FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS AND MANAGEMENT 1
Analyzing Business Transactions
Quarter 3, Module 5
(Week 6)
Fundamentals of Accountancy, Business and Management 1
Senior High School
Locally-Developed Module
Quarter 3-Module 5: Analyzing Business Transactions
First Edition, 2021
All rights reserved. No part of this module may be reproduced or
transmitted to any form or by any means, electronic or mechanical,
including photocopying, recording, or by any information storage and
retrieval system without written permission from the publisher and
authors.
Published by the Schools Division Office (SDO) Dagupan City
OIC, Schools Division Superintendent: Aguedo C. Fernandez
OIC, Asst Schools Division Superintendent: Ma. Criselda G. Ocang
Development Team of the Module
Writer:
Jacqueline G. Melendez
Editor:
Pina T. Cochangco
Reviewer:
Pina T. Cochangco
Renata G. Rovillos
Layout Artist: _______________
Management Team: Venus Maria SM. Estonilo
Maria Linda R. Ventenilla
Renata G. Rovillos
Cherry A. Cayabyab
Department of Education-SDO Dagupan City
Office Address: Burgos Street, Poblacion Oeste, Dagupan City
Telefax: (075) 515-6009
E-mail Address: dagupan.city@deped.gov.ph
Cabrera, M.E.B. (2016). Fundamentals of Accountancy, Business
and Management 1 for Senior High School ABM Curriculum. GIC
Enterprises & Co., Inc. C.M. Recto Avenue, Manila
Reyno, F.Z. et.al. (2019). Financial Accounting and Reporting 1
Fundamentals of Accounting. Reyno Publishing House. Perez
Boulevard, Dagupan City
Harina, R.M. (2007). College Accounting 1: Accounting for Service
and Merchandising Businesses, National Bookstore, Pioneer St.,
Mandaluyong City
To further understand the lessons kindly visit:
Analyzing Business Transactions
In this module, you will study how to perform the
fundamental mathematical operations – addition, subtraction,
multiplication, and division – on fractions. Learning how to perform
these operations accurately can help you solve real-life problems
related to business.
In this module you will learn to:
1. Analyze common business transactions using the rules of debit
and credit. ABM_FABM11- IIIg-j-27; and
2. Solve simple problems and exercises in the analyses of
business transaction. ABM_FABM11- IIIg-j-28.
https://www.youtube.com/playlist?list=PLGxEv9ADBII1GQsabQLD5rgsMuuwVHgD
PREPARED BY:
JACQUELINE G. MELENDEZ
Teacher III
In doing this module, please follow
these reminders…
1. Take the pretest before working
or answering the module.
2. Perform the activities as
suggested.
3. Answer all the exercises.
4. Check your answers against the
Key to Correction.
5. Take the Post Test.
Dagupan City National High School, Senior High School
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1
Direction: Write “Debit” or “Credit” on the space provided before
Debit or Credit
1. The left side of an account
2. The right side of an account
3. Increase in assets
4. Decrease in assets
5. Increase in liabilities
6. Decrease in liabilities
7. Increase in capital
8. Decrease in capital
9. Increase in revenue
10. Decrease in expense
each item.
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7. Paid ₱ 105,000 for business automobile.
A. Debit Cash, Credit Accounts Payable
B. Debit Transportation Expense, Credit Cash
C. Debit Automobile, Credit Cash
D. Debit Cash, credit Transportation Expense
8. Purchase office equipment in cash.
A. Debit Office Equipment, Credit Cash
B. Debit Office Equipment, Credit Accounts Payable
C. Credit Cash, Credit Office Equipment
D. Debit Accounts Payable, Credit Cash
9. Purchases on account: Office Supplies and Office Equipment
A. Debit Office Supplies and Office Equipment, Credit Cash
B. Debit Office Supplies and Office Equipment, Credit accounts
Payable
C. Debit Cash, Credit Office Supplies and Office Equipment
D. Debit Accounts Payable, Credit Office Supplies and Office
Equipment
10. The Accounts payable T-account shows the following: ₱1,200,
debit; ₱3,500 debit; ₱8,240, credit; and ₱100, credit. What is the
balance of the account?
A. ₱8,340 credit
B. ₱8,340 debit
C. ₱4,700 debit
D. ₱3,640 debit
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Direction: Choose the letter corresponding to the correct answer for
each of the questions provided below.
1. The started T-account includes all of the following except ____.
A. A credit side
B. A debit side
C. A title
D. The current date
2. Increases are entered on the credit side of a/an _____
A. Asset account
B. Liability account
C. Expense account
D. Drawing account
3. Which of the following is an asset account?
A. Insurance expense
B. Advertising expense
C. Office equipment
D. Service income
4. The fact that each transaction has a dual effect on the
accounting elements provides the basis for what is called
_____.
A. Single-entry accounting
B. Compound-entry accounting
C. Multiple-entry accounting
D. Double-entry accounting
5. J. Datuin invested ₱50,000 in a real state agency.
A. Debit Land, credit Cash
B. Debit Cash, Credit Land
C. Debit cash, Credit J. Datuin, Capital
D. Debit J. Datuin, Capital, Credit Cash
6. J. Datuin paid the monthly rent of the office.
A. Debit Cash, Credit J. Capital
B. Debit Rent Expense, Credit Cash
C. Debit J. Capital, Credit Cash
D. Debit Cashm Credit Rent Expense
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Before we proceed on this module, Let us recall the
elements that discussed on the previous modules.

Transactions can be defined as exchanges of values. For every
value received there is an equal value parted with. This nature
of every transaction gave rise to the double-entry
bookkeeping method (it means that every time a
transaction is recorded, the recording has two parts – the left
side and the right side).
 The Basic Accounting Equation is:

An account is defined as an accounting device used in
summarizing the changes in the assets, liabilities and owner’s
equity. A group of accounts is called a ledger.

The simplest form of an account is called a T-account.
If those topics were clear, you may proceed. Enjoy reading and
analyzing.
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Activity #3
Analyzing Business Transactions
Debit and Credit
The accountant uses the term debit (“debire”) in lieu of
saying “place an entry on the left side of the T-account” and credit
(“credire”) for “place an entry on the right side of the T-account.”


Debit (abbreviated Dr.) simply means left side;
Credit (abbreviated Cr.) means right side.
Thus, for any account, the left side is the debit side and the
right side is the credit side:
Name of Account
Debit
Credit
The difference between the total debits and the total credits
on an account is called account balance; an account may have
either a debit balance or a credit balance.
If the sum of debit exceeds the sum of credits, the result is a
debit balance; conversely, if the sum of credits exceeds the sum of
debits, the result is a credit balance.
Debits and credits are an accounting technique used to
record business transactions.
Direction: Analyze and record the transactions in the T-accounts
and determine the balance of each.
On February 1, 2020, Paul De Vera started a TV repair business.
1. He invested ₱50,000 in cash to start his business.
2. Purchased for cash shop supplies worth ₱3,500.
3. Paul bought repair equipment worth ₱20,000 on credit.
4. Customers paid ₱12,000 cash for repair services.
5. Paul paid ₱15,000 of the amount owed on the repair equipment.
6. Customers were billed on account ₱14,000 for repair services.
7. Rental for the month of February was paid, ₱6,000.
8. Collected ₱8,000 from customers to apply on their account.
9. Paid wages of assistant for the month of February, ₱4,000.
10. Bought ₱7,000 worth of repair parts, paid ₱3,000 and balance
on account.
11. Billed customers for ₱9,000, received ₱4,500 and balance on
account.
12. Repair supplies bought for cash and used for repairs amounted
to ₱6,500.
13. Paul withdrew ₱10,000 for personal use.
The accounts that were used to record the above transactions were
as follows:
Cash
Accounts Receivable
Shop Supplies
Repair Equipment
Accounts Payable
Paul, Capital
Paul, Drawing
Repair Income
Salary Expense
Rent Expense
The Rules of Debit and Credit
The rules of debit and credit are patterned after the
accounting equation.
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Activity #1
Direction: State whether the account should be debited or credited and
the normal balance of the account for the items listed below:
Activity #2
Direction: State the account to be debited and credited for the
following transaction. Choose from the following list of accounts:
Rule 1 To debit an asset means to increase an asset
To credit an asset means to decrease an asset
Rule 2 To credit a liability means to increase a liability
To debit a liability means to decrease a liability
Rule 3 To credit owner’s equity means to increase owner’s equity
To debit owner’s equity means to decrease owner’s equity
Expanding the accounting equation illustrates using debits
and credits for revenue, expense and drawing.
Rule 4 To debit a withdrawal account means to increase withdrawal
To credit a withdrawal account means to decrease
withdrawal
The withdrawal or drawing account is a deduction on the
owner’s equity section. Therefore, it has a contra or opposite effect.
Withdrawal can be directly debited to the capital account.
Rule 5 To credit revenue account means to increase the revenue
To debit revenue accounts means to decrease the revenue
The revenue account is an addition in the owner’s equity
section. Therefore, is has the same effect to the owner’s equity.
Rule 6 To debit an expense account means to increase the
expense
To credit an expense account means to decrease the
expense
The expense account is a deduction in the owner’s equity
section, therefore, it has an opposite effect to the owner’s equity.
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5
A summary of the RULES OF DEBIT AND CREDIT is as
follows:
Debit to
Credit to
Increase in asset
Decrease in asset
Decrease a liability
Increase a liability
Decrease in owner’s equity
Increase in owner’s equity
Increase a withdrawal
Decrease a withdrawal
Decrease a revenue
Increase a revenue
Increase an expense
Decrease an expense
Illustrations on the Rules of Debit and Credit
As you study each transaction, answer the following
questions:
1. What happened?
2. Which accounts are affected?
3. How is the accounting equation affected?
Transaction #1: Investment by owner
Jake deposited ₱20,000.00 in a bank account for his
business.
Analysis:
1. The business acquired an asset, Cash, and gives Jake’s owner’s equity.
2. The owner’s equity account is Jake, Capital. The asset, Cash is
increased and Jake, Capital is increased.
3. Debit Cash for ₱20,000.00 and Credit Jake, Capital for
₱20,000.00.
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Normal Balances and Increases and Decreases
Summarized below in a table are the normal balances of
major accounts and contra-asset accounts and how they move
(increase or decrease) through debit or credit.
Accounts
Normal
Balance
Increase
through
Decrease
through
+
-
Assets
Debit
Debit
Credit
Liabilities
Credit
Credit
Debit
Owner’s Equity
Owner, Capital
Owner, Drawing
Credit
Debit
Credit
Debit
Debit
Credit
Revenue
Credit
Credit
Debit
Expenses
Debit
Debit
Credit
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Transaction #6: Paid rent for the month
Jake paid ₱2.000.00 for office rent for January.
Analysis:
1. Rent Expense increases and Cash decreases.
2. Debit Rent Expense and Credit Cash for ₱2.000.00
Effect on the Accounting Equation
Effect on the Accounting Equation
Transaction #2: Purchase of an asset for cash
Jake bought a various Tools and Equipment for ₱12,000.00
cash.
Analysis:
1. Jake exchanged one asset, Cash, for another, Tools and
Equipment.
2. Tools and Equipment is increased and Cash is decreased
3. Debit Tools and Equipment and Credit Cash for ₱12,000.00
Effect on the Accounting Equation
Based on the T-account balances, the accounting equation
will show:
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7
Transaction #3: Purchase of an asset on account
Jake bought a second hand motor scooter for ₱9,000.00
Analysis:
1. The asset Tools & Equipment increase by ₱9,000.00 and the
liability, Accounts Payable, increases by the same amount.
2. Debit Tools & Equipment and Credit Accounts Payable for
₱9,000.00.
Effect on the Accounting Equation
Effect on the Accounting Equation
Transaction #5: Revenue earned in cash
Jake performed services and received ₱5.000.00 cash.
Analysis:
1. The asset, Cash, and the revenue, Service Fees, increase.
2. Debit Cash and Credit Service Fees for ₱5.000.00
Effect on the Accounting Equation
Transaction #4: Payment of Debt
Jake made the first ₱3,000.00 payment on the equipment
purchased in transaction.
Analysis:
1. This payment decreased the asset, Cash and decreased the
liability, Accounts Payable.
2. Debit Accounts Payable and Credit Cash ₱3,000.00
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