Accounting Equation SHS Lesson Plan Ethel (1)

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 Owner’s Equity. Let me first define these three accounts. Assets are a company's resources—things the company owns. Examples of assets include cash, accounts receivable, inventory, prepaid insurance, investments, land, buildings and equipment. Liabilities are a company's obligations—amounts 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 source—along with owner or stockholder equity—of 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the amounts invested into the company by the owners plus the cumulative net income of the company that has not been withdrawn or distributed to the owners.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

Owner’s 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 owner’s (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

Owner’s 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 owner’s 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

Owner’s Equity

2. 3.

2. What things fall under assets, liabilities and owner’s 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

+ +

Owner’s 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 Owner’s 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 group’s 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

Owner’s Equity ?

?

592,000

108,000 376,240

760,000 ?

800,000

(100,000 )