Professional Documents
Culture Documents
EQUATION
MOTIVATION
THE THREE MAJOR ACCOUNT
• The word equation comes from the word equal. For any equation, one side
always equals another
• These equations may also be used:
• The equation shows that assets or properties of the business are owing to
outsiders (Liabilities) and to owner’s (proprietor)
ACCOUNTING EQUATION
• Examples:
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 Liabilities Owner’s Equity
Cash = = Capital
100,000 0 100,000
GROUP ACTIVITY
Transactions:
• 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
Miscellaneous Expense P2,000
INDIVIDUAL ACTIVITY:
b. 860,000 ? 592,000
c. ? 108,000 760,000
d. 626,600 376,240 ?
e. ? 800,000 (100,000)
ASSIGNMENT
For your Assignment I want you to illustrate and perform the following transaction.
Carl has the following transaction, prepare the following equation.
• a. Business started with cash P175,000
• b. Purchased goods from Jam P50,000
• c. Sold goods on credit to Mike (Costing P17,500) P20,000
• d. Purchased furniture for office use P10,000
• e. Cash paid to Jam in full settlement P48,500
• f. Cash received from Mike P20,000
• g. Rent Paid P1,000
• h. Cash withdrew for personal use P3,000.
END