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    Accounting Equation

    Uploaded by

    Mimi Adriatico Jaranilla
    The document introduces the accounting equation, which states that assets are equal to liabilities plus owner's equity. It provides examples of assets, liabilities, and owner's equity using a fictional business called Campus Pizza. The accounting equation is illustrated through a series of transactions involving Orlando Reyes' business and students are given a quiz to test their understanding.

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    © All Rights Reserved
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    Accounting Equation

    Uploaded by

    Mimi Adriatico Jaranilla
    49 views10 pages
    The document introduces the accounting equation, which states that assets are equal to liabilities plus owner's equity. It provides examples of assets, liabilities, and owner's equity using a fictional business called Campus Pizza. The accounting equation is illustrated through a series of transactions involving Orlando Reyes' business and students are given a quiz to test their understanding.

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    The document introduces the accounting equation, which states that assets are equal to liabilities plus owner's equity. It provides examples of assets, liabilities, and owner's equity using a fictional business called Campus Pizza. The accounting equation is illustrated through a series of transactions involving Orlando Reyes' business and students are given a quiz to test their understanding.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    49 views10 pages

    Accounting Equation

    Uploaded by

    Mimi Adriatico Jaranilla
    The document introduces the accounting equation, which states that assets are equal to liabilities plus owner's equity. It provides examples of assets, liabilities, and owner's equity using a fictional business called Campus Pizza. The accounting equation is illustrated through a series of transactions involving Orlando Reyes' business and students are given a quiz to test their understanding.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 10

    At the end of the session, the

    learners should be able to:


    A. Understand the basic
    accounting equation
    B. Illustrate the accounting
    equation
    C. Perform operations involving
    simple cases with the use of
    accounting equation.
    ASSETS
     are resources a business owns

     The businesses uses its assets in carrying out such

    activities as production and sales.


     The capacity to provide future services and benefits

    which eventually results in cash inflows. (receipts)

    For Example:
    Campus pizza owns a delivery truck that provides
    economic benefit from delivering pizzas. Other assets
    of Campus Pizzas are tables, chairs, jukebox, cash
    register, oven, tableware and of course cash.
    LIABILITIES
     are claims against assets – that is existing debts and

    obligations.
     Businesses of all sizes usually borrow money and

    purchase merchandise on credit. These economic


    activities result in payables of various sorts.
    For Example:
     Campus pizza, for instance purchase cheese, sausage,

    flour, and beverages, on credit from suppliers. These


    obligations are called accounts payable.
     Campus pizza also has a note payable to a bank for

    the money borrowed to purchase the delivery truck.


     Campus Pizza may also have wages payable to

    employees and sales and real estate taxes payable to


    the local government.
    OWNER’S EQUITY
     The ownership claim on total assets is owner’s

    equity.
     It is equal to total assets minus total liabilities. Here

    is why : The assets of a business are claimed by


    either creditors or owners. To find out what belongs
    to the owners, we subtract the creditors’ claims (the
    liabilities from asset. The remainder is the owner’s
    claim on the assets – the owner’s equity. Since the
    claim of creditors must be paid before ownership
    claims, owner’s equity is often referred to as residual
    equity.
    The Basic Accounting Equation
     Thethree account have the same relationship to
    each other. We call this relationship the
    Accounting Equation.

    Owner’s
    Asset Liabilities Equity

     The 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)
    Cash Supplies Income
    Land Building Expenses
    Accounts Salaries Drawing
    Payable Payable
    Capital Notes Equipment
    Receivable
    Let us assume that on July 1, 2010
    Orlando Reyes engaged in business
    with a cash capital investment of
    P100,000.00. On this date, the
    accounting equation is:

    Assets = Liabilities + Owner’s Equity


    Cash = Capital
    P100,000.00 = 0 + P100,000.00
    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.
    Transactions:
    1. Orlando deposited P750,000 in the bank in
    the name of D & W Enterprise.
    2. Orlando purchased land amounting to
    P500,000, paid in cash.
    3. Orlando Reyes purchased P20,000 supplies
    paying in the near future.
    4. Received P55,000 from services rendered.
    5. Paid the following expenses: Salaries
    P10,000; Rent P5,000; Utilities P4,000 and
    miscellaneous Expense P2,000
    Quiz
    Using the given data accomplish the
    accounting equation by applying
    necessary operations:
    Assets Liabilities Owner’ Equity

    a. 760,000.00 360,000.00 ?

    b. 860,000.00 ? 592,000.00

    c. ? 108,000.00 760,000.00

    d. 626,600.00 376,240.000 ?

    e. ? 800,000.00 (100,000.00)

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