BUSINESS ETHICS
The
Accounting
Equation
Learning Competency:
Illustrate the accounting equation
ACCOUNTING EQUATION
ASSETS =
LIABILITIES +
OWNERS’ EQUITY
ILLUSTRATIVE EXAMPLE
Compute for the missing amount
• Assets:
P70,000
• Liabilities: 0
• Owners’ Equity: ?
ILLUSTRATIVE EXAMPLE
ASSETS
Cash
Cleaning
Equipment
Cleaning
Supplies
Loan Payable
=
LIABILITIES
+
P85,000
20,000
5,000
P40,0000
Perez, Capital
Total
CAPITAL
P110,000 =
P40,000
+
P70,000
P70,000
ILLUSTRATIVE EXAMPLE
ACCOUNTS
ASSETS
Cash
P52,000
Equipment
109,000
Supplies
=
LIABILITIES
+
CAPITAL
5,800
Accounts Payable
Notes Payable
30,000
Natty, Capital
Total
P102,000
P166,800
=
?
+
P102,000
ILLUSTRATIVE EXAMPLE
Filemon Car Repair Shop started the business with total
assets of P100,000 and total liabilities of P50,000 on
January 1, 2014. During the year, the business
recorded P140,000 in car repair revenue, P85,000 in
expenses and Filemon withdrew P12,000.
Required:
1. Compute for the correct net income of Filemon’s Car
Repair Shop for the year ended December 31, 204.
2. Compute for the correct change (net movement) in
Filemon, Capital during the year 2014.
3. Compute for the correct balance of Filemon, Capital
account at the end of the year
ILLUSTRATIVE EXAMPLE
+
CAPITAL
+ Revenues
- Expenses
- Withdrawal
ILLUSTRATIVE EXAMPLE
Car repair revenue
Deduct: Total expenses
Net income
Net income
Deduct: Withdrawal
Change in Filemon capital
P140,000
85,000
55,000
P55,000
12,000
43,000
ILLUSTRATIVE EXAMPLE
Total Assets, January 1, 2014
Deduct: Total liabilities, January 1 , 2014
Change in Filemon capital, January 1, 2014
Add: Change in Filemon Capital
Filemon, Capital, December 31, 2014
P100,000
50,000
50,000
43,000
93,000
ACTIVITY
Answer Exercises 6-9 Problem Solving
Textbook Page 60