SHS
Fundamentals of Accountancy,
Business and Management 1
Module 6
i
ABM • Fundamentals of Accountancy, Business and Management I
Module 6
First Edition, 2021
Copyright © 2021
La Union Schools Division
Region I
All rights reserved. No part of this module may be reproduced in any form
without written permission from the copyright owners.
Development Team of the Module
Author: Narciso A. Martin Jr., T-II
Editor: SDO La Union, Learning Resource Quality Assurance Team
Illustrator: Ernesto F. Ramos Jr., P II
Management Team:
Atty. Donato D. Balderas, Jr.
Schools Division Superintendent
Vivian Luz S. Pagatpatan, Ph.D
Assistant Schools Division Superintendent
German E. Flora, Ph.D, CID Chief
Virgilio C. Boado, Ph.D, EPS in Charge of LRMS
Lorna A. Gaspar, EPS in Charge of Accountancy Business and
Management
Michael Jason D. Morales, PDO II
Claire P. Toluyen, Librarian II
Target
After reading these learning materials, the learner must analyze common
business transactions applying the rules of debit and credit and its significance to
ensure a balanced accounting equation in a business's life.
Every individual or business must fully understand the importance of a
balanced equation every time there are value exchanges among goods and services.
The Accounting cycle compels future Bookkeepers and Accountants in the field to
have mastery on applying the rules of debit and credit to warrant the accuracy of
financial data that will help individuals and business owners with their decisionmaking.
After going through this information sheet, the learner expects to
Analyze common business transactions using the rules of debit and credit
(ABM_FABM11-IIIg-j-27) and solve simple problems and exercises in the
analyses of business transactions (ABM_FABM11-IIIg-j-28).
Subtasks
1. Discuss the concept of a double-entry bookkeeping system
2. Analyze the rules of debit and credit in business transactions
3. Apply the rules of debit and credit in solving business transactions
Jumpstart
Pretest Activity:
Directions: From the keywords inside the main boxes, recall some basic business
transactions or personal experiences that best describe them. Put your answers
inside the connecting boxes. Use a separate sheet. (20 points)
DEBIT
(value received)
CREDIT
(value given out)
For you to understand the lesson well, let us do some
practice drills. Have fun!
Activity 1
Direction: Read the situation below then answer the questions that follow. Use a
separate sheet to show your computations. (25 points).
Situation: Supposed your parents or guardians give you P150 as your allowance for
the day and had the following transactions:
Allowance: P150
Transactions made
Paid morning tricycle fare
Bought one (1) ballpen
Bought morning snacks
Bought lunch
Paid 5 pages photocopied papers
Bought afternoon snacks
Bought one (1) pencil
Bought 5 pcs short bond papers
Bought 5 pcs Construction papers
Paid Afternoon Tricycle Fare
Total:
Amount paid
Table 1. Learner’s Transaction
Provide a short answer to the following questions.
1. How much was left in your pocket?
2.
What were the items or transactions that shortened your allowance for the
day?
3. From each of the transactions you had for the day, what did you exchange
with to get it?
4. Do you think you get the value of each transaction every time there are
exchanges of values? Support your answer.
5. Based on the transactions above, explain the importance of exchanging value
amounts in every transaction? Support your answer.
Discover
The Concept of Double-Entry Bookkeeping System
The “two sides” of the Accounting equation apply the dual aspect concept,
which provides that every value received must have a corresponding value parted
with or value gave out. This concept is the basis of debit and credit in recording
economic transactions and events. The two equal sides define the foundation of the
rules of debit and credit.
A debit (Lat. Debitum, “a debt”) is a value received in a business transaction
which must record in the journal. The place of debit in the equation is on the lefthand
side.
A credit (Lat. Creditus, “a creditor”) is the value parted or value given out
within a business transaction, which must record in the journal. The place of credit
in the equation is on the right-hand side.
The Double Entry Bookkeeping is a discovery of human effort, not science,
because of the business world's evolving complexities. It is the outcome of continued
efforts to meet the changing necessities of trade. It justifies the concept "that in every
value received (debit), there is value parted with or value given out (credit)." Source:
Accounting Made Easy By Win Lu Ballada (2010)
Can you guess what will be the debit and credit entries in the transaction as
shown below?
Exchange of values
Figure 1. The Double Entry Bookkeeping System
Types of Bookkeeping Systems
1. Single Entry Method – is similar to a stand-alone checkbook. For example,
when you make a deposit, your balance increases, and when you issue a
check, your balance decreases. It gives a one-sided picture for a single-legged
entry of the transaction made.
2. Double Entry Method – involves financial data with equal and opposite effect
in every transaction. For example, when you issue a check, you decrease cash,
but at the same time, you increase the account corresponding to the reason
for the expense, such as salaries or office supplies.
Analyzing the Rules of Debit and Credit in Business Transactions
As a general rule, a Bookkeeper or an Accounting clerk must first analyze every
business transaction that happened for the period. It realizes by understanding the
nature and movement of economic transactions. Again, it is a must to have mastery
in applying the rules of debit and credit to warrant the accuracy of financial reports
at the end of the accounting period.
The Rules of Debit and Credit
The rules of debit and credit follow the normal balance of an accounting
element or account. The term "normal balance" of an account refers to an account's
usual position in the financial reports.
Asset accounts are generally in the debit balance, while the liability and
owner's equity accounts are usually in the credit balance.
The normal balance of an account provides the basis for analyzing when to
debit and credit an account. The following rules must observe when to debit or credit
an asset, liability, and capital accounts.
Basic Accounting Elements
Entries (Increase/Decrease)
Assets
Debit to increase the amount of asset
Credit to decrease its amount
Liabilities
Credit to increase the amount of liability
Debit to decrease its amount
Owner’s Equity
Credit to increase the capital account
Debit to decrease its amount
Owner’s Drawing
Debit to increase withdrawal account
Credit to decrease its amount
Income
Credit to increase the income account
Debit to decrease its amount
Expense
Debit to increase expense account
Credit to decrease its amount
This part summarizes the rules of debit and credit in the accounting equation.
Increase or
Decrease
Assets, Withdrawals
and Expenses
Liabilities, Capital
and Income
To record increases
DEBIT
CREDIT
To record decreases
CREDIT
DEBIT
Table 2. The Rules of Debit and Credit
Let us analyze the given examples of debit and credit entries to some common
transactions.
1. Jose is not able to attend regular classes due to the COVID-19 pandemic. He
started saving his P40 fare every day for the whole month of June 2020.
June 30, 2020
Cash
P800
Jose, Savings
P800
:. To record personal savings made by Jose.
2. Ben bought some supplies that he will use to answer all the activities in the
modules while studying at home that cost him P300 for July 2020. July 31,
2020 School Supplies P300
Cash
P300
:. To record the expenses paid by Ben.
3. Maria paid his miscellaneous for the School Year 2020 – 2021, amounting to
P560 on August 31, 2020.
August 30, 2020
Miscellaneous
P560
Cash
P560
:. To record the payment of miscellaneous (tuition fees).
Applying the Rules of Debit and Credit in Business Transactions
A financial report is usually prepared and submitted to help management in
decision-making in a typical business setting. It is a prerequisite to analyze first the
business transactions and then apply the rules of debit and credit entries. In the
succeeding modules, the structures and significance of the different financial reports
will discuss.
Let us carefully examine how debit and credit rules shall apply in a service
type of business.
Given Case: Based on the Balance Sheet (BS) date as of November 2020 of Growee,
it appeared the following financial information:
Cash
P 47,000.00
A/R
28,000.00
Car
750,000.00
Equipment 55,000.00
Furniture
45,000.00
P925,000.00
Loans Payable
Growee, Capital
P100,000.00
825,000.00
P925,000.00
The following transactions appeared in the books of Growee for December
2020.
December 2020
3
Received payments for the rendered services amounting to P15,000.00.
8
Collected payments for the rendered services amounting to P8,000.00.
16
Paid utilities expense amounting to P3,000.00; Gas and Oil amounting
to P2,000.00 and repair amounting to P3,000.00.
18
Paid company’s loan amounting to P20,000.00.
20
25
27
30
31
Received payments for the rendered services amounting to P7,500.00.
Collected payments for the rendered services amounting to P5,000.00.
Paid utilities expense amounting to P750.00.
Paid rent expense amounting to P10,000.00 and salaries expense
amounting to P9,000.00.
The owner withdrew P5,000.00.
Applying the rules of debit and credit entries for the foregoing transactions of
Growee for December 2020, the General Journal (GL) has the following account titles
with their corresponding balances.
General Journal
Date
Account Titles and Explanations
Page No. 1
Debit
PR*
Credit
2020
Dec
3
Cash
P
15,000.00
Service Income
P
15,000.00
To record payment for professional fees.
8
Cash
8,000.00
Accounts Receivable
8,000.00
To record collections of receivables.
16
Utilities Expense
3,000.00
Gas and Oil
2,000.00
Repair Expense
3,000.00
Cash
8,000.00
To record payment of expenses.
18
Loans Payable
20,000.00
Cash
20,000.00
To record payment of loans.
20
Cash
7,500.00
Service Income
7,500.00
To record payment for professional fees.
25
Cash
5,000.00
Accounts Receivable
5,000.00
To record collections of receivables.
27
Utilities Expense
Cash
To record payment of expenses.
750.00
750.00
30
Rent Expense
10,000.00
Salaries Expense
9,000.00
Cash
19,000.00
To record payment of expenses.
31
Steven, Drawings
5,000.00
Cash
5,000.00
To record owner's cash withdrawals.
P
88,250.00
P
88,250.00
*Omitted Posting Reference (PR)
Let us summarize the effects of debit and credit entries based on the foregoing
transactions in the accounting equation of Growee for December 2020.
Explore
Activity:
Directions: Interview one (1) Sari-sari store owner (attach a photo) in your barangay
and indicate all the possible transactions which involve value receives (debt) and
value is given out (credit). Use a separate sheet and present your outputs following
the format below. (10 points)
Sari-Sari Store’s Name___________________
All Debit Transactions
All Credit Transactions
1.
6.
2.
7.
3.
8.
4.
9.
5.
10.
Please attached a photo of the Sari-sari Store located at Barangay ________________
Insert photo
Deepen
Activity 1. Increase or Decrease?
Directions: Review again the account titles of the Basic Accounting Elements
(Assets, Liabilities, Owner’s Capital, Income, Expenses). Evaluate the transactions
below and determine how their normal balances get increased or decreased. Write
the word DEBIT or CREDIT on the blank side after the account title if you think its
normal balance increases by an entry. Use a separate sheet. (20 points)
Increased by?
Rent Expense
___________
Telephone Expense ___________
Water
___________
Internet
___________
Power/light
___________
Salaries
___________
Wages
___________
Commission
___________
Equipment
___________
Repairs
___________
Loans Payable
Notes Payable
A/R
A/P
Cash
Supplies
Tools
Machineries
Drawings
Furnitures
Decreased by?
__________
__________
__________
__________
__________
__________
__________
__________
__________
__________
Activity 2. Give and Take!
Directions: Based on the business transactions of Juan Magalang, indicate in the
appropriate column, the ACCOUNT TITLES. The Basic Accounting Elements provided
these ACCOUNT TITLES. Use a separate sheet. (10 points)
Business Transactions
Juan Magalang invested 150K cash.
1
Purchased laundry equipment on
account from SCI Corp.
2
Borrowed money from the bank
payable in 3 years with the laundry
equipment as collateral.
3
Paid salary (15th) of the store helper.
4
Paid the rent of the office space.
5
Bought laundry supplies for cash.
6
Bought additional laundry equipment,
issued a 30-day note.
Value Received (Take)
Value Parted With (Give)
Cash
Juan Magalang, Capital
7
Billed Mr. Lawrence for laundry
services done.
8
Received cash from various customers
for laundry services.
9
Received the full payment from Mr.
Manzano on his account of previous
month.
10
Paid salary (30th) of the store helper.
Great job! You have understood the lesson well!
Are you now ready to take the final assessment?
Gauge
Posttest. Debit and Credit Entries.
Required: Analyze the given business transactions and apply the rules of debit and
credit entries. Use a separate sheet for your answers with a General Journal format.
(15 points)
Carbs Computer and Cellphone Shop was opened by Carbs on November 01,
2020, with a cash investment of P200,000.00 and furniture worth P5,000.00.
Additional transactions for the month following;
November 2020
3
Signed Contract of Lease and deposited P15,000.00.
4
Paid for the construction of display counters, P25,000.00.
5
Bought repair supplies for cash, P7,500.00.
6
Bought and paid for furniture and fixture, P45,000.00.
8
Bought repair equipment worth P15,000.00 from XYO Co. for use in the store.
Paid 50% with the balance to be paid within 30 days.
9
Collected P1,500.00 for cellphone repair services.
10
Billed Madison Corp. P3,500.00 for computer repair services rendered.
13
Paid for salaries of clerks, P5,000.00.
14
Summary of cash received P4,000.00 and a promissory note for
P2,000.00 for computer repair services.
15
Signed a contract with Telecom System for the repair work to be done on their
computers, P15,000.00.
16
Paid for telephone, light and water, P3,800.00.
17
Collected P1,500.00 from Madison.
18
Sent a bill to Telecom System for repair work done.
22
Total Cellphone repair work collected in cash, P8,500.00.
25
Repair supplies used amounted to P2,200.00.
29
Payments for; Salaries, P5,000.00; Rent, P5,000.00.
30
Carbs made a personal cash payment of P2,500.00 to XYO Co.
Carbs used
Receivable; Repair
Accounts Payable;
and Maintenance;
Utilities Expense.
the following account titles: Cash; Accounts Receivable; Notes
Supplies; Office Furniture; Repair Equipment; Deposit for Rent;
Carbs, Capital; Carbs, Personal; Repair Fees Revenue; Repairs
Repair Supplies Used; Rent Expense; Salaries Expense; and
You’re done on this part. Great job! Congratulations!
References
Books
Ballada, Win Lu (2010). Basic Accounting Made Easy. 15 th Edition. ISBN: 978-971-944938-6. Chapters
1-15 DomDane Publishers and Made Easy Books. Sampaloc, Manila
Department of Education Curriculum Guide (2013). Fundamentals of Accountancy, Business and
Management I for Grade 11. K to 12 Senior High School ABM Specialized Subject. Second Semester.
Pp 1-6. December 01, 2013. Pasig City, Manila.
Department of Education Teacher’s Guide (2016). Fundamentals of Accountancy, Business and
Management I. Teaching Guide for Senior High School – Academic ABM. The Commission on Higher
Education in collaboration with the Philippine Normal University. Pp 1-187. EC-TEC Commercial.
Quezon City.
Martin, Narciso Jr., A. and Nieva, Jimena Veronica T. (2019). Fundamentals of Accountancy,
Business and Management I. Specialized Subject. Department of Education ROI. La Union Schools
Division Office. Don Eulogio de Guzman Memorial National High School. Senior High School
Department. Accountancy, Business and Management Strand. Document Seq No 001. s, November
2019. Pp 1-68.
Website
https://phlconnect.ched.gov.ph/search/category/businessrelated
Key Answer