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    Fundamentals of Accountancy, Business, and Management 1

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    Fundamentals of Accountancy, Business, and Management 1

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    Muyco Mario Angelo
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    FABM1-Lesson 4.pptx

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    103 views12 pages

    Fundamentals of Accountancy, Business, and Management 1

    Uploaded by

    Muyco Mario Angelo

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
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    Fundamentals of Accountancy, Business, and Management 1

    Lesson 4: The Accounting Equation

    BREAK A LEG!
    The Accounting Equation

    Assets = Liabilities + Capital


    • Assets are goods, services, and other resources that the business entity acquired
    and have control over. (values owned by the business)
    • Assets are properties of the entity that are expected to be utilized for its benefit.
    • Assets may be tangible and intangible
    1. Cash
    2. machines
    3. trademarks
    4. copyrights
    5. equipment
    BREAK A LEG!
    The Accounting Equation

    Assets = Liabilities + Capital


    • Liabilities anything that increase the debt or obligation of the business
    organization. (values owed by the business)
    • Something that the business has to pay or that it owes from someone or another
    entity and can potentially reduce the value of the business if not enough income
    comes into the business.
    accounts payable
    loans payable
    notes payable
    salaries payable
    interest payable BREAK A LEG!
    The Accounting Equation

    Assets = Liabilities + Capital


    • Capital refers to the amount of equity of the business owners.
    • It represents the investment of the owner or proprietor.
    • The net amount/income that will remain after all liabilities or obligations have
    been paid from the assets.
    • The share of the owner in the assets of the business
    POTTER, CAPITAL
    POTTER, DRAWINGS
    Capital = Assets – Liabilities
    Liabilities = Assets - Capital
    BREAK A LEG!
    The Accounting Equation
    Assets invested by the owner:
    July 1 – Sir Gelo started a delivery service on July 1, 2013. The following
    transactions occurred during the month of July. He invested Php. 800,000 cash
    and Cars amounting to Php. 200,000.
    ASSETS = LIABILITIES + OWNER’S EQUITY
    Cash Php. 800,000 Reyes, Capital Php. 1,000,000
    Cars Php. 200,000

    Php. 1,000,000 Php. 1,000,000

    BREAK A LEG!
    The Accounting Equation
    Borrowings from the bank:
    July 2 – Gelo borrowed Php. 100,000 cash from PNB for use in business.

    ASSETS = LIABILITIES + OWNER’S EQUITY


    Cash Php. 900,000 Loans Payable Php. 100,000 Reyes, Capital Php. 1,000,000
    Cars Php.
    200,000
    Php. 1,1000,000 Php. 1,100,000

    BREAK A LEG!
    The Accounting Equation
    Assets purchased for cash:
    July 7 – Bought tables and chairs from Orocan and paid Php. 45,000 cash.

    ASSETS = LIABILITIES + OWNER’S EQUITY


    Cash Php. 855,000 Loans Payable Php. 100,000 Reyes, Capital Php. 1,000,000
    Cars Php.
    200,000
    Furnitures Php. 45,000
    Php. 1,100,000 Php. 1,100,000

    BREAK A LEG!
    The Accounting Equation
    Assets purchased on account:
    July 15 – Various equipment were purchased on account from Fortune for Php
    55,000

    ASSETS = LIABILITIES + OWNER’S EQUITY


    Cash Php. 855,000 Loans Payable Php. 100,000 Reyes, Capital Php. 1,000,000
    Cars Php. Accounts Payable Php. 55,000
    200,000
    Furnitures Php. 45,000
    Equipment Php. 55,000
    Php. 1,155,000 Php. 1,155,000

    BREAK A LEG!
    The Accounting Equation
    Cash withdrawal by the owner:
    July 18 – Gelo made a cash withdrawal of Php. 5,000 for personal use.

    ASSETS = LIABILITIES + OWNER’S EQUITY


    Cash Php. 850,000 Loans Payable Php. 100,000 Reyes, Capital Php. 1,000,000
    Cars Php. Accounts Payable Php. 55,000 Reyes, Drawing (Php. 5,000)
    200,000
    Furnitures Php. 45,000
    Equipment Php. 55,000
    Php. 1,150,000 Php. 1,150,000

    BREAK A LEG!
    The Accounting Equation
    Payment of liability:
    July 20 – The account of Fortune was paid in Cash

    ASSETS = LIABILITIES + OWNER’S EQUITY


    Cash Php. 795,000 Loans Payable Php. 100,000 Reyes, Capital Php. 1,000,000
    Cars Php. Reyes, Drawing (Php. 5,000)
    200,000
    Furnitures Php. 45,000
    Equipment Php. 55,000
    Php. 1,095,000 Php. 1,095,000

    BREAK A LEG!
    The Accounting Equation BREAK A LEG!

    Sir Gelo’s Delivery Services


    Worksheet
    For the period June 1 to June 20 (In Philippine Pesos)
    Date Assets = Liabilities + Owner’s Equity
    July Cash Cars Furnitures Equipment Loans Accounts Gelo, Geo,
    Payable Payable Drawings Capital
    1 800,000 200,000 1,000,000
    2 100,000 45,000 100,000
    7 (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 (5,000) 1,000,000

    Php. 1,095,000 = Php. 1,095,000


    TASK 3
    BREAK A LEG!

    For each transaction, tell whether the assets, liabilities, and equity will
    increase (I), decrease (D), or is no effect (NE).
    A L E
    1. The owner invests personal cash in the business ___ ___ ___
    2. The owner withdraws business assets for personal use ___ ___
    ___
    3. The company receives cash from a bank loan ___ ___ ___
    4. The company repays the bank that had lent money ___ ___
    ___
    5. The company purchases equipment with its cash ___ ___
    ___

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