Republika ng Pilipinas

Kagawaran ng Edukasyon
Rehiyon IV-A CALABARZON
SANGAY NG BATANGAS
Grade: 11
Course Title: Fundamentals of Accountancy, Business
and Management 1
Content: The Accounting Equation
Content Standards: The Accounting Equation
Performance Standards: Solve problems applying the
accounting Equation
Time

Section

Date

Learning Competencies:
ABM_FABM11- IIIb-c-17
Illustrate the accounting equation.
ABM_FABM11- IIIb-c-18
Perform operations involving simple cases with the use
of accounting equation.
Subject Matter: The Accounting Equation
References: K to 12 Basic Education Curriculum SHS
Accountancy, Business and Management (ABM),
pages 2-3
Textbook: Basic Accounting Theory and Practices
Ma. Luisa Witty Ramirez Reyes, pages 16-21
Procedure
Activity I
Motivation

Activity 2
You have now some ideas about the three major
accounts of a financial make up. Assets, Liabilities and
Owners Equity. Let me first define these three
accounts.
Assets are a company's resourcesthings the
company owns. Examples of assets include cash,
accounts receivable, inventory, prepaid insurance,
investments, land, buildings and equipment.
Liabilities are a company's obligationsamounts the
company owes. Examples of liabilities include notes or
loans payable, accounts payable, salaries and wages
payable, interest payable, and income taxes payable (if
the company is a regular corporation). Liabilities can be
viewed in two ways:
(1) as claims by creditors against the company's assets,
and
(2) a sourcealong with owner or stockholder equityof
the company's assets.
Owner's or stockholders' equity also reports the
amounts invested into the company by the owners plus
the cumulative net income of the company that has not
been withdrawn or distributed to the owners.
Owner's equity or stockholders' equity is the amount
left over after liabilities are deducted from assets:
Assets - Liabilities = Owner's (or Stockholders') Equity
These three accounts have the same relationship to
each other. We call this relationship the Accounting
Equation.
Assets

Liabilities

Owners Equity

Take a look on this picture that I have paste in the board.

What can you notice or what can you say about the
picture?
The word equation comes from the word equal. For any
equation, one side always equals another.
The equation shows that assets or properties of the
business are owing to outsiders (Liabilities) and to
owners (proprietor)
The equation may also be expressed as:
Assets

I have here some cut pictures were I got from the

internet. What you are going to do is to put or paste
that picture on its proper places inside the stall. I will call
some of you to do the task.
Analysis 1
1. What is the nature of the business then?
2. Who owns these things?
3. Assuming that your parent is the owner of the
business, how do think your parent was able to
acquire those things inside the stall?
4. Supposedly that before acquiring some of those
things your parent money is not enough to buy,
where do you think your parent gets the money?
5. What can you say about those things or those
asset?

Liabilities

Owners Equity

The equation means that out of the properties of the

business will first be paid the debts to outsiders and
any amount remaining thereafter should go to the
owner.
Analysis 2
1. Using your prior knowledge about financial
statement, here are list of assets, liabilities and
owners equity. Put them in their proper column.
Follow the format.
Cash
Supplies
Income
Land
Building
Expenses
Accounts
Salaries
Drawing
Payable
Payable
Capital
Notes
Equipment
Receivable

Republika ng Pilipinas
Kagawaran ng Edukasyon
Rehiyon IV-A CALABARZON
SANGAY NG BATANGAS
1.
Asset

Liabilities

Owners
Equity

2.
3.

2. What things fall under assets, liabilities and

owners equity?
3. What did you found out?
Let us assume that on July 1, 1991 Orlando Reyes
engaged in business with a cash capital investment
of P100,000.00. On this date, the accounting
equation is:
Assets

Cash
P100,000.0
0

=
=

Liabilities
0

+
+

Owners
Equity
Capital
P100,000.0
0

The accounting equation could also apply to

personal situation. Suppose you buy a car for
P5000, borrow P4,000 from the bank, and pay the
rest yourself. Try to illustrate the accounting
equation.
Assets
Car
P5,000.0
0
P5,000.00

=
=
=

Liabilities
Accounts
PayableBank
P4,000.00

P5,000.00

+
+

Equity
Capital

4.
5.
6.

Orlando deposited P750,000 in the bank in the

name of D & W Enterprise.
Orlando purchased land amounting to P500,000,
paid in cash.
Orlando Reyes purchased P20,000 supplies
paying in the near future.
During the month, P15,000 is paid to creditors
on account.
Received P55,000 from services rendered.
Paid the following expenses: Salaries P10,000;
Rent P5,000; Utilities P4,000 and
Miscellanous Expense P2,000

.
Assessment
Individual Activity:
Using the given data accomplish the accounting
equation by applying necessary operations.
Assets
a.
b.
c.
d.
e.

760,00
0
860,00
0
?
626,60
0
?

P1,000.0
0
Prepared by:

Abstraction
Why Assets is always equal to Liabilities and Owners
Equity?
Application:
Work Together:
I will group you into five groups. Review the
Accounting Equation and examine each of the
transactions and perform necessary operation with
the use of Accounting Equation.
I will ask one group to share the solution with the
class. If that groups solution is wrong, another group
will be asked to share, and so on.
For the group activity I will illustrate and perform the
operation for transaction No. 1 and each group will
do the rest
Transactions:

ESTELITA M. MARASIGAN

Liabilitie
s
360,000

Owners
Equity
?

592,000

108,000
376,240

760,000
?

800,000

(100,000
)