Fundamentals of Accountancy, Business and Management - 1 - ABM-11 - Q3 - W3 - Module-3-V3 (Ready For Printing)
Fundamentals of Accountancy, Business and Management - 1 - ABM-11 - Q3 - W3 - Module-3-V3 (Ready For Printing)
Fundamentals of Accountancy, Business and Management - 1 - ABM-11 - Q3 - W3 - Module-3-V3 (Ready For Printing)
Fundamentals of
Accountancy, Business and
Management 1
Quarter 3 - Module 3:
The Accounting Equation
Republic Act 8293, Section 176 states that: No copyright shall subsist in
any work of the Government of the Philippines. However, prior approval of the government
agency or office wherein the work is created shall be necessary for exploitation of such work
for profit. Such agency or office may, among other things, impose as a condition on the
payment of royalties.
Members: Neil A. Improgo, PhD, EPS-LRMS; Bienvenido U. Tagolimot, Jr., PhD, EPS-ADM;
Erlinda G. Dael, PhD, CID Chief; EPS assign Celieto B. Magsayo, LRMS Manager;
Loucile L. Paclar, Librarian II; Kim Eric G. Lubguban, PDO II
Office Address: Masterson Avenue, Upper Balulang, Zone 1, Cagayan de Oro City
Cagayan de Oro, Lalawigan ng Misamis Oriental
Telephone Nos.: (088) 881-3094 | Text: 0917-8992245
E-mail Address: misamis.oriental@deped.gov.ph
Senior High School
Fundamentals of
Accountancy, Business
and Management 1
Quarter 3 - Module 3:
The Accounting Equation
Pre-test ---------------------------------------------------------------------- 3
Lesson ---------------------------------------------------------------------- 4
Post-test ---------------------------------------------------------------------- 13
Reference ---------------------------------------------------------------------- 16
What I Need To Know
Good Job! Thank you for completing Module 2. You are now ready for
the next lesson which is The Accounting Equation. You need to learn more
effectively. Good luck!
Module Content
Learning is fun! So enjoy your journey as you unfold the most interesting and
worthwhile activities in accounting.
Perform operations involving simple cases with the use of accounting equation
(ABM_FABM11- IIIb-c-18)
1
General Instructions
7. Remember to review every time you are done answering the activities.
2
What I Know
3
9. This shows no changes when an owner invests additional cash in the business.
a. Assets c. Owner’s Equity
b. Liabilities d. Accounting Equation
10. This demonstrates the dual aspect of a business transaction and proves
that Debit = Credit.
a. Assets c. Owner’s Equity
b. Liabilities d. Accounting Equation
What’s In
Activity 1: Review
What’s New
4
3 234,000 434,000
4 123,000 23,000
5 876,000 500,000
6 15,000 5,999
7 1,089,021.18 396,156.93
8 68,000 66% of assets
9 1/3 of owner’s equity 143,628
10 164% of liabilities 26,007
What Is It
The accounting equation formula represents the relationship between the assets,
liabilities, and owner's equity of a business. The value of a company's assets should
always equal the sum of its liabilities and owner's equity. The underlying concept of
this formula is that every asset acquired by a company was financed either through
debt (liability) or through investment from owners (owner’s equity).
The accounting formula materializes a company's assets in terms of its liabilities and
owner’s equity. This simple formula serves as the foundation of double-entry
bookkeeping wherein there are always two account entries made for each
transaction—a debit to one account and a credit to another.
Keep reading to have a better understanding on the accounting formula basics, its
elements, and its relationship to one another.
5
The Elements of the Accounting Equation
1. Assets - these are economic resources owned by the company expected for future
gain. They are property and rights of value owned by the company.
Let us put into practice the accounting equation above. For example, if Company
Tibs owns Php100, 000 in assets but owes Php30, 000 to creditors, how much would
be the total claim of the owners?
6
The equity to which owners/investors have a claim is Php70, 000. As you can see,
the accounting formula is all about balance. Any activity on the right side is reflected
on the left side.
1. Given liabilities of Php10, 000 and the owner’s equity of Php50, 000. Find the value
of the assets.
2. Given assets of Php100, 000 and the owner’s equity of Php70, 000. Find the value
of liabilities.
3. Given assets of Php200, 000 and liabilities of Php90, 000. Find the value of the
owner’s equity.
The accounting equation shows that for every debit, there must be an equal credit.
As we have already discussed, Assets, Liabilities and Owner’s Equity are the three
components of the accounting equation that make up a company’s balance sheet.
Accounting Equation demonstrates the dual aspect of a business transaction and
proves that Debit = Credit. Here is a table to show you the effects of transactions on
the accounting equation.
7
The following details will include the amount and the account affected in
illustrating the effects on the accounting equation. Notice that the accounting
equation is always balanced in every transaction such that assets are always equal to
liabilities and owner’s equity.
8
correspondingly
increase as the
supplies were
bought in credit.
5. Purchases Increase No Change No Land increases the
Php200,000 Land Land Change assets of the
paying cash business. Cash
Decrease correspondingly
Cash decreases with the
cash paid for the
purchase of land.
What’s More
Activity 3.
On August 21, 2020, Don JPacs opens Pacs Laundry Services. On the
transaction summary table below, indicate the effect of each transaction to each
account. Put “+” to signify increase or “-” to signify decrease. Indicate the amount of
increase or decrease for each account. The first one is done for you.
9
TRANSACTION ASSETS LIABILITIES OWNER’S
EQUITY
1. Don Jpacs invested + +
Php100, 000 cash in the Php100,000 Php100,000
business.
2. Bought Php 2,000 worth of
supplies by cash.
3. Borrowed Php50, 000 cash
from Don Almabs.
4. Services rendered to client
on credit worth Php5,000
5. Cash services rendered to
Ms. Rastaken, Php10,000
Reflective Question:
How can you apply the Accounting Equation to your daily transactions as a
student and as a consumer? What are some examples of these transactions?
10
What I Can Do
Applying the accounting equation to your daily life as a student and consumer, write
your transactions made on a day to day basis and analyse the effects of each
transaction to the different accounting accounts.
11
Self-Check!
Great job! You have completed Module 3 successfully! Before going to the next
lesson, check the icon that best shows your learning experience.
If you checked the first icon, you are ready for module 4. If you have checked the
second icon, you need to review the things that you need to relearn. If you have
checked the third icon, it would be best if you read more and ask help from your
teacher, parents or peers in clarifying the lessons that you find it difficult. Be honest
so that you will truly improve.
Additional Activity
I noticed _______________________________
I realized _______________________________
12
Assessment
Let us check how much you have learned from this module’s coverage.
Directions: Choose the corresponding answer from the word box and write it on the
space provided before each number.
Assets Decrease
Increase No Changes
_______________ 5. This refers to the property and rights owned by the business..
13
CONGRATULATIONS
FOR COMPLETING THIS
MODULE!
14
15
Post-test
1. Liabilities 6. Owner’s Equity
2. Assets 7. Liabilities
3. Accounting Equation 8. Assets
4. Accounting Equation 9. Accounting Equation
5. Assets 10. Liabilities
Activity 4.
1. Bonus
2. Assets + 2,000 and Owner’s Equity + 2,000
3. Assets + 50,000 and Liabilities + 50,000
4. Assets + 5,000 and Owner’s Equity + 5,000
5. Assets + 10,000 and Owner’s Equity + 10,000
Activity 3.
1. Assets = Liabilities + Owner’s Equity
2. Assets are the economic resources owned by the company
expected for future gain. Liabilities include debts, obligations to pay,
and claims of the creditors on the assets of the company. Owner’s
Equity are the investments of the owner plus or minus the results of
business operations.
Activity 2.
1. Bonus 6. 9,001
2. 318,000 7. 692,864.25
3. 668,000 8. 23,120
4. 100,000 9. 191,504
5. 376,000 10. 16.644.48
Pre-test
1. D 6. B
2. A 7. D
Answer Key
References
BOOKS
Skousen, K. Fred, Earl Stice, and James Stice. 2000. Intermediate Accounting. 14th
ed. Vol. 1. Singapore: Thomson Learning Asia.
WEBSITES
“Teacher Sheila’s Lessons Portal: FABM-1.” n.d. Teacher Sheila’s Lessons Portal.
Accessed August 2, 2020. https://bit.ly/303Kp8Y.
Carlson, Rosemary. n.d. “What Is the Accounting Formula?” The Balance Small
Business. Accessed August 2, 2020. https://bit.ly/2X3giwC.
OTHERS
16
For inquiries or feedback, please write or call:
Department of Education
Masterson Avenue, Upper Balulang, Zone 1,
Office Address: Cagayan de Oro City, Misamis Oriental