BASIC

ACCOUNTING
EQUATION
Entrepreneurship 10
 OBJECTIVE:
Illustrate accounting
equation in various
business transactions.
Let’s have a
REVIEW!
 What is DEBIT?
 The “value received” in a
business transaction and
usually on the left side entry.
What is
CREDIT?
 The “value parted with”
in a business transaction
and usually on the right
side entry.
How is DEBIT abbreviated?

“Dr”
 “Cr
How is CREDIT abbreviated?

”
 THE BASIC
ACCOUNTING
EQUATION
ASSETS = LIABILITIES + PROPRIETORSHIP

Algebraically, the following formulas can be

derived:

LIABILITIES = ASSETS – PROPRIETORSHIP

PROPRIETORSHIP = ASSETS - LIABILITIES
Let us illustrate the
accounting
equation as
follows…
CASE 1 CASE 2 CASE 3
Assume that Mr. Assume that Mr. Assume that Mr.
Emer Patiu invested Ruben Viray Nick Ligon gave
P10,000 cash as
invested assets cash and goods for
initial capital for a
vulcanizing business worth of P50,000 a buy-and-sell
called Patiu for handicraft business
Vulcanizing Shop. business. However, amounting to
The business also actual assets he P60,000. However,
took charge of invested is only a P5,000 notes
P2,000 payable of P40,000. payable by him to
furniture and PNB is assumed by
equipment it is using.
the business.
 THE BASIC
ACCOUNTING
EQUATION
 CASE 1
Assume that Mr. Emer Patiu invested P10,000
cash as initial capital for a vulcanizing business
called Patiu Vulcanizing Shop. The business also
took charge of P2,000 payable of furniture and
equipment it is using.
ASSETS = LIABILITIES + PROPRIETORSHIP
= P2,000 + P10,000
ASSETS = P12,000
 CASE 2
Assume that Mr. Ruben Viray invested assets
worth of P50,000 for handicraft business.
However, actual assets he invested is only
P40,000.

LIABILITIES = ASSETS - PROPRIETORSHIP

= P50,000 - P40,000
LIABILITIES = P10,000
 CASE 3
Assume that Mr. Nick Ligon gave cash and goods
for a buy-and-sell business amounting to P60,000.
However, a P5,000 notes payable by him to PNB
is assumed by the business.
PROPRIETORSHIP = ASSETS - LIABILITIES
= P60,000 - P5,000
PROPRIETORSHIP = P55,000
Apply the accounting
equation in illustrating
the given case problems
Belle invested the amount of
P100,000 for her coffee shop. As a
new business, she purchased furniture
and fixtures on credit in the amount
of P55,000. How much total assets
she has?
Belle invested the amount of P100,000 for her
coffee shop. As a new business, she purchased
furniture and fixtures on credit in the amount
of P55,000. How much total assets she have?

ASSETS = LIABILITIES + PROPRIETORSHIP

= P55,000 + 100,000
ASSET = P155,000.00
QUESTIONS
?
Illustrate the basic
accounting equation from
the given case problems.
Write your answer in ¼
sheet of paper.(5 points/item)
1. Mr. Henry Uy has a
poultry business
amounting to P150,000.
But his actual assets
worth only P85,000.
2. Elle Bake Shop has a total
property assets of P500,000.
However, the business has a
debt of P P200,000 from
Landbank of the Philippines.
ANSWER KEY
 1.
LIABILITIES = ASSETS - PROPRIETORSHIP

= P150,000 – 85,000

= 65,000.00
 2.
PROPRIETORSHIP = ASSETS - LIABILITIES

= P500,000 – 200,000

= P300,000.00
 GROUP
ACTIVIT
1. What accounting
equation used for
solving computing
assets?
2. What accounting
equation used for
solving computing
proprietorship?
3. What accounting
equation used for
solving computing
liabilities?
4. You paid initial capital of
P50,000 cash to your
laundry business but
have a P20,000 payable
of equipment.
5. Mr. Willy invested an
assets of P100,000 for a
buy-and-sell business, but
the actual assets he
invested is only P70,000.
6. Investing an assets
worth of P25,000 to a
sari-sari business and
have a debt obligation
of P10,000.
7. Assume that you are
selling lumpia in your
school with initial
investment of P500 with
debt obligation of P300.