Detailed Lesson Plan

in Fundamentals of Accountancy, Business and Management 1

I. Learning Objectives
At the end of the discussion, 85% of the class is expected to:
a. define and provide examples of the components of the accounting equation:
Assets, Liabilities and Owner’s,
b. explain correctly the effect of a business transaction to the accounting equation;
and,
c. write the accounting equation after solving and classifying the missing amount.

II. Learning Content

The Accounting Equation
Basic Accounting Made Easy
Win Ballada, CPA, CBE, MBA
pp. 3 – 10

Instructional Materials:
PowerPoint Presentation
Hand-out on Accounting Equation
Google Forms for the Accounting Equation Quiz

Values to be Integrated:
Proper Financial Budgeting
Honesty and Transparency in Allocation of Resources
Respect for a Person’s or Business’s Financial Status

Background of the Learners:

85% are critical thinkers
90% are active listeners
75% pursued ABM track at will

21st Century Competencies:

Managing Complexities
Sound Reasoning and Decision Making
Responsibility and Accuracy in Recording Business Transactions
III. Learning Experience (Teaching Learning Process)
A. Preparation
Teacher’s Activity Student’s Activity
Good morning, everyone! Good morning, Ma’am.

Before we begin the lesson this Student leads the prayer.

afternoon, let us ask the guidance of
the Almighty God. Would you please
lead the prayer?

How was your week? How are Our week was great. We are
you today? doing fine today as well.

That’s really nice! Now, let me

check the attendance.

I think everyone is present. I’m

so glad that everyone understands the
reason for attending classes regularly. I
also have some few reminders. Since
we are in an online class, turning your
camera on is highly encouraged
especially when you do not have
internet connection issues. Stay on
mute unless you were called or have
something to say. Lastly, listen
carefully, respond actively and enjoy
the discussion.

Just a short recap, can anyone Last meeting, we discussed the

share what we have discussed last definition of accounting, its history,
meeting? function, and nature.

That’s right! Now, before we

proceed to our new topic, we will be
having a short activity.

Now, I will be showing you a

photo. I will call some of you to
answer my questions.

What do you think is the nature The business is a food stall.

of the business in the photo?
 Excellent. The business is a Everything that you can see in
food stall. Now, what can you say the food stall is considered an asset.
about the things you see that are being
used in the business?

That’s right! The things you see They were able to acquire these
in a business, including the property and the property by the use of their own
itself where this is located, can be investment.
considered as an asset. Now, assuming
that your parents are the owners of this
business, how do you think they were
able to acquire the things you see in
there to put-up the business?

That’s really nice. They were They can acquire additional

able to put-up the business by investing cash from loans in a bank or other
from their own pockets. Now, financial institutions that lend money in
assuming that your parents want to add order for them to have the amount they
delivery services in this food business. need to purchase a delivery vehicle.
However, they do not have enough
money to purchase a delivery vehicle.
How or where do you think your
parents can resource cash to purchase
such?

That’s good! Yes, owners of

the businesses also resort to outside
creditors and financial institutions for
them to acquire certain assets for the
business.

B. Presentation
Teacher’s Activity Student’s Activity
Perhaps now you have an idea
on terms such as properties and
vehicles because in accounting, you're
going to encounter transactions
involving such. In the course of our
discussion, you will know what sources
of finance are used by owners in setting
up a business, why businesses borrow
money, and why it is difficult for new
business to borrow money. But before
anything else, our objectives for this
lesson are as follows:
 First, define and provide
examples of the components of the
accounting equation: Assets, Liabilities
and Owner’s Equity. Second, explain
correctly the effect of a business
transaction to the accounting equation.
And lastly, solve the accounting
equation by constructing and
classifying the missing amount.

C. Assimilation
Teacher’s Activity Student’s Activity
So today, we're going to move Yes, we are ready for the next
on to our next topic -- the accounting lesson!
equation. Last meeting, I gave you an
assignment to do your advanced
reading and was able to provide you the
hand-out for today’s lesson. I asked you
what the components of the accounting
equation are. Are you ready?

The accounting equation uses

the principle of duality as it can be
thought of as looking at the business in
two different elements:

First, the resources the business

has -- the asset of the business. Second,
how these resources were financed --
by the owner's equity and the liabilities
from outside creditors.

The accounting equation states

that these two elements, the two sides
of the equation, must be equal. This is
sometimes described as the equation
‘balancing’. The equation may be
expressed as: Assets = Liabilities +
Owner’s Equity.

The Duality Principle states that

a business transaction always has two
entries, one debit, and the other one is
credit, to be made in the accounts; also
known as "double entry".
 For example, a business The assets will increase by P
purchases a car on credit for P 200,000. 200,000 and the liabilities will also
How does this affect the accounting increase by P 200,000.
equation? Can anyone guess?

That’s great! Buying a car

means that the business has the use of
the car as an asset. On the other hand,
the car was purchased on credit.
Meaning, the business has a new
liability which amounts to the car
purchased. As a result, both sides of the
accounting equation increase by the
same amount.

Now that we have mentioned Assets are resources that a

the effects of business transactions in person or a business owns.
the accounting equation by means of
the duality principle, let us now dig
deeper in the components of such. As
presented earlier, Assets, Liabilities,
and Owner’s Equity are the
components of the Accounting
Equation. Perhaps we can define first
what assets are? Can anyone give me
the definition of an asset?

Terrific! Assets are a Other examples of assets are

proprietor’s or company's resources — inventory, prepaid insurance,
things that someone or a company investments, land, building, and
owns, which are regarded as having equipment.
value and available to meet debts and
commitments. Examples of assets
include cash and accounts receivable.
Can you give other examples of Assets?

Fantastic! Indeed those are other

examples of assets. Now what is the The next component of the
next component of the accounting accounting equation is Liabilities.
equation?

That’s right! So what are

liabilities, anyone? A liability is something a person
or company owes.

Exactly right! Liabilities are a

person or company's obligations — Some other examples of
amounts that he/she or the company liabilities are salaries and wages
owes. It is also an obligation but is payable, interest payable, and income
more defined by previous business taxes payable.
transactions, events, sales, exchange of
assets or services, or anything that
would provide economic benefit at a
later date. Examples of liabilities
include notes or loans payable and
accounts payable. Can anyone give
other examples of liabilities?

Wonderful! Yes, those are some

other examples of liabilities. Liabilities
can also be viewed in two ways: One,
as claims by creditors against the
company's assets, and two, a source,
along with owner or stockholder equity,
of the company's assets.

Now, what is the last

component of the accounting equation, Owner’s Equity.
anyone?

That’s right! Owner’s Equity or

Shareholders’ Equity for corporations. Owner's equity is the total value
So what is owner’s equity, anyone? of an entity’s assets that belong to the
owner/s once the liabilities have been
settled.
Great! Owner’s Equity is the
owners’ claim to company assets after
all of the liabilities have been paid off.
In other words, if the business assets
were liquidated to pay off liabilities, the
excess asset leftover would be
considered owner’s equity. It also
reports the amounts invested into the
company by the owners, plus the
cumulative net income of the company
that has not been withdrawn.

These three accounts have the

same relationship to each other. We
call this relationship the Accounting
Equation. The word equation comes
from the root word equal. For any
equation, one side always equals
another. As mentioned earlier, the
equation may be expressed as: Assets =
Liabilities + Owner’s Equity.

The equation shows that assets

or properties of the business are from or
owing to outside creditors (liabilities)
and to the owner (proprietor). In other
words, assets are sourced from the
liabilities and the owner’s equity.

The equation may also be

expressed as: Assets - Liabilities =
Owner’s Equity. This means that out of
the properties of the business first will
be paid are the debts to outsiders or
creditors, and any amount remaining
thereafter should go to the owners.

Here is an example to illustrate

the accounting equation:

Let us assume that on January 1,

2020, Juan Dela Cruz engaged in
business with a cash capital investment
of P 70,000.00 and loaned cash
amounting to P 30,000.00 from the
bank.

On this date, the accounting

equation is as follows:

So the asset, which is Cash, was

derived from the cash loan from the
bank and the actual cash investment of
Mr. Dela Cruz.

The accounting equation could

also be applied to personal situations.

Suppose you bought a mobile

 phone for P 5,000, you borrowed P
2,000 from a relative, and paid the rest
yourself.

The accounting equation is

illustrated as follows:

The mobile phone is the asset

acquired using your own money and
the cash borrowed from relatives.
Basically, that is the relationship
between assets, liabilities and owner’s
equity -- forming the accounting
equation.

D. Generalization
Teacher’s Activity Student’s Activity
To sum up our discussion, how Assets are things that you own
can you differentiate assets from while liabilities are things you owed to
liabilities? someone.

Excellent! What about the Assets are the things you own
difference between assets and owner’s while owner’s equity is your total assets
equity? less all the liabilities.

Marvelous! You all did listen

very well. Please do not forget this
basic equation, since you will be using
this in all your accounting subjects and
can also apply this in your life
experiences.

Again, what are the three Assets, Liabilities, Owner’s

components of the accounting Equity.
equation?

Wonderful! Does anyone have

questions or clarifications? If none, we
will proceed. But if a question pops in
your mind, please don't hesitate to
email me after the class.
E. Application
 Teacher’s Activity Student’s Activity
Now that we have discussed the Yes, understood.
accounting equation and its
components, I will be presenting you
three business situations and you are
going to provide me what is being
asked. You can just unmute your
microphone to answer or type it in the
chat box. Understood?

Now, for our first business The liabilities are amounting to

transaction. ABC Pest Control has P 150,000.00.
assets of P 600,000 and owner's equity
of P 450,000. How much is the entity's
liabilities?

Fantastic! It is computed by
deducting P 450,000.00, which is the
owner's equity, from the total assets of
P 600,000.00. This means that the
creditors' claim in the total assets is P
150,000.00.

Next situation: Tiya Fely's Tiya Fely’s equity is P

Restaurant has assets of P 624,000.00 387,000.00.
and liabilities of P 237,000.00. How
much is Tiya Fely's equity?

Wonderful! It is computed by
deducting the liabilities of P 237,000.00
from the total assets of P 624,000.00.
This means that, after the liabilities are
paid, the leftover of P 387,000.00
belongs to Tiya Fely.

Now for our last business The total asset of the entity is P
transaction: Magic Struck Acting 300,000.00.
Studio has liabilities of P 147,000.00 to
various creditors and owners' equity of
P 153,000.00. How much is the total
assets?

Good work! This is computed

by adding the liabilities of P
147,000.00 and owner's equity
amounting to P 153,000.00. This means
 that the total assets of P 300,000.00
were sourced from various creditors
and the owner's investment.

IV. Evaluation
The students will answer an asynchronous quiz that comprises of 5 transactions
wherein they need to construct the accounting equation by filling-out the missing
amount. A Google Form link will be sent in the Google Meet chat box and will be
posted to Google Classroom. Such can only be accessed and answered until 12nn the
next day. The passing grade is 75% or greater.

V. Assignments
A. In your notebook, explain why Assets are always equal to Liabilities and Owner’s
Equity?
B. Enumerate and define the different forms of business organizations. Give two
examples each. Write your answers in your notebook.

Business Organizations
Basic Accounting Made Easy
Win Ballada, CPA, CBE, MBA
pp. 11-26