Fundamentals of Accountancy

Learning Area Grade Level 11

W7 Quarter
Business and Management 1
3rd Quarter Date

I. LESSON TITLE Accounting Cycle - Transactions

II. MOST ESSENTIAL
The learners describe the nature of transactions in a service business (ABM_FABM11-IVa-d-
LEARNING
29)
COMPETENCIES (MELCs)
III. CONTENT/CORE CONTENT Business Transaction and Their Analysis As applied to the Accounting Cycle of a Service
Business
Ref: Teachers Guide FABM, pages 97-118/ FABM1 Textbook, pages 70-124/ Quexhub PERC
Learning Portal
Suggested
IV. LEARNING PHASES Learning Activities
Timeframe
A. Introduction 20 mins DAY 1
Panimula Good day! Welcome to another exciting week of learning. By the end of
our topic, you should be able to:
1. describe the nature of transactions in a service business,
2. perform transaction analysis of a service business, and
3. display timeliness, courtesy, consistency, and accuracy in service business
transactions.
Before we begin with our new lesson, can you tell what has been retained from your
accounting cycle lesson? Can you briefly discuss each step?
B. Development 145 mins Let us begin your Pre-test. Read and understand the following questions. Write the letter of
Pagpapaunlad the correct answer in your accounting journal.
PRE-TEST
1. Which of the following does not correctly define a business transaction?
A. an exchange between at least two parties
B. an exchange involving money, goods, or services
C. an activity involving changes on the assets, liabilities, and owner’s
equity
D. an act of providing something to oneself
2. What is a service business?
A. It benefits customers.
B. It is a commercial enterprise that provides work performed by an individual or
team.
C. It produces non-physical outputs in the form of service.
D. Options A, B, and C
3. Which of the following is an example of a service business?
A. Banking B. Cleaning C. Consulting D. Options A, B, and C
4. What type of business transaction is applicable in the service business of full body
massage?
A. Complex transaction B. Simple transaction
C. Ongoing transaction D. Options A, B, and C
5. What is exchange in a transaction involving service business?
A. Money and property B Money and franchise
C. Money and goods D. Money and service

That was great!

Let us now proceed with our topic.
A business transaction is an exchange between two parties such as a company to its
customers. There is an exchange of money, goods, or services and in service business
transactions; money and services are being exchanged. It is also an activity involving
changes in the assets, liabilities, and owner’s equity. A service business is a commercial
enterprise that provides work performed by an individual or team. It produces non-physical
outputs in
the form of service. Here, there is an exchange of service and cash. It aims to provide the
fullest service to its customers. Examples are Banking, Consulting, and Cleaning. Here,
money and service are being exchanged. It is also associated with “tangibles” such as the
following: (1) Aesthetics of the place;
(2) Quality of the seating; (3) Cleanness of the place. It should know first customers’
expectations so that they will know the right service they can provide to the customers.

Classification of Service Business Transactions

External or exchange transactions where there is an exchange of value with external
parties. Examples: (1) Providing an overnight room to backpackers;
(2) Offering a healthy meal to cyclists; (3) Letting runners use the tracking field for training.
Cash transactions wherein cash is received or paid immediately after the transaction.
Examples are eating at a buffet restaurant, watching a movie in the cinema, and relaxing in
an hour of massage. Credit transaction wherein cash is received or paid on the agreed
future date after the transaction. An example is enrolling for another month of gym wherein
cash is paid on a scheduled date in a month.

Type of Service Business Transactions

Simple transactions involve a simple exchange between cash and service such as massage
service. Complex transaction involves a series of transactions such as a number of papers
to be signed and provided before the loan is provided. Ongoing transactions involve
multiple types of transactions such as booking for a hotel, booking for an airline, and
booking for tour packages among others before a vacation package is provided to families.
In service business transactions, customers want value that pertains to the performance,
characteristics, features, attributes, and any other aspect of services for which customers are
willing to give up resources (usually money).

The ways to effectively provide value to the customers are the following: (1) Providing
service that they need; (2) Providing service when they need it; (3) Providing service where
they need it. Service quality is one of the important matters to be considered in service
business transactions and the following are the service quality dimensions: (1) Timeliness;
(2) Courtesy; (3) Consistency; and (4) Accuracy. Customer satisfaction should also be
considered. It measures how the services meet or surpass a customer’s expectations. It refers
to how satisfied or not the customers upon receiving the service they need. It also provides
pointers to the management on how to effectively manage and improve service businesses.

Photo courtesy of QuexBook Smart Mobile Learning

Here are the top six reasons why customer satisfaction is so important:

1. It is a leading indicator of consumer repurchases intentions and loyalty.

2. It is a point of differentiation.
3. It reduces customer churn.
4. It increases customer lifetime value.
5. It reduces negative word of mouth.
6. It is cheaper to retain customers than acquire new ones.
 Customer advocates the customers who are satisfied with the services and who can leverage
to become evangelists of the company who can bring in more customers to the service
business.

On the other hand, analyzing business transactions from source documents requires
familiarity with business documents. Common business documents are official receipts
(usually for a service business), sale invoice usually for merchandising business),
statements of accounts or billing statements (an example is electricity bill), deposit slips and
withdrawal slips (for banks), payroll sheets (for salaries and wages), debit memoranda,
credit memoranda, among others. You may search the internet, ask your parents, or visit a
business if possible for some examples of these documents.

Nevertheless, transaction analysis only involves three simple steps. These are the following:
1. Classify whether the transaction is a business or a non-business transaction. If the
transaction is a non-business, then there is no need to proceed to step 2.
2. Identify the major account/s and the account title/s affected and the movements with
respect to its/ their normal balance/s.
3. Determine the amount/s to be credited or debited.

I hope you learned a lot about service business. Now, choose one or two of your classmates,
friends, or family members to help you analyze each service business transaction. Write
your analysis in your accounting journal. Letter A is already given.
ACTIVITY 1 – Transaction Analysis!
A. February 14, 2018 – Juan dela Cruz invested PHP200,000 into his
Minesgate Computer Repair business.
Following the three simple steps, our analysis shall be:
1. It is a business transaction since it affects the accounting equation.
2. The major accounts affected are assets and owner’s equity. More specifically,
the account titles affected are Cash (increase through a debit) and dela Cruz,
capital (increase through credit).
3. The amount to be debited is P200,000 for Cash (accounts with normal debit
balances are increased through a debit) and the amount to be credited is
P200,000 for dela Cruz, Capital (accounts with normal credit balances are
increased through a credit).
B. February 15, 2018 - Juan dela Cruz purchased one computer unit from Octagon
Computer Store to be used for his business. He issued a check number 001 amounting
to PHP25,000.
C. February 16, 2018 - Juan dela Cruz hired Perla Silangan, an experienced secretary.
D. February 17, 2018 – Repaired the computer of Jose and collected PHP10,000.
E. February 18, 2018 – Repaired the computer of Maria. However, Maria will pay
PHP15,000 only on March 18, 2018.
F. February 19, 2018 – Juan dela Cruz purchased office supplies from J&R
Merchandise amounting to PHP5,000 on the account. Juan dela Cruz will pay this on
March 30, 2018.
G. February 25, 2018 – Paid the salary of Perla Silangan amounting to PHP4,000.
That was fun!

6. Engagement 15 mins DAY 2

Pakikipagpalihan Today, let us continue the excitement with yesterday’s lesson. Get your transaction analysis
yesterday and do the following activity below. Copy and answer it in your accounting
journal.
ACTIVITY 2 –Effects on Transactions
 Proverbs 21:8 - The way of man [is] froward and strange: but [as for] the pure, his work
[is] right.

To summarize the aforementioned transactions, yesterday had the following effects on the
major accounts and account titles. Complete the table below. Number 1 is already given.

Owner’s Equity
Transaction Assets Liabilities
(+C+R+E+W)
Increase of Increase of P200,000
A No effect
P200,000 (Cash) (dela Cruz, Capital)
B
C
D
E
F
G
7. Assimilation 40 mins ACTIVITY 3 –Debit or Credit
Paglalapat In your accounting journal, create a table for a summary of normal balances, the increases
(through), and the decreases (through) of Assets, Liabilities, Owner’s Equity, Revenues,
Expenses, and Valuation (Contra-asset) accounts. Write Debit or Credit.

V. ASSESSMENT 15 mins Before we end our topic, let us have your post-test. Please copy and answer the following
(Learning Activity Sheets for questions in your accounting journal.
Enrichment, Remediation or Assessment
to be given on Weeks 3 and 6)
POST-TEST
1. Which of the following is one of the service quality dimensions that are significant
in transactions involving service business?
A. Courtesy B. Timeliness C. Consistency D. Options A, B, and C
2. What is accuracy as one of the service quality dimensions that are significant in
transactions involving service business?
A. Accessibility to customers B. Performed correctly each time

C. Fully serviced, as required D. Options A, B, and C

3. What is customer satisfaction?
A. Provides pointers for managing and improvement of service businesses
B. Measures how services meet or surpass a customer’s expectations
C. An important matter considered in service business transactions
D. Options A, B, and C
4. What are customer advocates in a service business transaction?
A. Persons who can bring out customers from the company
B. Persons who can watch customers go
C. Persons who can leverage to become evangelists of the company
D. Options A, B, and C
5. Which of the following is an example of the “tangibles” associated with a service
business transaction?
A. Aesthetics of the place B. Cleanness of the place
C. Quality of the seating D. Options A, B, and C

VI. REFLECTION 5 mins ● Communicate the explanation of your personal assessment as indicated in the
Learner’s Assessment Card.
● In your accounting journal write your personal insights about the lesson using the
prompts below.
I understand that .
I realize that .
I need to learn more about .

Prepared by: Jennifer B. Fernandez, SDO Imus City Checked by: Dr. Josephine P. Canlas, Adora G. del Mundo, Cherie
L. Logatoc