THE ACCOUNTING

EQUATION
GRADE 11- 3RD QUARTER
 OBJECTIVES
At the end of this lesson, the students are expected to be able to:
A.Understand the Accounting Equation and its elements;
B. Solve problems using the Accounting Equation; and
C.Cultivate appreciation of the value and importance of accounting
equation for personal use and career preparation.
4PICS ONE WORD!

ASSETS
 ASSETS
•An asset is something an entity
owns or controls in order to
derive economic benefits from
its use.
4PICS ONE WORD!

LIABILITIES
 LIABILITIES
• A liability is an obligation that a
business owes to someone. Its
settlement involves the transfer
of cash or other resources.
4PICS ONE WORD!

EQUITY
 EQUITY
•It is what the business owes to its
owners. It reflects the residual
claims of the owner.
 ASSETS

LIABILITIES EQUITY
ASSETS EQUITY
LIABILITIES
 REMEMBER

•When using the accounting equation, one must remember that both
sides of the equation must be equal at all times. Each transaction
would have to affect at least two accounts in order for the equation
to remain in balance.
•+Asset, -Asset
•+Asset, +Equity or -Asset, -Equity
•+Asset, +Liability or -Asset, -Liability
FIRST SCENARIO

I am starting up a business. In January 1, 2025,

I invested my personal money, Cash of
P100,000. What do you think are the 2
accounts involved in this scenario?
ANSWER:

Increase in Asset, Cash for

P100,000 and Increase of
Owner’s Equity, Capital of
P100,000.
SECOND SCENARIO

February 1, 2023 came. I purchased Equipment on

account for my business amounting P15,000. Who
can provide the 2 accounts that are affected in this
scenario?
ANSWER

Increase Asset, Equipment of P15,000

and Increase in Liability, Accounts
Payable of P15,000
 REMEMBER

Transactions that have words like “on

account”, “through credit”, “by loan” and the
like means that the transaction is not paid by
cash but rather, purchased through a liability.
THIRD SCENARIO

• March 31, 2025 came. It’s time for me to pay my Rent

dues amounting P5,000 by cash, also at the same time I
received cash because of the services that I rendered for
the month, an income of P10,000. What do you think
are the components or accounts being affected?
ANSWER

Both Increase and Decrease in Asset, Cash is

deducted by P5,000 and increased by P10,000 then
Increase in Expense and Increase in Revenue
which is Rent Expense of P5,000 while Service
Revenue is P10,000
 ACCOUNTING EQUATION

•Assets= Liabilities + Equity

•Liabilities= Assets- Equity
•Equity = Assets- Liabilities
 CHECK YOU UNDERSTANDING
ASSETS LIABILITIES EQUITY
1 500,000 200,000
2 250,000 250,000
3 2,700.000 2,500,000
4 450,000 275,000
5 850,000 200,000
 WORD PROBLEM
1.The economic obligations of a business amount
to P60,000 and its residual interest amounts to
P200,000. What would be the amount of the
economic resources of the business?
 SOLUTION

Assets=Liabilities + Equity
= P60,000 + P200,000
= P260, 000
 WORD PROBLEM

2. The economic resources of a business

amount to P500,000 and its economic
obligations amount to P250,000. What would
be its residual interest?
 SOLUTION

Equity= Assets - Liabilities

= P500,000 - P250,000
= P250,000
 WORD PROBLEM

3.The company’s assets are

P12,000,000 out of which is 1/3
represents owner’s equity. How
much is the total liabilities?
 SOLUTION

Liabilities = Assets - Equity

=P12,000,000 - P400,000
= P800,000
 CHECK YOUR UNDERSTANDING
EQUITY
ASSETS LIABILITIE Capital Drawings Revenue Expense
S (+) (-) (+) s
(-)
1 80,000 10,000 30,000 5,000 60,000

2 11,000 15,000 2,000 10,000 4,000

3 44,000 18,000 20,000 1,000 6,000

 GROUP ACTIVITY
GROUP I
I have Cash amounting P200,000, I have my Equipment amounting
P300,000, Service Vehicle for P150,000 and my Equity is amounting
P500,000. How much is my Liabilities?

GROUP II
I have Cash of P100,000, Building worth P300,000, Land worth
P1,000,000 and Liabilities of 500,000. How much is my Owner’s Equity?
 QUIZ TIME
•Direction: Solve the following problems using the Accounting Equation in 15 minutes. (20 points)
For items 1 to 5, identify what accounts are affected and its amount. For item 6, complete the table
and show the solution.

1. On January 1, 2023, Dan made an initial investment of P500,000.00 cash in DPE Company.
2. On February 15, 2023, Dan paid his monthly rent due for the month of January amounting to
P2,000.00.
3. On February 28, 2023, Dan acquired office equipment worth Php100,000.00 on account of Chenie
Company.
4. On March 31, 2023, Dan made a cash withdrawal amounting to P50,000.00 from the business.
5. On April 31, 2023, Dan paid cash, 50% of its February 1, 2023 accounts payable to Chenie
Company
 QUIZ TIME
Complete the table show your solution;

ASSETS LIABILITIES EQUITY

1 500,000 150,000
2 120,000 250,000
3 700.000 200,000
4 450,000 225,000
5 550,000 230,000
ASSIGNMENT:

•Using an existing song or melody, compose a song by integrating the accounting definition and its
basic concepts. (2-3 minutes to be presented next meeting)
Criteria:
Melody - Beauty of the melody; high recall (hook) 30%
Lyrics - Beautiful and meaningful lyrics
20%
Musicality - Melodic structure, relationship of lyrics to melody
30%
Relevance - Connection of lyrics to Fundamentals of Accounting
20%

100%
Take Home Task:

Answer Assessment on Page 22 in the Self-

Learning Module