ACC 104: Fundamentals of Accounting

and Financial Statement Analysis

Student Activity Sheet #3

Navarrete, Kendrick C'zar M.

Name: ____________________________________________________ Class #:_____________
Section: SJC-1BSBA-MM-A
____________ Schedule: ____________________________ Date: _______________
Dec 4, 2023

Lesson Title: Basic Accounting Equation, Double-Entry Systems Materials:

and the Rules of Debits and Credits Activity Sheet #3

Lesson Objectives: References:

At the end of this module, I should be able to: Basic Financial Accounting and
1. Illustrate the accounting equation and use it solving Reporting, WIN Ballada
accounting problems Financial Accounting and
2. Describe the double entry system of recording transactions Reporting, Zeus Vernon Millan
3. State and apply the rules of debit and credit

Productivity Tips:
After finishing this module, write some tips on what helped you learn on your Learning Tracker in
Thinking About Learning.

A. LESSON PREVIEW/REVIEW
Introduction
Good day future entrepreneur! Please smile as we start this new session. 
Today, another great lesson you can learn from this module. This lesson will introduce you to the
most exciting and popular topic in accounting: the rules of debit and credit. Don’t get worry yet, I know you
heard that this is a mind-blowing topic but with a right amount of focus and confidence you will learn and
enjoy it for sure!
Happy learning! 

Activity 1: What I Know Chart, Part 1

Do you know anything about the lesson today? Try answering the questions below by writing your
ideas under the first column What I Know. It’s okay if you write key words or phrases that you think related
to the questions.
What I Know Questions: What I Learned (Activity 4)

The accounting equation shows how a
company’s assets, liabilities, and equity
are related and how a change in one
typically results in a change to another.
Double-Entry accounting system is a dual effects of a
business transactions are recorded. it is recorded in
two parts a debit, and a credit. Each amount that is
debited, there must be a corresponding amount that
is credited, and vice-versa. a debits for a transaction
must be always be equal the total credits.
A debit is an accounting entry that either
increases an asset or expense account,or
decreases a liability or equity account.
A credit is an accounting entry that either
increases a liability or equity account, or
decreases an asset or expense account.
1. What is the accounting
equation?
2. What do you mean by double
entry accounting system?
3. What do you mean by debit?
Credit?
All the process in an accounting system must
observe the equality of the accounting equation. Accounting
equation is the most basic tool of accounting and the
equality of it must be maintained at all times because if not,
there is an error.
Double-Entry accounting system is a dual effects of a
business transactions are recorded. it is recorded in two
parts a debit, and a credit. Each amount that is debited,
there must be a corresponding amount that is credited,
and vice-versa. a debits for a transaction must be always
be equal the total credits.
Debit – from the Latin word debere; the left side of
the account or accounting equation
Credit – from the Latin word credere; the right side
of the account or accounting equation

A normal balance refers to the 4. What is normal balance? refers to the side of the account – debit or
debit or credit balance that's credit – where increases are recorded.
normally expected from a certain
account.

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 ACC 104: Fundamentals of Accounting
and Financial Statement Analysis
Student Activity Sheet #3
B. MAIN LESSON
Activity 2: Content Notes

The Accounting Equation

All the process in an accounting system must

observe the equality of the accounting equation. Accounting
equation is the most basic tool of accounting and the
equality of it must be maintained at all times because if not,
there is an error. The basic accounting equation is shown
ASSETS LIABILITIES below:
EQUITY

ASSETS = LIABILITIES + EQUITY

Let’s try it!

Illustration: You decide to put up a barbeque stand and estimated that you will be needing
P2,000 as start-up capital.
You then went to your closet and broke Mr. Piggy bank which you have been saving for quite
some time now. Alas! You have only P800. You try to ask your parents but unfortunately they can’t help
you. As of this point, your accounting equation is as follows:

ASSETS = LIABILITIES + EQUITY

800 = 0 + 800

Since you are a determined entrepreneur you don’t just give up because Mr. Bombay is just
around the corner. After a lengthy negotiation, Mr. Bombay agreed to lend you P1,200. So your
accounting equation becomes:

ASSETS = LIABILITIES + EQUITY

800 = 0 + 800
1200 = 1200 + 0
2000 = 1200 + 800

Notice that your total assets or resources controlled are now P2,000 (from your capital of 800
and liability of 1,200).

You can do it! Using the accounting equation as your guide, compute the missing amounts.

ASSETS = LIABILITIES + EQUITY

1. 350,000 290,000 ?
2. 530,000 ? 270,000
3. ? 790,000 130,000
4. 2,200,000 890,000 ?
5. 300,000 (100,000) ?

If your answers are the following then you understand the importance of maintaining the equality of
accounting equation:
60,000; 260,000; 920,000; 1,310,00 and 400,000

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 ACC 104: Fundamentals of Accounting
and Financial Statement Analysis
Student Activity Sheet #3

The Account and T-account

Account (also known as the basic summary device) it the basic storage of information in
accounting. It is a record of the increases and decreases in a specific item of asset, liability, equity,
income or expense. An account may be represented through a “T- account” known as simplest form of
account.

ACCOUNT TITLE
Debit Credit
Left Side Right Side

Debit – from the Latin word debere; the left side of the account or accounting equation
Credit – from the Latin word credere; the right side of the account or accounting equation

Double-entry Accounting System

 Accounting is based on a double-entry system which means that the dual effects of a business
transaction are recorded.
 Each transaction is recorded in two parts – debit and credit.
 No transaction is recorded by a debit alone or a credit alone.
 For each amount that is debited, there must be a corresponding amount that is credited, and
vice-versa
 The total debits for a transaction must always equal the total credits.

Rules of Debit and Credit

BALANCE SHEET ACCOUNTS

ASSETS LIABILITIES & EQUITY

Debit Credit Debit Credit
(+) (-) (-) (+)
Increases Decreases Decreases Increases

Normal Balance Normal Balance

INCOME STATEMENT ACCOUNTS

EXPENSES INCOME
Debit Credit Debit Credit
(+) (-) (-) (+)
Increases Decreases Decreases Increases

Normal Balance Normal Balance

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 ACC 104: Fundamentals of Accounting
and Financial Statement Analysis
Student Activity Sheet #3
Normal Balance of an Account
 refers to the side of the account – debit or credit – where increases are recorded.

Increases Recorded by Normal Balance

Account Category
Debit Credit Debit Credit
Assets / /
Liabilities / /
Equity / /
Income / /
Expense / /
Withdrawal / /

Activity 3: Skill-building Activities

Let’s practice! After completing each exercise, you may refer to the Key to Corrections for feedback.
Try to complete each exercise before looking at the feedback.

Exercise 1: True or False.

Write T if the statement is correct, otherwise F if it is incorrect.
T 1. Liabilities + Equity = Assets
T 2. Assets – Liabilities = Equity
T 3. In every debit there should be a corresponding credit
T 4. The equality of accounting equation must be maintained in all cases
F 5. Credit means decrease
F 6. Normal balance refers to the side of the account either debit or credit where
decreases are recorded
F 7. A transaction can be recorded by a debit alone or a credit alone.
F 8. Increase in equity is recorded at debit
F 9. Increase in withdrawal is recorded at credit
F 10. Debit means increase

Exercise 2: Identification
Identify the normal balance of each item presented below. Write Dr. for Debit and Cr. for Credit.

Dr. 1. Prepaid Insurance Expense Cr. 6. Deferred Income

Dr. 2. Depreciation Expense Dr. 7. Accounts Receivable
Cr. 3. Equipment Cr. 8. Capital
Cr. 4. Sales Dr. 9. Withdrawal
Cr. 5. Accrued Expense Cr. 10. Notes Payable

Activity 4: What I Know Chart, part 2

It’s time to answer the questions in the What I Know chart in Activity 1. Log in your answers based on
what you now know in the third column of the chart.

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 ACC 104: Fundamentals of Accounting
and Financial Statement Analysis
Student Activity Sheet #3

Activity 5: Check for Understanding

Short Quiz: Problem Solving

Choose the letter of the correct answer and show your solution.

Questions: Answer and Solution:

1. Which of the following is correct? Answer: ________
A
ASSETS LIABILITIES EQUITY Solution:
a. 7,850 1,250 6,600 Assets = Liabilities + Equity
b. 8,200 2,800 11,000
c. 9,550 1,150 8,200 7,850 = 1,250 + 6,600
d. 5,420 6,540 1,120
2. At the beginning of the year, the assets of XYZ Answer: ________
A
Service Company were P360,000 and its owner’s Solution:
equity was P200,000. During the year, assets Assets = Liabilities + equity
increased by 120,000 and liabilities increased by 360,000 = 160,000 + 200,000
20,000. What was the owner’s equity at the end of the 120,000 = 20,000 + 100,000
year? So the total Owner's Equity at the end of the year
a. 300,000 c. 100,000 is. 300,000
b. 200,000 d. 400,000
3. The liabilities of ABC Company is equal to one-third Answer: ________
C
of the total assets and the owner’s equity is P240,000. Solution:
What is the amount of the liabilities? Assets = Equity + Liabilities
a. 80,000 c. 120,000 a = 240,000 + 0.33a
360,000 = 240,000 + Liabilities
a - 0.33a = 240,000
b. 360,000 d. 400,000 0.66a = 240,000
Liabilities = 360,000 - 240,000
Liabilities = 120,000
a = 360,000 This can be tested to prove its correct
0.33 Assets = Liabilities
0.33(360,000) = 120,000

C. LESSON WRAP-UP

Activity 6: Thinking about Learning

Congratulations for finishing this module! Shade the number of the module that you finished
answer the questions below.

You are done with the session! Let's track your progress.
Period 1 Period 2 Period 3

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

1. What could you have done better to improve your learning today?
______________________________________________________________________________
None
__________________________________________________________________________________
__________________________________________________________________________________
2. What surprised you about the lesson today?
______________________________________________________________________________
Normal balance of accounting
__________________________________________________________________________________
__________________________________________________________________________________

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 ACC 104: Fundamentals of Accounting
and Financial Statement Analysis
Student Activity Sheet #3
3. Some tip/s on what helped you learn about this module is/are:
the video provided
______________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________

FAQ

1. What’s the reason why every time an asset increases it should be recorded to debit and not
to credit?

Answer: Accounting equation explains why assets increase must be recorded at debit. As you
noticed, asset is in the left side of the accounting equation. In this side (left) asset normally increases.
This is also the reason why asset has a normal balance of debit.

KEY TO CORRECTIONS

Answers to Skill-Building Exercises

Exercise 1: True or False
1. T
2. T
3. T
4. T
5. F
6. F
7. F
8. F
9. F
10. F

Exercise 2:
1. Dr.
2. Dr.
3. Dr.
4. Cr.
5. Cr.
6. Cr.
7. Dr.
8. Cr.
9. Dr.
10. Cr.

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