Slide 1
BASIC ACCOUNTING
EQUATION
ANGELINA MARIE R. SANTOS, MBA
A. Prayer : Good Morning class! Let us all stand and pray.
Dear Lord, thank you for the blessings you have given us. Please guide us in our studies
today. Amen
B. Greetings: Hello class! How are you today? (Pause for a while) It’s good to hear that
your doing fine. So before we are going to proceed with our formal discussions, let me
first introduce myself. I’m Ms. Angelina Marie Santos, MBA currently affiliated at DSWD
FO III as Project Development Officer II assigned in the office of the Auditor.
C. Classroom Management : ¡°Before you sit, make sure that everything around you is in
proper.
Take note of the following
classroom rules:
Be on Time
Put your phone on silent
One-mouth-rule
D. Check Attendance: Let me check the attendance, Say Present as I call your name
Canlas, Regine = Present
David Pat ¨C Present
(Very good class nobody is absent today)
Let us now begin our lesson
Slide 2
Have you ever
been to the
circus?
“Ok class, have your ever been to the circus?
(“Yes ma’am”)
It is a fun place to go with your family right? There’s a lot of tricks that are performed in
a circus.
Slide 3
“So I have here a picture of a highwire act.” What do you observed in this picture?
£¨¡°Student will answer the question¡±£©
“Ok good. It’s amazing how that woman manage to walk across that thin wire
stretched way above the ground right?” What amazes me is that the thing they use to
keep their balance is just a long pole. It’s hard to believe, right?”
Slide 4
Tight Rope Walker
Accountant
Accounting
Equation
“Did you know that an accountant and a tightrope walker have the same goal? It’s true.
They both work hard to keep something balanced. Where the tight rope walker uses the
pole to
maintain balance, the
accountant uses a basic mathematical equation that is called the accounting equation to
make something balanced.”
Slide 5
Accounting Equation
• The whole of financial accounting is based on the accounting equation.
• For a firm to operate it needs resources (assets), and those resources have to
be supplied to the firm by the outsider (liabilities) or the owner himself
(capital or owner’s equity).
• Based on the accounting equation, we can describe the financial position of an
organization.
The whole of financial accounting is based on the accounting equation.
For a firm to operate it needs resources (assets), and those resources have to be
supplied to the firm by the outsider (liabilities) or the owner himself (capital).
Based on the accounting equation, we can describe the financial position of an
organization.
Slide 6
The Accounting Equation
ASSETS = LIABILITIES + OWNER’S EQUITY
Economic Resources
Claims to economic resources
“The accounting equation written as Assets = Liabilities + Owner’s Equity
Assets are the resources possessed by the business and expected to generate future
economic benefits
- Have cash value or can be converted into cash
Examples of assets in business: cash, land, building, machinery, supplies
Liabilities - obligations that are owed by the business and expected to provide assets or
services to outsiders in the future.
Examples of liabilities: accounts payable, mortgage loan etc.
Owner's equity is the portion of a company's assets that an owner can claim; it's what's
left after subtracting a company's liabilities from its assets.
Both liabilities and owner's equity are claims to economic resources
Slide 7
The Two Sides of the Equation
must be Equal
The resources we have
(ASSETS)
=
The resources from whom
supplied (liabilities+owner’s
equity)
What resources does the firm have? (Assets)
equals to
Where do those resources come from?
(Liabilities and Capital)
- The accounting equation must remain in balance (equal) at all times.
- An increase to the left (right) side would mean
- an increase to the right side
- a simultaneous decrease in another item(s) on the same side
Slide 8
Illustration in Business Transaction
Record the following transactions by use of the accounting equation
• Miss Santos started her business on March 1 and deposited
P80,000.00 into a bank account opened specially for the business.
2. On March 7, Miss Santos had borrowed P140,000.00 to puchase a
production machine.
Slide 9
Solution
a. Prayer
“Good morning class!Let us all stand and pray”
b. Greetings
“So how was your day?”
“So before we are
going to proceedto our formal discussion, let me first introduce myself. I am Ms. Maria
Teresa O. Aparre from Ozamiz. You can call me Ms. Teresa.
Classroom Management“Before you sit, make sure thateverything around
you
is inproper.Take note of
the followingclassroom rules: Be on Time Check
your internet connection (microphone and headset-online class) One-mouth rule
d) Checking of Attendance Class, who is absent today?
Slide 10
Activity: You are required to complete the gaps in the following table
Assets
1
2
47,000
?
3
52,100
4
123,400
5
39,800
6
Liabilities
?
Capital
32,000
?
21,000
34,000
?
17,600
65,400
?
?
22,700
43,420
11,730
Slide 11
Assets
Liabilities
Capital
1
47,000
32,000
15,000
2
55,000
21,000
34,000
3
52,100
34,500
17,600
4
123,400
65,400
58,000
5
39,800
17,100
22,700
6
55,150
43,420
11,730