This is one of the lessons in ABM 11

5. 1. True 6. False
2. True 7. True
3. True 8. True
4. False 9. True
5. True 10. True

6. LEFT RIGHT
Assets
Liabilities
Equity

7. ***There is also an extended accounting equation where revenue and
expenses are added.

8. Assets = Liabilities + Equity

10. BUSINESS ENTITY PRINCIPLE
NO

11. Directions: Compute the missing amount in the equation. Write your answers on a separate sheet of
paper (1/2).
ACTIVITY 1

12. Directions: Compute the missing amount in the equation. Write your answers on a separate sheet of
paper (1/2).
ACTIVITY 1 - Answers
Php150,000.00
Php30,000.00
Php100,000.00
Php150,000.00
Php790,000.00
Php389,000.00
Php987,217.00
Php562,879.00
Php912,556.00
Php1,896.00

13. !!!REMEMBER!!!
Accounting Equation must be BALANCED for each transaction
Assets = Liabilities + Equity

14. 3 MAJOR ACCOUNTS

15. ASSETS
LIABILITIES
EQUITY

16. ASSETS
-are the items that a company owns that can
provide future economic benefit. Assets are
valuable resources controlled by the company.
Examples: cash, supplies, accounts receivable

17. LIABILITIES
-are the financial obligation of a company that
results in the company’s future sacrifices of
economic benefits to other businesses.
Examples: loans and accounts payable

18. 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.

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

21. Effects of every transaction to the major accounts:
a. 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 a car amounting to Php 200,000.00 which both happened in the month of July.
b. Borrowings from the bank
July 2 – Sandy Dela Cruz borrowed Php 100,000.00 cash from Matagumpay Bank for her business.

22. c. Asset purchased for cash
July 7 – Sandy bought tables and chairs from Matibay Furnitures and paid Php 45,000.00 cash.
d. Assets purchased on account
July 15 – Various equipment were purchased on account from Masigasig Trucking Services for Php
55,000.00.

23. e. Cash withdrawal by the owner
July 18 – Sandy Dela Cruz made a withdrawal of Php 5,000 for her personal use.
f. Payment of liability
July 20 – The account due to Masigasig Trucking Services was paid in cash.

24. DATE ASSETS LIABILITIES OWNER’S EQUITY
JULY Cash Car Furniture Equipmen
t
Loans
Payable
Accounts
Payable
Dela Cruz
Capital
Dela Cruz
Drawings
1 800,000 200,000 1,000,000
2 100,000 100,000
7 (45,000) 45,000
15 55,000 55,000
18 (5,000) (5,000)
20 (55,000) (55,000)
Balances 795,000 200,000 45,000 55,000 100,000 0 1,000,000 (5,000)
Total
Balance
1,095,000 1,095,000

25. g. 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.
h. 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.

26. i. 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.
j. Paid for expenses incurred
July 25 – Dela Cruz paid Php 500.00 for the telephone bill.

27. i. 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.
j. Customer’s account collected in cash
July 30 – The customer on July 24 paid 50% of his account in cash.

28. i. 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.
j. Customer’s account collected in cash
July 30 – The customer on July 24 paid 50% of his account in cash.

29. k. 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.

30. The table summarizes the effects of these transactions on the accounting
equation
(increase or decrease in each account)