Department of Education
CAMP VICENTE LIM INTEGRATED SCHOOL
Discussing Accounts, Preparing Charts
& Illustrating Journals and Ledger
FUNDAMENTALS OF ABM 1
PATRICK R. NAHIAL
WARM-UP & REVIEW QUIZIZZ
ACTIVITY #1
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Review of the Previous Lesson CVLIS
OBJECTIVE
After going through this lesson,
you are expected to:
• define and explain what is asset, liabilities, and capital or
equity are.
• illustrate the accounting equation; and
• perform operations involving simple cases with the use
of accounting equation.
• discuss the five (5) major accounts and prepare chart of
accounts.
• illustrate the format of a general ledger and special
journals and illustrate the format of a general and
subsidiary ledger.
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CVLIS
The
accounting
equation
THE ACCOUNTING EQUATION
ASSET = LIABILITIES + EQUITY
A=L+C
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CVLIS
THE ACCOUNTING EQUATION
ASSETS
An asset is a resource controlled
by the entity as a result of past
events and from which future
economic benefits are expected
to flow to the entity.
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CVLIS
THE ACCOUNTING EQUATION
LIABILITIES
A liability is a present
obligation of the enterprise
arising from past events, the
settlement of which is
expected to result in an
outflow from the enterprise
of resources embodying
economic benefits.
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CVLIS
THE ACCOUNTING EQUATION
CAPITAL/
EQUITY
Equity is the residual
interest in the assets
of the entity after
deduction all its
liabilities.
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THE ACCOUNTING EQUATION
RESOURCES = CLAIMS
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THE ACCOUNTING EQUATION
CLAIMS of the Creditors
RESOURCES = +
CLAIMS of the Owner
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CVLIS
THE ACCOUNTING EQUATION
LIABILITIES
RESOURCES
ASSETS = +
CAPITAL/EQUITY
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THE ACCOUNTING EQUATION
A=L+C ASSET = LIABILITY + EQUITY
L=A-C LIABILITY = ASSET - EQUITY
C=A-L EQUITY = ASSET - LIABILITY
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CVLIS
Knowledge Check
ANSWER THE FOLLOWING
1. XYZ Company has an asset of ₱100,000 and has
liabilities ₱45,000. How much is the capital?
C = A - L | C = ₱65,000
2. ABC Company has a liabilities of ₱30,000 and capital
of ₱30,000. How much are the assets?
A = L + C | A = ₱60,000
3. MNO Company has assets of ₱123,000 and capital of
₱65,000. How much are the liabilities?
L = A - C | L = ₱58,000
Exercise # 1 We lead, we serve, we excel with a heart
CVLIS
Knowledge Check
ANSWER THE FOLLOWING
ASSETS LIABILITIES CAPITAL
1 400,000 150,000 ? ₱ 250,000
2 ? 800,000 1,200,000 ₱2,000,000
3 3,000,000 ? 1,800,000 ₱1,200,000
4 4,200,000 896,000 ? ₱3,304,000
5 ? 523,000 755,000 ₱1,278,000
Exercise # 2 We lead, we serve, we excel with a heart
CVLIS
Five
major
accounts
The Five Major Accounts
ASSETS LIABILITIES EQUITY INCOME EXPENSES
are decreases in
is increases in economic
are the resources are your is assets minus economic benefits benefits during
you control that present liabilities. during the period in the period in the
have resulted obligations that the form of inflows form of outflows
from past events have from past or enhancements or depletions of
and can provide events and can of assets or assets or
you with future require you to decreases of increase of
economic give up liabilities that result liabilities that
benefits. resources in increases in result in decrease
when settling equity, other than in equity, other
them those relating to than those
investments by the relating to
business owners. distributions to
the owners.
The Five Major Accounts
Answer the following questions:
1. What account are we going to use if the
businessman purchased supplies worth ₱5,000
on the new “Food Kiosk” he started?
2. What account are you going to use if the owner
wants to record the loan payable in schedule?
3. The company earned ₱50,000 on that deal.
What account are we going to used?
4. He bought office supplies on account. What
account are we going to use?
5. When you compute a cash investment minus
obligation it is describe as what account?
ASSETS
CURRENT ASSETS NONCURRENT ASSETS
Cash Long-Term Receivable
Accounts Receivable Land
Office Supplies Building
Merchandise Inventory Equipment and Machineries
Prepayment covering less than 1 year Furniture and Fixtures
Investment in Equity Securities
Intangible Assets
Investment Properties
Prepayment extending more than 1 year
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LIABILITIES
CURRENT LIABILITIES NONCURRENT LIABILITIES
Accounts Payable Long-Term Notes Payable
Short-Term Notes Payable Bonds Payable
Unearned Revenue Deferred Tax Payable
Accruals Other long-term liabilities
Other short-term liabilities
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CAPITAL
SOLE PROPRIETORSHIP PARTNERSHIP CORPORATION
Owner’s Equity Partner’s Equity Share Capital
Owner’s Drawing Partner’s Drawings Share Premium
Retained Earnings
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REVENUE
SERVICE COMPANIES MERCHANDISING AND
MANUFACTURING
Service Revenue Sales Revenue
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EXPENSES
Salaries Representation
Rent Transportation
Utilities Communication
Depreciation
Repair and Maintenance
Gas and Oil And many more….
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NORMAL BALANCE OF ACCOUNT
ACCOUNT DEBIT CREDIT NORMAL BALANCE
Assets + - Debit
Liabilities - + Credit
Equity - + Credit
Revenue - + Credit
Expenses + - Debit
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CHART OF ACCOUNT
Chart of account is a listing of the
names of the accounts that a
company has identified and made
available for recording of
transactions.
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FINANCIAL STATEMENTS
are a structured representation of the financial
position and financial performance of an entity. The
objective of the financial statements is to provide
information about the financial position, financial
performance and cash flows of an entity that is useful
to a wide range of users in making economic decision.
Financial statements also show the results of the management’s
stewardship of the resources entrusted to it. To meet this objective,
financial statements provide information about an entity’s:
a) Assets;
b) Liabilities;
c) Equity;
d) Income and expenses, including gains and losses;
e) contributions by and distributions to owner in their capacity as
owners; and
f) cash flows;
This information along with other information in the notes, assists users
of financial statements in predicting the entity’s future cash flows and,
in particular, their timing and certainty.
An account is the basic storage of
information in accounting. It is a
record of the increases and
decreases in a specific item of
assets, liability, equity, income or
expense, as represented by
individual ledger pages, to which
changes in value are chronologically
recorded with debit and credit entries.
An account may be depicted through a “T-account.” A “T-account” is called
as such because it resembles the letter “T”.
THREE PARTS OF T-ACCOUNT
1. Account title – describe is describes the specific item of asset, liability, equity, income or expense.
2. Debit side – the left side of the account
3. Credit side – the right side of the account
Knowledge Check
TRUE OR FALSE
1.The difference between the total
debits and credits in the account
represents the balance of the
account.
TRUE
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Knowledge Check
TRUE OR FALSE
2. If total credits exceed total debits,
the account has a debit balance.
FALSE
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CVLIS
Knowledge Check
TRUE OR FALSE
3. A Chart of accounts is a list of all the
accounts used by the entity.
TRUE
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Knowledge Check
TRUE OR FALSE
4. The Income Statement accounts are
assets, liabilities and owner’s equity.
FALSE
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Knowledge Check
TRUE OR FALSE
5. All income is revenue.
FALSE
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Knowledge Check
IDENTIFY THE ACCOUNT TITLE AND THE MAJOR ACCOUNT IN THE
FOLLOWING TRANSACTIONS.
1. He purchased table napkins worth ₱200 to be used in
your barbecue operations. SUPPLIES, ASSETS
2. The customer with the ₱500 account receivable is
broke you have estimated that you can only collect
₱420 from him. ACCOUNTS RECEIVABLE, ASSETS
3. He hired a helper in a barbecue business. The
employee earns compensation of ₱8,000. SALARIES EXPENSE
4. The cost of barbecue that was sold for ₱500 is ₱300.
SALES REVENUE, REVENUE
Activity # 3 We lead, we serve, we excel with a heart
CVLIS
Knowledge Check
Indicate whether it is an increase, decrease, or no effect on the asset,
liabilities, and equity accounts.
Transaction Asset Liabilities Equity
1. Investment of cash in the business
+ N/E +
2. Purchase of computer equipment for cash
N/E N/E N/E
3. Billed a customer for services rendered
+ N/E +
4. Received a loan granted by bank
+ + N/E
5. Paid advertising expense
- N/E -
Activity # 4 We lead, we serve, we excel with a heart
CVLIS
Book of
accounts
BOOK OF ACCOUNTS
is a set of books used by
accountants to record
transactions and events
that are financial in nature.
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GENERAL JOURNAL
The accounting book
where the business
transactions are first
recorded. Also called as
the book of original entry.
The process of recording in
the journal is called
journalizing.
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Books of Accounts CVLIS
GENERAL JOURNAL
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Books of Accounts CVLIS
GENERAL LEDGER
The accounting book
where the business
transactions are finally
recorded. Also called as
the book of final entry.
The process of
recording in the ledger
is called posting.
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Books of Accounts CVLIS
GENERAL LEDGER
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Books of Accounts CVLIS
GENERAL LEDGER
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Books of Accounts CVLIS
GENERAL LEDGER
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Books of Accounts CVLIS
GENERAL LEDGER
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Books of Accounts CVLIS
SPECIAL JOURNALS AND SUBSIDIARY LEDGERS
Special Journals are journals designed for
transactions that are repetitive and recurring, in
which the use of general journal would be
inefficient.
Subsidiary Ledgers are ledgers that support the
main general ledger account.
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Books of Accounts CVLIS
CASE ANALYSIS
Direction: Analyze the case and find out if Jenny Rose was able to compute the total
assets and total owner’s equity of the business as of the quarter ended December 30,
2018 correctly.
Jenny Rose, the sole proprietor of the photocopying business that opened
October 1, 2018. For the quarter ended December 30, 2018, the business
was able to make revenues of ₱50,000 (all in cash) and it was able to incur
expenses of ₱35,000 (all in cash). As the end of the quarter, total liabilities
amounted to ₱50,000. Jenny wants to know the business total assets and
total owner’s equity. With the help of his friend who is an accountant, he
arrived at ₱75,000 total assets and ₱25,000 total owner’s equity. Moreover,
Jenny Rose had an investment of ₱45,000 cash and Equipment amounting to
₱30,000.
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Activity No. 4 CVLIS
CASE ANALYSIS
Asset = Liabilities + Equity
₱75,000 = ₱50,000 + ₱25,000
₱75,000 = ₱75,000
Cash ₱ 45,000
Equipment 30,000
Total Assets ₱ 75,000
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Activity No. 4 CVLIS
ASSESSMENT
Activity # 5 We lead, we serve, we excel with a heart
CVLIS
Department of Education
CAMP VICENTE LIM INTEGRATED SCHOOL
Thank You!
