TASK SHEET 2 THE ACCOUNTING EQUATION che Basic Accounting Equation In relation to double-entry bookkeeping, ensuring equal debit effect and credit effect is fundamental to the universal acceptance of the basic accounting equation, Because of this, the basic accounting equation should be in balance at all times. This equation is represented below. ASSETS = LIABILITIES + OWNER’S EQUITY Assets must be equal the sum of liabilities and owner’s equity. The equal sign in the equation ensures balance of the movement in the three main accounts being used in accounting, The equal sign also separates the left side (debit) from the right side (credit) of the equation. ‘The same accounting equation was used by Jose Mercado in computing for the correct total assets and total owner’s equity. This equality should be preserved at all times. This basic equation serves as the backbone of the entire accounting cycle. All the steps that go with the accounting cycle should abide by this equation. Expanded Accounting Equation Now that other accounts have been introduced, let us expand the accounting equation by including the revenue, expenses, and withdrawal accounts. The expanded equation will look like this: INCREASE DECREASE OWNER’S: EQUITY CaaS ASSETS, = LIABILITIES: + OWNER’S EQUITY ‘Capital Investment Revenue (Expenses) (Withdrawal) Date Developed: Document No.1 Fundamentals of ABM 1 June 2023 ‘Revision # 01 | | The Accounting Equation Developed. Tesued by Page 13 of 202Here are some sample transactions of Rob Photocopying Services and the effects to the accounting equation on January 2023. January 1 — Mr. Rob Lee, the owner, invested capital of P20,000. Analysis: The company received cash from the owner. Assets (Cash) increased and owner's equity (Rob Lee, Capital) increased. Transaction Effects in the Accounting Equation: ee SET: - ties || OWNER’S 2023 | Explanation ASSETS LIABILITIES EQUITY Jan.[_1 [Owner's Investment 20,000 20,000 January 2— Acquired loan from a bank, P30,000. Analysis: The company received cash from bank arising from barrowing. Assets (Cash) increases and liability (Loan Payable) increased. ‘Transaction Effects in the Accounting Equation: OWNER’S 2023 | Explanation ASSETS. =| LIABILITIES EQUITY Jan.| 2 [Acquired loan from Bank 30,000 30,000 January 3 — Purchased printers on cash, P1,000. Analysis: The company received the printer that it had purchased. Thus, it increased assets (Printer) but a decreased in another form of asset (Cash) ‘Transaction Effects in the Accounting Equation: OWNER’S 2023 | Explanation ASSETS | =| LIABILITIES EQUITY Jan.] 3 | Purchase printers for cash 1,000 1,000) January 4 — Rendered services and received cash, P500. Analysis: The company received cash for services rendered. Cash increased thereby increasing assets. At the same time, owner's equity (Rob Lee, Capital) is increased hecause of the income (Service Revenue) earned. Transaction Effects in the Accounting Equation: OWNER’S 2023 Explanation ASSETS =| LIABILITIES EQUITY Jan.|_4 | Services rendered for cash 500 500 Date Developed: Document No.1 3) Fundamentals of ABM 1 jawentas Revision #0 ] 1¢ Accounting Equation ‘Developed by: Tssued by Page 14 of 202 The Accounting Fa Eietikiee | BeMs |January 5 — Rendered services on account, ?750. Analysis: The company rendered services on account. The services have been rendered, hence, already earned, thus, the P750 worth of services rendered is considered income even if the amount has not yet been collected, Asset (Accounts Receivable) increased and owner's equity (Service Revenue) increase. Transaction Effects in the Accounting Equation: _ |, | OWNER’S 2023 | Explanation ASSETS =| LIABILITIES EQUITY Jan. | 5 | Services rendered on credit 750 750, January 6 — Purchased office supplies on account, 200. Analysis: Office supplies worth P200 were acquired. This increases the company's Office Supplies thereby increasing total assets. The purchase results in an obligation to pay to the supplier thereby, liabilities (Accounts Payable) increased by P200. Transaction Effects in the Accounting Equation: OWNER’S 2023 | Explanation ASSETS. =| LIABILITIES EQUITY Tan. |_6 | Purchase of supplies on credit 200 200 January 7— Had some equipment repaired for P400, to be paid after 15 days. Analysis: The company incurred P400 Repairs Expense. Expenses decreased owner's equity. The amount has not yet been paid; thus, it results to an increase in liabilities (Accounts Payable). ‘Transaction Effects in the Accounting Equation: OWNER’S 2023 | Explanation ASSETS =| LIABILITIES EQUI Jan. |_7 | Repair equipment on credit 400 (400) January 8 - Mr. Rob Lee, the owner, withdrew P5,000 cash for personal use. Analysis: The owner withdrew 5,000 cash. Cash is decreased thereby decreasing total assets. Withdrawals or drawings decrease (Rob Lee, Capital) owner's equity. Transaction Effects in the Accounting Equation: | — ties || OWNER’S 2023 | Explanation ASSETS LIABILITIES EQUITY Jan.[ 8 [Owner's withdrawal (5,000) (5,000) Date Developed Dosumeat NT Fundamentals of ABM 1 Sune 2025 Revision #0 ‘The Accounting Equation Developed by rom Page 15 of 202 Raberto P. Rebueas I NSJanuary 9 — Paid one-third of the loan obtained on January 2. Analysis: One-third of the P30,000 loan was paid. Therefore, Assets (Cash) decreased by P10,000 due to the payment. Liabilities (Accounts Payable) also decreased by the amount paid. The partial payment actually cancels some of the Loans Payable previously recorded. Transaction Effects in the Accounting Equation: OWNER’S 2023 | Explanation ASSETS, =| LIABILITIES | + | “gourry Jan.|_9 | Partial payment of loan (10,000) (10,000) |_| January 31 — Received customer payment from services on January 5. Analysis: The P750 accounts in a previous transaction has been collected. Therefore, the asset (Accounts Receivable) is decreased and another form of asset (Cash) is increased. Transaction Effects in the Accounting Equation: OWNER’S: 2023 | Explanation ASSETS =| LIABILITIES -| EQUITY 5 750 Jan.| 31 | Collection of customer’s account (750) The summary of the transaction effects of Rob Photocopying Services on January 31, 2023 is presented below: Rob Photocopying Services Transaction Analysis Worksheet January 31, 2023 ; OWNER’S 2023 Explanation ASSETS LIABILITIES + “pourry Jan_[_1 | Owner's investment 20,000 20,000 2 | Acquired loan from bank 30,000 30,000 1,000 3 | Purchased printer for cash (000) 4 | Services rendered for cash 500 500) 5 | Services rendered on credit 750) 750 6 | Purchase of supplies on eredit 200) 200) 7 | Repair equipment on eredit 400) (400)) 8 | Owner's withdrawal (5,000) (6,000) 9 | Partial payment of loan 10,000) 10,000) Bolles customer's accou 750 31 | Collection of customer's account 750) Balance 36,450 = 20,600 + 15,850 Date Developed Doses Nal Fundamentals of ABM 1 fne 2023 Revision #0 [The Accounting Equation ‘Develops by iesed by Page 16 of 202 Rabeto P. Rebueas I NSTASK PROBLEMS: Task 2-1 The narrative transactions taken from Kythe Management Consultancy Services for the Month of January 2023 follows: Jan 5 ~ Invested P100,000 cash for the Management Consultancy Services. 10 — Purchased supplies inventory of P15,000. Paid cash P10,000 and made oral promise to pay for the balance. 15 — Received P35,000 cash from a client for services rendered. 20 — Purchased an equipment costing P40,000. Paid cash of P30,000 and the balance on credit. 22 — Withdrew cash of P15,000 for personal use. 26 — Paid taxes and licenses, P7,000 27 — Paid salaries, P15,000. 30 — Rendered consultancy service on credit, P20,000, Required: Prepare a transaction analysis worksheet on January 31, 2023, by completing the template given on the next page: Kythe Management Consultancy Services Transaction Analysis Worksheet January 31, 2023 OWNER’S 2023 Explanation ASSETS = LIABILITIES + “pourry Jan | 5 10 15 20 22 26 27 30 Balance Docu No Fundamentals of ABM 1 aes Revision |___ The Accounting Equation Developed Teed Page 17 of 202 Roberto P, Rebueas Lala NUS,Task 2-2 The narrative transactions taken from Simpak Intemet Café for the month of March 2023 were given below Mar.2 - Mr. Richard Tee, the owner, invested P100,000 for the business. 4 - Bought computer tables and chairs for cash, P10,000. 6 - Bought 12 units computer worth P160,000, Paid cash P70,000 as downpayment and the balance on account. 8 - Bought office supplies on account from Air Supply Company, P15,000, 13. - Received P35,000 cash from customers for services rendered. 15. - Paid business permits to the local government, P7,000. 20 = Paid the account with Air Supply Company in full. 25. - Rendered services to customers on credit, P25,000. 29 - Collected P20,000 from customers’ account. 31. - Paid salaries to employees, P5,000. Required: 1. Prepare a Transaction Analysis Worksheet with the following column heading: Cash, Accounts Receivable, Office Supplies, Office Equipment, Furniture and Fixtures, Accounts Payable, and Tee, Capital. 2. Total each column and assess the equality of the accounting equation. Simpak Internet Café Transaction Analysis Worksheet March 31, 2023 ASSETS JLiABiiries OWNERS DATE EQUITY can | Accounts | omfce | ommce | Furniture | Accounts | 7.6 Capita Receivable | Supplies | Equipment | & Fixtures | Payable | T+ C#” Mar | 2 4 6 8 13 15 20 25 29 31 Balance Dat Developed Docume Na 3) Fundamentals of ABM 1 cana Rev ‘The Accounting Equation Developed Tews Page 18 of 202Task 2-3 ‘The following selected transactions were taken from the book of Ozamiz Laundry Ser and managed by Mr. Allan Young on February 2023 Feb, wan 10 - 12 - 1s - 20 - 22 - 25 - 28 - Required: 1. Prepare a Transaction Analys Mr. Allan Young invested cash of P150,000. Rendered service to a customer on account, P4,000. Bought computer on account, P40,000, Mr. Allan Young withdrew cash of P5,000 for his personal use. Paid office rental for the month P1,000. Partial payment of account, P3,000. Mr. Allan Young invested office table, P10,000. Partial collection of a customer's account P2,000. Barrowed money from a bank and issued a promissory note, P10,000. Paid taxes and licenses and other assessments P1,000. Paid the bank for barrowed money, P10,000. Received cash for services rendered, P3,000, Bought office supplies on account, P5,000. Paid in full the office supplies account, P5,000, ices, owned Worksheet with the following column heading: Cash, Accounts Receivable, Office Supplies, Office Equipment, Furniture and Fixtures, Accounts Payable, Notes Payable and Young, Capital. 2. Total each column and assess the equality of the accounting equation. ‘Ozamiz Laundry Services Transaction Analysis Worksheet February 28, 2023 asses tiamuries | OUSER'S ca] gecctaute | sopptes | equpment | &'ivurc | Prauie | prabie | Capa re 2 4 6 7 § 3 io 2 5 20 2 25 28 Balance @ Date Develop Dosumneat Wo Fundamentals of ABM 1 Sane 2023 Revision #0 ‘The Accounting Equation Developed Tesued ty "e Fa Roberto P, Rebueas Lala NUS, Page 19 of 202Task 2-4 Listed below are the selected business transaction Purling Company during its first month of operations: Mar 1 ~The owner invested cash in the business amounting to P300,000. 5 — Purchased equipment for cash amounting to PS0,000. 10 — Purchased furniture amounting to P30,000. Made P10,000 cash downpayment and the balance of P20,000 on account. 12 ~Purchases inventories through credit amounting to P35,000. 22 —Paid cash to the local government for business permit, P9,000. 26 — Made sales of P17,000. Cash sales P12,000, on account P5,000. 27— The cost of sales made on March 26 amounted to P8,500. 28 — Paid the accounts payable in full on March 10. 29 — Partially collected P2,500 of the credit sales on March 26 — Paid salaries to employees, P12,000. Required: Prepare a transaction analysis worksheet on March 31, 2023, by completing the template given below: Purling Company Transaction Analysis Worksheet March 31, 2023 oe ‘Accounts ‘Accounts Can | REE [aaventries Furniture | A=ea0 Tp, Capita May| 1 10 12 22 26 27 28 29 31 Balance Date Developed: Document No.1 3) Fundamentals of ABM1 | ge 33 visi #0 [The Accounting Fat on PeTask 2-5 The following are the selected transactions of Troy Trading on November 2022, during the first month of its operation: Nov. 3—The owner, Troy Kwang, invested P100,000 cash and his personal computer costing P18,000 to the business. 5 — Paid business permits to the local government, P5,800. 8 — Purchased merchandise costing P50,000. Paying P30,000 cash and the balance of P20,000 on account. 11 —Purchases store supplies for cash costing P5,000. 16 — Sold merchandise to various customer amounting to P30,000 on a cash basis. The cost of merchandise sold is P18,000. 18 — Paid P10,000 of the account on November 8 and issued promissory note for the balance of P10,000. 22 Sold merchandise on account amounting to P7,500. The cost of merchandise sold is 5,000. 29 — Paid salaries to employees P22,000. 30 — It was ascertained that P2,000 cost of supplies has been used at the end of November. Required: Prepare a transaction analysis worksheet on November 30, 2022, by completing the template given below: ‘oy Trading Transaction Analysis Worksheet November 30, 2022 ASSETS Tuamumes | SERS DATE can | Accounts | St0re | speecamdige| _ Office ‘Kwang, esate | sapates egal copia Nov. | 3 5 8 i 16 18, 22 29 30 Balance Date Developed: Document No.1 3) Fundamentals of ABM 1 foes Revision #0 ] The Accounting Equation [Devnet iia Page 21 of 202 ting Ea Eieiiee | oeMs |