BKP 9 Accounting Equation

The Bookkeeping Equation
Assets= Liabilities + Owner’s Equity

Expanded Equation
A= L + OE
where: OE is (+) increased by
income/revenue
OE is (-) decreased by
expenses
EFFECTS OF OWNER’S
INVESTMENT/
WITHDRAWAL AND CASH
ACQUISITON OF ASSETS
Transactions Assets Liabiliti Owner’s
es Equity
1. Owner invests cash in the business. + +
2. Owner invest furniture. + +
3. Owner withdraws cash for personal - -

use.
4. Owner purchases supplies using cash. +
-
5. Owner gets cash refund for returning +
damaged supplies bought on cash. -
6. Owner purchases furniture using cash. +
-
7. Owner makes additional cash + +
investment.
Give the effect of the following transactions on the
owner’s equity of the business. Put a check mark
under the appropriate column.
Transaction Increase Decrease No
Effect
1. Owner invested equipment.
2. Bought office computer on

account.
3. Paid the office computer in no. 2
4. Owner withdrew cash.
5. Owner withdrew furniture.

Give the effect of the following transactions on
the assets, liabilities and owner’s equity.
TRANSACTIONS ASSETS LIABILI- OWNER’S
TIES EQUITY
1. Owner invested cash in + +

the business.
2. Owner invest furniture.
+ +
3. Owner withdrew cash for

- -
personal use.
4. Owner purchase supplies +
-
using cash.
TRANSACTION ASSETS LIABILITIES OWNER’S
EQUITY
Cash Accounts Accounts Notes Pura,

Receivable Supplies Payable Payable Capital
1. Dona Pura + +
invested P 60,000 60,000 60,000
in the business.
2. Bought P1,500 - +
worth of supplies 1,500 1,500
for cash
3. Borrowed + +
P50,000 from 50,000 50,000
Dona Tekla
4. Cash services + +
rendered to Ms. 25,000 25,000
Ko, P25,000
5. Issued a note - +
for the amount 50,000 50,000
borrowed from
Dona Tekla.
ASSETS LIABILITIES OWNER’S
EQUITY
Cash Accounts Supplies Accounts Notes Pura,

Receivable Payable Payable Capital
6.Services + +
rendered to 5,000 5,000
client on
account,
P5,000.
7.Settled the - -
note to 50,000 50,000
Dona Tekla
8. Made - -
personal 10,000 10,000
withdrawal,
P10,000
9. Hired a
secretary NO EFFECT
with a
monthly
salary of
P13,000
Accounts LIABI LITIES OE
Cash Receivable Supplies A/P N/P Pura, C.
10. Collections from + +

various clients 30,000 50,000
amounting to
P30,000 for services
rendered.
11. Returned P200 + -

worth of defective 200 200
supplies bought
using cash.
12.Invested + +
additional cash, 24,000 24,000
P24,000
13. Full collection of + -

account from all 100,000 100,000
clients, P100,000.
Transactions Accounts Loan Toad,
Cash Receivable Furniture Accounts Payable Capita
& Fixture Payable
1. Mr. Toad invested
P500,000 in the
business
2. Bought P10,000
worth of furniture
on account
3. Loaned P80,000
from May Bank
4. Cash services
rendered to Ms. Tan
P 10,000.
5. Paid the loan to

May Bank.
& Fixture Payable
6. Services rendered
to Mr. Ty on account,
P6,000
7. Collected the
account from Mr. Ty
in full
8. Made additional
investment of P
20,000
9. Hired executive
assistant with
monthly salary of
P16,000
10. Collections from
various clients in the
amount of P50,000
for services
rendered
& Fixture Payable
11. Returned P2,000
worth of defective
furniture bought on
account.
12. Made cash

withdrawal, P24,000
13. Collections from

various clients for
services rendered,
P80,000
Chart of Accounts
 is a list of all account titles used by the company
with the corresponding account number.
 Accounts titles are arranged in financial
statement order
 The accounts are so numbered for purposes of
indexing and cross referencing.
Wedding J. Yu
Chart of Accounts

Balance Sheet Accounts Income Statement Accounts
Assets
Account Account Income
Number Titles
110 Cash 410 Consulting Revenues
120 Accounts Receivable 420 Referral Revenues

130 Supplies
140 Prepaid Rent Expenses
150 Prepaid Insurance 510 Salaries Expense
160 Service Vehicle 520 Supplies Expense
170 Office Equipment 540 Insurance Expense
Liabilities 550 Interest Expense
210 Accounts Payable 560 Utilities Expense
210 Notes Payable 580 Miscellaneous Expense
230 Salaries Payable
240 Utilities Payable
Owner’s Equity
310 Yu, Capital
320 Yu, Withdrawal
330 Income Summary
Account - a detailed record of the increases,
decreases and the balance of each element in the
financial statement.
Account Title
Debit Credit
Transaction:
June 1, 2017:
Owner, Mr. Cruz purchase computer equipment
amounting to P 20,000 on
cash.
Accounting/Bookkeeping is based on
a double entry system which means
that the dual effects of a business
transaction is recorded. A debit entry
must have a corresponding credit
entry. Total debits for a transaction
must always equal to the total credits.
An account is debited when an amount is entered
on the left side of the account and credited when
the amount is entered on the right side.
The Rules of Debit and Credit:

1. Increases in assets are recorded debits while
decreases in assets are recorded credits.
2. Increases in liabilities and owner’s equity are
recorded by credits and decreases in liabilities
and owner’s equity are recorded debits.

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The Bookkeeping Equation

Assets= Liabilities + Owner’s Equity

2. Owner invest furniture. + +

3. Owner withdraws cash for personal - -

2. Bought office computer on

4. Owner withdrew cash.

5. Owner withdrew furniture.

1. Owner invested cash in + +

3. Owner withdrew cash for

Cash Accounts Accounts Notes Pura,

Cash Accounts Supplies Accounts Notes Pura,

10. Collections from + +

11. Returned P200 + -

13. Full collection of + -

5. Paid the loan to

12. Made cash

13. Collections from

120 Accounts Receivable 420 Referral Revenues

The Rules of Debit and Credit:

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