-)
Accounts
Payable
Php
55,000.00
(-)

27. The table summarizes the effects of these transactions on the accounting
equation:
Date Assets
July Cash Car Furniture Equipment
1 Php 800,000.00 Php 200,000.00
2 Php 100,000.00
7 Php (45,000.00) Php 45,000.00
15 Php 55,000.00
18 Php (5,000.00)
20 Php (55,000)
Balances Php 795,000.00 Php 200,000.00 Php 45,000.00 Php 55,000.00
Total
Balance
Php 1,095,000.00

28. Date Liabilities Owner’s Equity
July Payable Loans Accounts 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

29. Here are the examples where you will see the effects of every
transaction to the major accounts.
 Received cash for revenue earned
 July 21 – Sandy Dela Cruz’s catering service was hired and Php
15,000.00 cash was received from the customers.
Assets Liabilities Owner's Equity
Cash
Php 15,000.00
+
Service Revenue
Php 15,000.00
+

30. Here are the examples where you will see the effects of every
transaction to the major accounts.
 Paid cash for expenses incurred
 July 22 – Gas and oil worth Php 500.00, and car repairs worth
Php 1,000.00 were paid in a cash transaction.
Assets Liabilities Owner's Equity
Cash
Php (1,500.00)
(-)
Gas & Oil
Php (500.00)
Repair Exp.
Php (1,000.00)
(-)

31. Here are the examples where you will see the effects of every
transaction to the major accounts.
 Revenue rendered on account
 July 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 July 31 and August 15.
Assets Liabilities Owner's Equity
Accounts
Receivable
Php 16,000.00
+
Service Revenue Php
16,000.00
+

32. Here are the examples where you will see the effects of every
transaction to the major accounts.
 Paid for expenses incurred
 July 25 – Dela Cruz paid Php 500.00 for the telephone bill.
Assets Liabilities
Owner's
Equity
Cash
Php
(500.00)
(-)
Telephone expense
Php
(500.00)
(-)

33. Here are the examples where you will see the effects of every
transaction to the major accounts.
 Revenue earned with a down payment, balance on the
account
 July 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.
Assets Liabilities Owner's Equity
Cash
Php 10,000.00
+
Service Revenue Php 20,000.00
+
Accounts
Receivable
Php 10,000.00
+

34. Here are the examples where you will see the effects of every
transaction to the major accounts.
 Customer’s account collected in cash
 July 30 – The customer on July 24 paid 50% of his account in
cash.
Assets Liabilities Owner's Equity
Cash
Php 8,000.00
+
Accounts
Receivable Php
(8,000.00)
(-)

35. Here are the examples where you will see the effects of every
transaction to the major accounts.
 Paid cash for expenses incurred
 July 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
(19,000.00)
(-)
Salaries Expense Php
(9,000.00)
(-)
Rent Expense Php (10,000.00)
(-)

36. The table summarizes the effects of these transactions on the accounting
equation, (increase or decrease in each account).
Sandy Dela Cruz’s Catering Service
Financial Transaction Worksheet
Month of July, 2020
Date
Assets ( in Php ) Liabilities ( in Php ) Owner’s Equity
July Cash Car Furnitures Equipment
Accounts
Receivable Loans Payable
Accounts
Payable
Aguinaldo,
Capital
Other
Account
Title
1 P 800,000.00 P 200,000.00 P 1,000,000.00
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)
21 P 15,000.00 P 15,000.00
Service
Revenue
22 P (500.00) P (500.00) Gas and Oil
P (1,000.00) P (1,000.00)
Repair
Expense

37. The table summarizes the effects of these transactions on the accounting equation,
(increase or decrease in each account).
Sandy Dela Cruz’s Catering Service
Financial Transaction Worksheet
Month of July, 2020
Date Assets ( in Php ) Liabilities ( in Php ) Owner’s Equity
July Cash Car Furnitures Equipment
Accounts
Receivable Loans
Payable
Accounts
Payable
Aguinaldo,
Capital
Other
Account
Title
1 P
800,000.00
P
200,000.00
P
1,000,000.00
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

38. 20 P
(55,000.00)
P
(55,000.00)
21
P
15,000.00
P 15,000.00
Service
Revenue
22 P (500.00) P (500.00) Gas and Oil
P
(1,000.00)
P
(1,000.00)
Repair
Expense
24 P 16,000.00
P 16,000.00
Service
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
P
(9,000.00)
P
(9,000.00)
Salaries
Expense
Bal. P
807,000.00
P
200,000.00
P
45,000.00
P
55,000.00
P 18,000.00 P
100,000.00
P 0.00 P
1,025,000.00
TOTAL BALANCES P
1,125,000.00
P
1,125,000.00

39. QUIZ

40. Directions: Answer the questions that follow. Write the letter of your answers
on a separate sheet of paper.
1. Which is the accounting equation?
A. assets= liabilities + owner’s equity
B. liabilities = assets + owner’s equity
C. owner’s equity = assets + liabilities
D. assets = revenue - expenses
2. What are the resources owned by the owners?
A. expenses
B. liabilities
C. revenues
D. assets
3. Which term refers to the obligations of the business?
A. liabilities
B. assets
C. revenues
D. owner’s equity

41. 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
5. What does an extended accounting equation include?
A. revenues and expenses
B. revenues and assets
C. expenses and liabilities
D. none of the above
6. When the owner invested cash on the business, what account/s
increase/s?
A. assets and owner's equity
B. assets only
C. liabilities and assets

42. 7. Is there an effect on the assets account when the owner withdraws
cash for personal use?
A. Yes, it decreases.
B. Yes, it increases.
C. Yes, it increases and decreases.
D. None of the above
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

43. 9. Mr. Kim has assets of Php1,000,000.00 and liabilities of Php
300,000.00
What is his equity?
A. Php 700,000
B. Php 1,300,000
C. Php 800,000
D. 0
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

44. Let’s Check
your
Understandi
ng

45. Directions: Compute the amount of the missing element of financial position
(A= L+OE). Write your answers on a separate sheet of paper.
1. Del Mundo Corporation has assets of Php 500,000.00 and an owner’s
equity of Php 340,000.00.
2. Hernandez Cooperative has liabilities of Php 400,000.00 and an
owner’s equity of Php 320,000.00.
3. Valdez Plumbing Services has assets of Php 234,000.00 and liabilities
of Php 100,000.00.
4. Marta’s First Eatery has liabilities of Php 180,000.00 and an owner’s
equity of Php 230,300.00.
5. Paway Hub has assets of Php 892,000.00 and liabilities of Php
190,000.00.

46. ASSESSMENT
6. Golden Corporation has assets of Php 120,000.00 and liabilities of Php
20,000.00.
7. Tessie’s Store has liabilities of Php 8,000.00 and an owner’s equity of
Php 12,000.00.
8. De Guzman Merchandise has assets of Php 500,000.00 and an owner’s
equity of Php 390,500.00.
9. Marziano Cooperative has liabilities of Php 90,000.00 and an owner’s
equity of Php 240,000.00.
10. Pearl Trading Enterprise has assets of Php 800,500.00 and liabilities
of Php 450,000.00.

47. Perform the
Worksheet
PERFORMANCE TASK 3

48. Directions: Analyze the transactions of Kim as the owner of Chinita Girl Spa
Services. Record the transactions using a financial transaction worksheet.
June 1 Kim invested Php 500,000.00 cash and equipment amounting to
Php100,000.00 to open Chinita Girl Spa.
2 She borrowed Php 50,000.00 cash from Bamba Bank to be
used for her business.
7 She bought tables and chairs from Maginhawa Furnitures and
paid Php 20,000.00 cash.
15 Various equipment were purchased on account from Beauty
Shoppy for Php 50,000.00.
18 She made a withdrawal of Php 10,000.00 for her personal use.
20 The account due to Beauty Shoppy was paid in cash.
21 Chinita Girl Spa Services was hired. The cash of Php 10,000.00
was received from the customer.

49. Directions: Analyze the transactions of Kim as the owner of Chinita Girl Spa
Services. Record the transactions using a financial transaction worksheet.
June 22 Gas and oil worth Php 1,000.00 and equipment repairs worth
Php 1,000.00 were paid in a cash transaction.
24 Service was hired again by a customer for Php 15,000.00 but
this time the customer was only able to pay Kim 50% on that
day and she made a promise to pay the other 50% on June 30.
25 She paid Php 1,000.00 for the telephone bill.
27 Another customer hired the services of Chinita Girl Spa Services.
A bill was issued to them for Php 30,000.00 and 50% of it was
collected.
30 The remaining balance on the transaction last June 24 was
paid in cash.
30 She paid Php 5,000.00 for the office rental space and Php
4,000.00 for employees’ salaries

51. Thankyou
and God
bless you
all!