11

Fundamentals of Accountancy, Business

and Management 1

Quarter 1 – Week 3
Learning Activity Sheets (LAS)

SCHOOLS DIVISION OF SURIGAO CITY

Fundamentals of Accountancy, Business and Management 1

1st Quarter – Learning Activity Sheets
Week 3
First Edition, 2020

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Development Team of the Learning Activity Sheets

Writer:Kurt-Airion H. Sumaylo
Editor:
Reviewers:
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Printed in the Philippines by ______________________________

Week
3
THE ACCOUNTING EQUATION

Name: ________________________________________ Section: ________________________

Objectives:
1. Illustrate the Accounting Equation (ABM_FABM11-IIIb-c-17)

Author: KURT-AIRION H. SUMAYLO

School/Station: CARAGA REGIONAL SCIENCE HIGH SCHOOL
Division: Surigao City
Email Address: [email protected]
 2. Perform operation involving simple cases with the use of accounting
equation (ABM_FABM11-IIIb-c-18)

Pre-Test
Direction: Select the letter of the best answer.

1. It shows the relationship between a company’s assets, liabilities, and

capital. B.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
2. This refers to the economic resources owned by the company. A.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
3. Refers to the property and rights owned by business. A.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
4. This refers to the investment of an owner. D.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
5. These include claims of the creditors on the assets of the company. C.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
6. This refers to the obligations to pay and debts of a company. C.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
7. This has to show a balance in every business transaction.B.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
8. This include a company’s cash, supplies, and equipment. A.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
9. Shows no change when an owner invest additional cash in the business. C.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
10.Demonstrates the dual aspect of a business transaction and proves that
B.Debit=Credit.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity

Key Concepts:

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
concepts 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)

Author: KURT-AIRION H. SUMAYLO

School/Station: CARAGA REGIONAL SCIENCE HIGH SCHOOL
Division: Surigao City
Email Address: [email protected]
 The accounting formula materializes a company’s asset 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.

The Accounting Equation

Owners
ASSETS Liabilities Equity

Keep reading to have a better understanding of the accounting formula

basics, its elements, and relationship to one another.

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.

 Assets refer to items like cash, inventory, accounts receivable, buildings,

land, or equipment. Purchasing something with the company’s cash on hand
will not affect the accounting equation because it’s just converting one type
of asset (cash) into another type of asset (inventory, equipment, or whatever
else is purchased). The accounting formula doesn’t differentiate between
types of assets.
2. Liabilities – These are debts or obligations, which are amounts owed to
others. These include debts, obligation to pay, and claims of the creditors on
the assets of the company. Liabilities are one of three ways in which a
business can acquire funding.
 Liabilities can include bank loans, credit card accounts, or accounts payable
(such as when a supplier offers to extend credit to a business).
3. Owner’s Equity – These are the total capital the owners have invested in the
business. These include the interest of the owners on the company; claims of
the owners on the assets of the company.; and the investment of the owner
plus or minus the results on the operations of the company.
 Owner’s Equity or capital comes from two main sources: investment of
owners and earning from the company.
Let us put into practice the accounting equation above. For example, If
Company Tibs owns P100,000 in assets but owes P30,000 to creditors, how much
would be the total claim of the owners?
Assets = Liabilities + Owner’s Equity
P100,000 = P30,000 + ?

Author: KURT-AIRION H. SUMAYLO

School/Station: CARAGA REGIONAL SCIENCE HIGH SCHOOL
Division: Surigao City
Email Address: [email protected]
 P100,000 = P30,000 + P70,000
P100,000 = P100,000
The equity to which owners/investors have a claim is P70,000. As you can see,
the accounting formula is all about balance. Any activity on the right side is
reflected on the left side.
Here are some more example:
1. Given liabilities of P10,000 and the owner’s equity of P50,000, Find the value
of the assets.
Assets = Liabilities + Owner’s Equity
Assets = P10,000 + P50,000
Assets = P60,000
2. Given assets of P100,000 and the owner’s equity of P70,000, Find the
liabilities.
Assets = Liabilities + Owner’s Equity
Liabilities = Assets – Owner’s Equity
Liabilities = P100,000 – P70,000
Liabilities = P30,000
3. Given assets of P200,000 and liabilities of P90,000, find the owner’s equity.
Assets = Liabilities + Owner’s Equity
Owner’s Equity = Assets – Liabilities
Owner’s Equity = P200,000 – P90,000
Owner’s Equity = P110,000

Analyzing the effects of Business Transactions to the Accounting Equation

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 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.

Assets Liabilities EQUITY

= +
Cash Accounts Payable Owner Contribution + Revenue + Expenses –
Inventory Notes Payable Owner Withdrawals –
Receivables Deferred Revenue Sales Wages
Prepaid Expenses Interest Cost of Goods Sold
Equipment Rent Income Rent
Service Fees Depreciation
Advertising
Professional Fees
Utilities
Office Supplies

Author: KURT-AIRION H. SUMAYLO

School/Station: CARAGA REGIONAL SCIENCE HIGH SCHOOL
Division: Surigao City
Email Address: [email protected]
Activity 1 : Identify
Direction: On the last column, write I if the account title is an income account, E if
expense, A if asset, or L if liability.

# Account Title Answer

1 Accounts Payable L
2 Accounts Receivable A
3 Accumulated Depreciation A
4 Advances to Employees A
5 Advertising Expense E
6 Allowance for Doubtful Accounts A
7 Bad Debts Expense A
8 Bonds Payable L
9 Building A
10 Cash A
11 Commission Expense E
12 Commission Receivable A
13 Depreciation Expense E
14 Dividend Income I
15 Donation Expense E
16 Fuel & Oil Expense E
17 Furniture and Fixtures A
18 Insurance Expense E
19 Interest Expense E
20 Interest Income I
21 Interest Payable L
22 Interest Receivable A
23 Investment in Trading Securities A
24 Land A
25 Machinery A
26 Miscellaneous Expense E
27 Mortgage Payable L
28 Notes Receivable A
29 Notes Payable L
30 Office Equipment A
31 Office Supplies A
32 Pag-ibig Contributions Expense E
33 PhilHealth Contributions Payable L
34 Prepaid Insurance A
35 Prepaid Rent A
36 Prepaid Subscriptions A
37 Professional Fees I
38 Rent Expense E
39 Rent Income I
40 Rent Receivable A
41 Repair & Maintenance Expense E
42 Representation & Entertainment Expense E
43 Salaries & Wages Expense E
44 Salaries & Wages Payable L
45 Service Income I
46 SSS Premiums Expense E
Author: KURT-AIRION H. SUMAYLO
School/Station: CARAGA REGIONAL SCIENCE HIGH SCHOOL
Division: Surigao City
Email Address: [email protected]
 47 SSS Premiums Payable L
48 Store Equipment A
49 Store Supplies A
50 Tax and License Expense E
51 Tax and License Payable L
52 Transportation Equipment A
53 Travel Expense E
54 Unearned Advertising L
55 Unearned Commission L
56 Unearned Rent L
57 Unearned Expense
58 Utilities Payable L
59 Utilities Expense E
60 Withholding Tax Payable L

Activity 2 – What the Effect

Direction: Indicate the effect {increase ( ), decrease ( )} on assets, liabilities, and capital and the
specific account titles for each transaction.For transaction affecting the capital, indicate
on the last column “Investment”, “Withdrawal”, or specific income and expense
account..

TRANSACTION
TRANSACTION ASSETS LIABILITIES CAPITAL AFFECTING
THE CAPITAL

Author: KURT-AIRION H. SUMAYLO

School/Station: CARAGA REGIONAL SCIENCE HIGH SCHOOL
Division: Surigao City
Email Address: [email protected]
Cash investment of the
owner Cash Capital Investment
Permanent cash Withdrawal
withdrawal of the owner Cash Capital
Borrowing of money by
issuing a promissory
note
Cash advance to an Salary Expense
employee Cash Capital

Purchase of office
supplies for cash Supplies Cash
Purchase of office
supplies on account supplies Accounts
Payable
Purchase of store
equipment for cash Supplies Cash
Purchase of store
equipment on account Supplies Accounts
Payable
Partial payment of
accounts payable Cash Accounts
Payable
Rendering of services for Service Income
cash Cash Capital
Rendering of services on Service Income
account Account Capital
Receivable
Full collection of
accounts receivable Cash Account
Receivable
Cash receipt for Service Income
commission income Cash Capital

Payment of advertising Advertising

Cash Capital Expense

Activity 3 – You’re TURN

Direction: Give the effect of the following transactions on the accounting equation.

Author: KURT-AIRION H. SUMAYLO

School/Station: CARAGA REGIONAL SCIENCE HIGH SCHOOL
Division: Surigao City
Email Address: [email protected]
 On March 25, 2020, Don Clarion opens Clarions 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. Copy and answer in a ½ sheet of paper.

Transaction Assets Liabilities Owner’s Equity

1.Don Clarion + 200,00 + 200,000

invested P200,000
cash in the
business.
2.Bought P5,000 + supplies
worth of supplies -(5,000)

3.Borrowed + 80,000 + 80,000

P80,000 cash from
Don Clarky.

4.Services + 10,000 + 10,000

rendered to client
on credit worth
P10,000

5.Cash services + 10,000 + 10,000

rendered to Mr.
Emon Mejas
P5,000

Activity 4 – My Own Accounting

Direction: Applying the accounting equation to your daily life as a student and consumer,
write your transactions made on a day to day basis and analyze the effects of each
transaction to different accounting accounts. Copy and answer in a 1 whole sheet
of paper.

Transaction Assets Liabilities Owner’s Equity

Author: KURT-AIRION H. SUMAYLO

School/Station: CARAGA REGIONAL SCIENCE HIGH SCHOOL
Division: Surigao City
Email Address: [email protected]
Activity 5: Choose from the Box
Direction: Choose the corresponding answer from the word box and write on the
space provided before each number

Assets Decrease
Increase No changes
Liabilities Owner’s Equity
Balance sheet Accounting Equation

Liabilities 1. This refers to the obligations to pay and debts of a company

Assets 2. This refers to the economic resources owned by the company
Balance Sheet 3. This has to show a balance in every business transaction
Accounting Equation4. This demonstrate the dual aspect of a business transaction
and proves that Debit = Credit
Aseets 5. This refers to the property and rights owned by the business
Owner’s Equity 6. This refers to the investment of an owner
Liabilities 7. These include claims of the creditors on the assets of the company
Assets 8. This include a company’s cash, supplies, and equipment
Balance Sheets 9. It shows the relationship between a company’s assets, liabilities,
and capital
Liabilities _10. This shows no changes when an owner invests additional
cash in the business.

Author: KURT-AIRION H. SUMAYLO

School/Station: CARAGA REGIONAL SCIENCE HIGH SCHOOL
Division: Surigao City
Email Address: [email protected]
Reflection:
Direction:
Now that you have completed your worksheet for this week, write your reflection
about what you have learned from the lesson. Your reflections should include your
opinion, personal experience, and evidence to back up your thoughts. The purpose
of this is to ensure you are processing your thoughts on the content of the lesson.
Write your reflection on the space provided below.

I learned that……………

_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
________f________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________

Post-test
Direction: Select the letter of the best answer.

1. Refers to the obligations to pay and debts of a company.

a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
2. This has to show a balance in every business transaction.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity

Author: KURT-AIRION H. SUMAYLO

School/Station: CARAGA REGIONAL SCIENCE HIGH SCHOOL
Division: Surigao City
Email Address: [email protected]
 3. Include a company’s cash, supplies, and equipment.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
4. Shows no change when an owner invest additional cash in the business.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
5. Demonstrates the dual aspect of a business transaction and proves that
Debit=Credit.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity

6. It shows the relationship between a company’s assets, liabilities, and capital.

a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
7. This refers to the economic resources owned by the company.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
8. Refers to the property and rights owned by business.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
9. This refers to the investment of an owner.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
10.These include claims of the creditors on the assets of the company.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity

References:

Teaching Guide for Senior High School

Fundamentals of Accountancy, Business and Management 1
Specialized Subject I ACADEMIC – ABM
Published by the Commission on Higher Education, 2016 Chairperson: Patricia B.
Licuanan, Ph.D.

Accounting Theory (n.d) Retrieved from

http://accountingtheory.weebly.com/nature-and-scope-of-accounting

Author: KURT-AIRION H. SUMAYLO

School/Station: CARAGA REGIONAL SCIENCE HIGH SCHOOL
Division: Surigao City
Email Address: [email protected]