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FABM 1. Module 7 - ABM

Accountancy (STI College)

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Senior High School

33333

Fundamentals of
Accountancy, Business,
and Management
Module 7: Business Transactions And Their
Analysis As Applied to the Accounting Cycle
of a Service Business

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Fundamentals of Accountancy, Business and Management – Grade 11

Self-Instructional Learning Material (SILM)
Module 7: Business Transactions and their Analysis as Applied to the Accounting Cycle
of a Service Business
First Edition, 2020

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11
Fundamentals of
Accountancy, Business,
and Management
Module 7: Business Transactions And Their
Analysis As Applied to the Accounting Cycle
of a Service Business
`

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Introductory Message
For the facilitator:

Welcome to the Fundamentals of Accountancy, Business and Management - Grade

11Self-Instructional Learning Material on Business Transactions and their Analysis
as Applied to the Accounting Cycle of a Service Business.

This module was collaboratively designed, developed and reviewed by educators both
from public and private institutions to assist you, the teacher or facilitator in helping
the learners meet the standards set by the K to 12 Curriculum while overcoming
their personal, social, and economic constraints in schooling.

This learning resource hopes to engage the learners into guided and independent
learning activities at their own pace and time. Furthermore, this also aims to help
learners acquire the needed 21st century skills while taking into consideration their
needs and circumstances.

In addition to the material in the main text, you will also see this box in the body of
the module:

Notes to the Teacher

Hello, dear teacher of learning! You are lucky to have this learning
material intended to easily deliver the lessons for our learners and
enhance their knowledge on Business Transactions and their Analysis as
Applied to the Accounting Cycle of a Service [Link] help them
achieve our learning objective.

Please advise our learners to read, understand, analyze, and

answer all the activities and questions seriously as this material is
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This is just a reminder dear teacher of learning, do not go beyond

our objectives and main goal for our learners. Be an agent of learning.
Have fun!

As a facilitator, you are expected to orient the learners on how to use this module.
You also need to keep track of the learners' progress while allowing them to manage
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learners as they do the tasks included in the module.

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For the learner:

Welcome to the Fundamentals of Accountancy, Business and Management - Grade

11Self-Instructional Learning Material (SILM) Module onBusiness Transactions and
their Analysis as Applied to the Accounting Cycle of a Service Business.
The hand is one of the most symbolized part of the human body. It is often used to
depict skill, action, and purpose. Through our hands we may learn, create, and
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This module was designed to provide you with fun and meaningful opportunities for
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This module has the following parts and corresponding icons:

What I Need to Know This will give you an idea of the skills or
competencies you are expected to learn in the
module.

What I Know This part includes an activity that aims to

check what you already know about the
lesson to take. If you get all the answers
correct (100%), you may decide to skip this
module.

What’s In This is a brief drill or review to help you link

the current lesson with the previous one.

What’s New In this portion, the new lesson will be

introduced to you in various ways such as a
story, a song, a poem, a problem opener, an
activity or a situation.

What is It This section provides a brief discussion of the

lesson. This aims to help you discover and
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What’s More This comprises activities for independent

practice to solidify your understanding and
skills of the topic. You may check the
answers to the exercises using the Answer
Key at the end of the module.

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sentence/paragraph to be filled into process
what you learned from the lesson.

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into real life situations or concerns.

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Assessment This is a task which aims to evaluate your

level of mastery in achieving the learning
competency.

Additional Activities In this portion, another activity will be given

to you to enrich your knowledge or skill of the
lesson learned. This also tends retention of
learned concepts.

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module.

At the end of this module you will also find:

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this module.

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of the
module. Use a separate sheet of paper in answering the exercises.
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included in the module.
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If you encounter any difficulty in answering the tasks in this module, do not
hesitate to consult your teacher or facilitator. Always bear in mind that you are
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We hope that through this material, you will experience meaningful learning and
gain deep understanding of the relevant competencies. You can do it!

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What I Need to Know

Welcome dear students to this module. As learners you are expected to learn
new things every day. Though sometimes you feel confused but keep on trying until
you will understand the context of this module. You will encounter so many
interesting and challenging activities here about business transactions and their
analysis as applied to the accounting cycle of a service business.

Most Essential Learning Competency:

1. Analyze the common business transactions using the rules of debit and
credit; and (ABM_FABM11-IIIg-j-27)
2. Solve simple problems and exercises in the analyses of business
transaction. (ABM_FABM11-IIIg-j-28)

After going through this module, you are expected to:

1. identify business and non-business transaction;

2. gain familiarity on the rules of debit and credit;
3. analyze the common business transactions using the rules of debit and
credit; and
4. solve simple problems and exercises in the analyses of business
transaction.

What I Know

Directions: Read and understand the statements carefully. Write your answer on a
separate sheet of paper.

Test I. Choose the correct answer from the given choices.

1. The following are the characteristics of a business transaction except;

A. It must have a two-fold effect in the elements of accounting.
B. It must not be supported by a source of documents.
C. It is initiated by an authorized person.
D. It must be for sum certain of money.

2. It refers to the left-hand side of an account;

A. Asset
B. Credit side
C. Debit side
D. Liability

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3. An entry in the debit side means an increase in-

A. owner’s equity
B. liability
C. revenue
D. asset

4. An entry in the credit side means an increase in-

A. owner’s equity
B. drawing
C. expense
D. asset

5. Which of the following is NOT an example of business transactions?

A. Investment of cash or other assets by the owners
B. Buying a car for personal use
C. Sales of goods or services
D. Payment of borrowings

6. Which of the following should be debited upon cash investments of owner?

A. Cash
B. Investments
C. Owner’s Equity
D. Cash and Investments

7. Which of the following should be credited upon payment of payables due?

A. Cash
B. Expenses
C. Accounts Payable
D. Cash and Accounts Payable

8. Which of the following should be debited upon collection of receivables?

A. Cash
B. Income
C. Accounts Receivable
D. Cash and Accounts Receivable

9. Which of the following should be credited upon purchase of supplies for cash?
A. Cash
B. Supplies
C. Accounts Payable
D. Cash and Accounts Payable

10. Which of the following should be debited upon purchase of land on account?
A. Cash
B. Land
C. Accounts Payable
D. Cash and Accounts Payable

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Test II. Write TRUE if the statement is correct and FALSE if it is wrong.

11. The debit side of an account is considered as value received while the credit side
is value parted.
12. Business transactions are focuses on the business and not from its owner.
13. If the total of the debit side exceeds the total of the credit side, it is said to have
a debit balance.
14. Investment and revenues will cause the owner’s equity to decrease.
15. If the debit total equals to the credit total the account is said to be closed account.

Lesson Common Business Transactions

Using the Rules of Debit and
1 Credit

What’s In

Directions: Identify if the following, describes a ledger or a journal. Write your

answer on a separate sheet of paper.

1. The format is simple, and we include date, particulars, ledger folio, debit
amount, and credit amount.
2. It is called the “book of original entry.”
3. It uses a “T” format.
4. Balancing is mandatory.
5. Narration is a must to understand the nature of the entry.

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What’s New

Activity 1. “ CHECK ON ME”

Directions: Put a check mark if the following are considered as business

transactions and events. Write your answer on a separate sheet of paper.

______1. bought cake for your daughter’s birthday

______2. Salaries paid to employee
______3. Car repair owned by your company.
______4. Collecting payments from the customers
______5. Payment of payables to suppliers.

What is It

Accounting is an art of recording, classifying, summarizing in a significant

manner and in terms of money, transactions and events which are in part at least of
financial character and interpreting the result thereof. ( AICPA)

Recording – it involves the routine and mechanical process of writing down the
business transactions and events in the book of accounts in a chronological manner
called “ Journalizing”.

Classifying – it involves sorting or grouping of similar transactions and events into

their respective kind and classes. This is actually the process of transferring the
entries from journal to the ledger called “ Posting”.

Summarizing – it involve the completion of the financial statements and the

accounting requirements as well. This starts from striking of a trial balance, plotting
down of adjusting entries in the worksheet and the preparations of closing entries,
post-closing trial balance and reversing entries.

Interpreting - it involves the analytical and interpretative works. The financial

statements are analyzed, interpreted and is communicated to those interested
parties where these could be of great help to management as a basis for making a
sound decision.

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What are Business Transactions?

Business transactions are exchanges of equal monetary values. This means

1. For every value received, another value is given away as an exchange;

2. These values are measured in terms of pesos which are presumed to be equal.

Illustration: “Bought Office Tables for cash, P25,0000 “

1. Who bought the office tables?

Answer: the business Identifying

2. What is the value received?

Answer: office tables Analyzing

3. What is value parted with?

Answer: cash-money

4. What is the peso equivalent of these exchanges?

Answer: P 25,000 Measuring

Thus;

Debit, value received – office tables P25,000

Credit, value parted with- cash P25,000 Journalizing

Another illustration on transaction analyses:

Transaction 1: Bought heavy equipment for cash , P1,000,000

Analysis:

In this transaction, the value we received is a form of an asset which is the

heavy equipment and the value parted which is another form of asset which is
“cash”.
Debit Credit
Asset- Heavy Equipment P1,000,000
Asset - Cash P1,000,000

Transaction 2: Sold an old computer for cash, P 15,000

Analysis:

In this transaction, the value we received is a form of an asset which is the

“cash” and the value parted which is another form of asset which is “old computer”
naming this “Office Equipment”.
Debit Credit
Asset- Cash P15,000
Asset - Office Equipment P15,000

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Transaction 3: Bought office supplied on credit from M. Narisma , P 25,000

Analysis:

In this transaction, the value we received is a form of an asset which is the

“Office Supplies Inventory” and the value parted which is a form of “Liability” which
is “oral promise to pay” we call this “Accounts Payable”
Debit Credit
Asset-Office Supplies Inventory P25,000
Liability - Accounts Payable P25,000

THE T-ACCOUNT

Is in an accounting device called “account”. This device will group these accounting
values with their amounts belonging to one item only. In the item “cash” for example,
all amounts representing increases and decreases in cash are entered in the account
“cash”.

An “account is divided into two sides” The left-hand side is called the “debit side” and
the right-hand side is called “credit side”. The debit side shows the value received
while the credit side shows the value parted with. This is account is also called “T
Account” because it resembles a capital letter “T” account title is written above the
T- Account. The word debit came from a latin word “debere” and credit from a latin
word “credere”. These words are abbreviated as “Dr.” and “Cr.” respectively.

Illustration:
ACCOUNT TITLE
Left-Hand Side (Debit Side) Right-Hand Side (Credit Side)
Is for Is for
VALUE RECEIVED VALUE PARTED WITH

AN ACCOUNT BALANCE

Of The difference between the debit total and credit total of an account is called an
“Account Balance”.

Debit Balance – If the total of the debit side exceeds the total of the credit side.

Illustration
CASH ACCOUNT
Dr. Cr.
P25,000 P 10,000
10,000 5,000
Debit total P 35,000 P 15,000 credit total
Debit balance P 20,000

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With this illustration we can say, that cash account has a debit balance of P20,000

Credit Balance – If the total credit sides exceeds the total debit side.

Illustration:
ACCOUNT PAYABLE
Dr. Cr.
P15,000 P 40,000
20,000 10,000
Debit total P 35,000 P 50,000 credit total
P 15,000 --- credit balance

With this illustration we can say, that account payable has a credit balance of
P15,000

In- Balance or Closed Account- If the debit total equals with that of the credit total.
ACCOUNT RECEIVABLE
Dr. Cr.
P12,000 P 10,000
4,000 6,000
Debit total P 16,000 P 16,000 credit total

With this illustration we can say, that account receivable has a “zero “ balance or
the receivable account is Closed.

THE RULES OF DEBIT AND CREDIT

A = L + OE (accounting equation)

A – asset L – Liabilities OE - Owner’s Equity

For asset, the increase side in the debit side

For Liabilities and Owner’s Equity, the increase are on the credit side
Factors that will cause the “Owner’s Equity” to increase are investment of owner
and revenues.
Factors that will cause the “Owner’s Equity” to decease are withdrawal by owner
and expense.

DRAWING OR PERSONAL – the reduction of an Owner’s Equity account arising from

cash or property withdrawal by an owner is not debited to Owner’s Equity account
to effect the decrease but instead debited to “Drawing Account.”

Thus, DEBIT to increase DRAWING and CREDIT to decrease DRAWING.

TEMPORARY ACCOUNT

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INCOME OR SALES REVENUE – all income earned of the same nature are
summarized in this account.

Then we say, CREDIT to increase Income or Sales revenue and DEBIT to

decrease Income or Revenue.

COST AND EXPENSES – all expenses incurred of the same nature are summarized
in this account.

Hence we can say, DEBIT to increase in Costs and Expenses and CREDIT to
decrease Costs and Expenses.

Summarized Rules
We debit to: We credit to:
Rule 1. Increase in Asset Decrease in Asset
Rule 2. Decrease in Liability Increase in Liability
Rule 3. Decrease in Owner’s Equity Increase in Owner’s Equity
Rule 4. Increase in Drawing Decrease in Drawing
Temporary Accounts
Rule 5. Decrease in Income or Sales Increase in Income or Sales
Revenue Revenue
Rules 6. Increase in Costs and Expenses Decrease in Costs and Expenses

Illustrating a Sole Proprietorship Engaged in Servicing Activity

Assets are represented by Cash in Bank and Office Supplies Inventory

Liability is represented by Accounts Payable
Owner’s Equality is represented by Challoner Mateo, Drawing
Drawing is represented by Challoner Mateo, Drawing
Revenue is represented by Professional Income
Expense is represented by Salaries Expense

Transaction No.1 Mr. Challoner Mateo, CPA opened an account with Rizal
Commercial Banking Corporation the amount of P100,000 to start with his
accounting practice.

Analysis: Debit, Cash in Bank of P100,000 and credit C. Matero , Capital of

P100,000.

Rule : Debit, increase in Asset and Credit, increase in Owner’s Equality

C. Matero, Capital
Cash in Bank
Dr. Cr. Dr. Cr.

1) P 100,000 1) P 100,000

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Transaction No. 2 Bought office supplies on account for P3,000.

Analysis: Debit, office supplies Inventory of 3,000 and Credit in Account

Payable of P3,000.

Rule : Debit, increase in Asset and Credit increase in Liability

Cash in Bank C. Matero, Capital

Dr. Cr. Dr. Cr.

1) P 100,000 1) P 100,000

Accounts Payable
Office Supplies Inventory
Dr. Cr. Dr. Cr.

2) P 3,000 2) P 3,000

Transaction No, 3 : Received cash of P10,000 for auditing service rendered to clients

Analysis : Debit , cash in Bank of P10,000 and Credit, Professional

Income of P 10,000

Rule : Debit, increase in Asset and Credit, increase in Revenue

C. Matero, Capital
Cash in Bank
Dr. Cr. Dr. Cr.

1) P 100,000 1) P 100,000
3)P10,000

Office Supplies Inventory Accounts Payable

Dr. Cr. Dr. Cr.

2) P 3,000 2) P 3,000

Professional Income
Dr. Cr.

3) P10,000

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What’s More

Activity 2. FILL ME IN.

Directions: Determine the Value Received or Debit and Value Parted With or Credit
and indicate the amount in the blank. Write your answer on a separate
sheet of paper.

Transaction Analysis
The scrambled transactions of Mr. Raymundo Dolor are narrated below.
1. Mr. Raymundo Dolor invest cash in the business where he opened an
account with the BPI, P250,000.
2. Withdrew cash from the bank to pay for business permits to the city
government, P5,000.
3. Received cash for services rendered and deposited in the bank, P4,000.
4. Bought office supplies on account from R. Dinalo Convenience Store,
P2,000.
5. Withdrew cash from the bank for payment of rental, P8,000.
6. Withdrew cash from the bank for his personal use, P5,000.
7. Withdrew cash from the bank for partial payment of account with R. Dinalo
Convenience Store, P1,000.
8. Rendered services on account to various clients, P3500.
9. Withdrew cash from the bank for payment of salaries to his employees,
P10,000.
10. Collected P 2,000 from a client’s account and immediately deposited to the
bank.

Requirements:

1. In each item, determine the value received and value parted with. Place the
corresponding amount.
[Link] the amount of the value received and that of the value parted with columns.
[Link] if the totals of the debit and credit columns are equal.
ANALYSES
Transaction Value Received Amount Value Parted Amount
No. or Debit With or Credit
1
2
3
4
5
6
7
8
9
10
Total P_________ P____________

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Activity 3. CLASSIFY ME!

Directions: Determine the Value Received or Debit and Value Parted With or Credit
and indicate the account classification as to Asset, Liability, Owner’s
Equity, Income and Expenses. The transaction on Sept. 1 is answered
for your guide.

Date Value Received Account Value Parted Account

or Debit Classification With or Credit Classification
1 Cash Asset R. Besario, Owner’s Equity
Capital
3
5
8
10

The following were the transactions of Mrs. Rosalina Besario during the month of
September.

Septemer 1--- Rosalina Rosario invested cash in the business

3 --- Rendered service on account
5--- Borrowed money from a bank with a note issued.
8--- Received cash from services rendered.
10--- Rosalina Besario withdrew cash from the business.

What I Have Learned

Directions: Explain concisely and thoroughly. Refer to the rubric below for the
scoring. Write your answer on a separate sheet of paper.

What are the different rules of debit and credit. Explain each.

Rubrics
Criteria Advanced Proficient Approaching Developing Beginning
Proficient
(25) (20) (15) (10) (5)
Understanding Understand Understand Applied two Applied Needs
and and applied and applied concepts one improvement
application of all concepts several concept
concept and concepts
lesson
objectives

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What I Can Do

Directions: The following “paired” transaction are related to each other. Determine
the value received or debit and the value parted with or credit. (Assume
that periodic system is used for merchandising). Write your answer in a
separate sheet of paper.
Debit Credit
A – 1- Lord Aguilar invested cash in the business.
2 - Lord Aguilar withdrew cash from the business. ___________ ___________

B -1 – Bought supplies inventory on account from J. Te

Company. ___________ ___________
2 - Paid our account with J. Te Company

C- 1- Rendered services on account to M. Penaflor

Company. ___________ ___________
2 - Collected the account of M. Penaflor.

Assessment

Directions: The following account titles are given for a Merchandising Business.
Determine the accounts debited and credited with their respective
amounts. Write your answer on a separate sheet of paper.

ASSET REVENUE
Cash in Bank Sales
Account Receivable Sales Discounts
Building Sales Return and Allowances
Furniture and Fixtures
Office Machines and Equipment

LIABILITIES COSTS

Notes Payable Purchase

Accounts Payable Purchase Discounts
Purchase Returns and Allowances
Freight In

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CAPITAL EXPENSES
C. Laguna , Capital Freight Out
C. Laguna , Drawing Salaries and Wages

The transaction were as follows:

1. Cecelia Laguna invested P600,000 cash to start with a merchandising

business.
Debit,_________________________________________
Credit,_____________________________________________

2. Purchased merchandise for cash of P150,000 from N. Maguid Supermart.

Debit,_________________________________________
Credit,_____________________________________________

3. Paid cash of P1,200 for freight and handling on purchases.

Debit,_________________________________________
Credit,_____________________________________________

4. Returned P2,000 cost of merchandise to N. Maguid Supermart due to bad

order and no replacement were made.
Debit,_________________________________________
Credit,___________________________________________

Additional Activities

Directions: On the space provided, indicate a “check mark” as to what normal

balance the following accounts. Write your answer on separate sheet of
paper
Debit Credit
Sample: Cash on Hand _______
1. Freight Out _______ _______
2. Estimated Uncollectible Account _______ _______
3. Account Receivable _______ _______
4. Servive Income _______ _______
5. F. Magada , Capital _______ _______

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What I Know

Directions: Let us find out if you already have an idea about the different terms in
accounting. List down these terms in a separate sheet of paper and
write something that you know about it. Criteria of scoring are given
below.

1. Sales Return and Allowance 4. Freight In

2. Freight Out 5. Sales Discount
3. Purchases 6. Account Receivable

Points
Advanced Proficient Approaching Developing
Description Proficient
(10) (8) (6) (4)
Knowledge on Demonstrate Demonstrate Provide only Did not
the topic an in-depth substantial direct justify/explain
insightful insightful answers and the answer
interpretations interpretations unclear
and and explanation
conjectures of conjectures of of answer
the topic and the topic, and
provide clear provide clear
explanation of explanation of
answer answer though
some
supporting
ideas may be
misunderstood.

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Lesson
Analyses of Business Transaction
2
What’s In

Directions: Before you will start your new lesson, please review your previous lesson
by answering the following questions. Write your answer on a separate
sheet of paper.

1. What is accounting?
2. Define business transaction.
3. State the rules of debit and credit in accounting.
4. What are the factors that will increase an owner’s equity?
5. Does the word debit mean increase? Justify your answer.

Rubrics for Scoring

Points
Criteria Advanced Proficient Approach Developing
(5) (4) ing (2)
Proficien
cy
(3)
Understanding and Understand Understand Applied Applied one
application of account and applied all and applied two concept
titles and chart of concepts several concepts
accounts
concepts
Completion of the task Achieved the Accomplished Completed Attempted to
purpose of the task most of the accomplish
task, including task the task, but
insightful with little or
interpretations no success
and
conjectures

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What’s New

Activity 1. TRY ME NOW!

Directions: Write your analysis and the rules applied for debit and credit in a
separate sheet of paper.

Transaction 1: Sold merchandise on account, P50,000 to Sierra Company.

Analysis:_________________________________________________
Rule:____________________________________________________

What is It

ILLUSTRATING A SOLE PROPRIETORSHIP ENGAGED IN

MERCHANDISING ACTIVITY
Asset are represented by Cash in Bank and Accounts Receivable
Liability is represented by Accounts Payable
Owner’s Equity is represented by J. Selisana, Capital
Drawing is represented by J. Selisana , Drawing
Revenue or Income is represented by Sales, Sales Discounts and Sales Returns and
Allowances
Costs are represented by purchase, purchase discounts, purchase returns and
allowance and freight in.
Expense is represented by Freight Out.

Transaction 1 : Ms. J. Selisana, opens an account with the Bank of the Philippine
Island in the amount of P500,000 to start with merchandising
business.

Analysis: Debit, Cash in Bank of P500,000 and Credit, J. Selisana Capital of

P500,000

Rule: Debit , increase in Asset and Credit , increase in Owner’s Equity.

J. Selisana , Capital

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Cash in Bank
Dr. Cr. Dr. Cr.
1. P 500,000 1. P 500,000

Transaction 2: Purchased merchandise for cash from A. Grocery, P125,000 and

freight of P 3,400.

Analysis: Debit, Purchases of P125,000 and Freight In of P3,400 and Credit

, Cash in Bank of P128, 400

Rule:Debit , increase in Costs and Credit , increase in Asset.

Cash in Bank J. Selisana , Capital

Dr. Cr.
Dr. Cr.
1. P 500,000
2) P 125,000
Freight In

Dr. Cr.

1) P 500,000 2) P128,400

Purchases
Dr. Cr.
Dr. Cr.

2) P 125,000 2) 3,400

Transaction 3 : Returned cost of merchandise purchase from Alpha Grocery for

cash due to bad orders and no replacement was made, P3,000.

Analysis: Debit, Cash in Bank P3,000 and Credit, Purchases Returns

and Allowances of P3,0000

Rule:Debit , increase in Asset and Credit , decrease in Cost.

Cash in Bank-BPI J. Selisana , Capital

Dr. Cr. Dr. Cr.
1) P 500,000 2) P128,400 1) P 500,000
3) 3,000

Puchases Freight In

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Dr. Cr.
Dr. Cr.
2) 3,400
3) 3,000

Puchase Returns & Allowance

Transaction 4 : Purchased merchandise on

account from Bravo Supermart, P85,000. Terms : 2% discount if
paid within 30 days.

Transaction 5 : Paid the account with Bravo Supermart and availed the 2%
discount.
Transaction 6 : Purchased merchandise on account from Charlie Grocers,
P20,000.

Transaction 7 : Withdraw cash of P10,000 for her personal use.

Transaction 8 : Sold merchandise for cash, P104,000 to Echo Trading.
Transaction 9 : Paid cash on freight of merchandise sold, P2,000

Transaction 10 : Refunded cash to Echo Trading for merchandise sold for cash
and returned , P4,000.

Transaction 11 : Sold merchandise on account to Zebra Company, P70,000

Term: 5% discount if collected within 10 days.

Transaction 12 : Collected the account of Zebra Company, P66, 500 and was given
a 5% discount.

Transaction 13 : Sold merchandise on account, P50,000 to Sierra Company.

Summary of Debit and Credit Balance of Account

Debit Credit
Asset Cash in Bank 445, 800
Account Receivable 50,000
Liability Accounts Payable 20,000
Owner’s Equity J. Selisana , Capital 500,000
J. Selisana, Drawing 10,000
Sales Revenue Sales 224,000
Sales Return & Allowance 4,000
Sales Discount 3,500
Costs Purchases 230,000
Purchases Returns & Allowances 3,000
Purchase Discounts 1,700

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Freight In 3,400
Expense Freight Out 2,000
Total P 748,700 P 748,700

This proves the equality if Debit and Credit as expressed in the expanded
accounting equatiom
Asset, P495,800 = Liabilities , P20,000 + Owner’s Equity , P490,000

+ 216, 500 (Sales Revenue)

- 228,700 (Costs)
- 2,000(Expenses)
- P475, 800

Thus, we the say “ total debit is equal to total credit of 748, 700

What’s More

Directions: Write letter T if the statement is correct and letter F if incorrect. Write
your answer on a separate sheet of paper.

___1.The left hand side of an account refers to its credit side while the right hand
side refers to the debit side.
___2. The debit side of an account is for the value received while the credit side is for
the value parted with in a transaction analysis.
___3. Business transactions are analyzed from the point of the business rather than
the owner.
___4. The terms value refers to the three accounting elements which are the assets,
liabilities and owner’s equity.
___5. An asset’s normal balance is a debit while that of a liability is credit.
___6. Freight in is an addition to purchased account.
___7. Sales like a service income account has a credit balance..
___8. When merchandise is purchase for cash, it is debited to “purchase” account.
___9. Payment of a liability has the effect of reducing cash balance.
___10. When a debit entry is bigger than the credit entry the account is said to have
a credit balance.

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Activity 2. KEEP ME BALANCE!

Directions: The following T-accounts were taken from a Service Concern engaged in
Repair Shop Business
J. Selisana , Capital (2)
Cash In Bank (1)
Dr. Cr. Dr. Cr.
1) 450,000 5) 10,000 2) 75,000 4) 30,000
4) 30,000 10)
15,000
8)
8,000
Shop Furniture & Fixtures (4)(4)
Shop Supplies Inventory (3)
Dr. Cr. Dr. Cr.

2) 55,000 7) 35,000 6) 100,000

Accounts Payable (5) Accrued Rent (6)

Dr. Cr. Dr. Cr.

8) 8,000 3) 55,000 9) 5,000

6) 100,000

R. Miranda, Drawing (8)

R. Miranda, Capital (7)
Dr. (8) Cr.
Dr. Cr.

1) 450,000 5) 10,000

Service Income (9) School Supplies Used (10)

Dr. Cr.
Dr. Cr.
2)
75,000 7) 35,000

Rent Expense (11) Salaries Expenses(12)

Dr. Cr. Dr. Cr.

9) 5,000 10) 15,000

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Required:
1. Total the debit and credit sides of each account and determine their respective
balances.
2. List down the account with open and total the same
3. Are the debit and credit balance equal?

What I Have Learned

Directions: Fill in the blank the correct term that is appropriate for each transaction.
Write your answer on a separate sheet of paper.
1. Transaction: Refunded cash to M. Trading for merchandise sold for
Cash and returned , P4,000.

Rule: Debit, decrease in ____________ and Credit , decrease in _________

2. Sold merchandise on account to R. Company,P70,000 Term : 2% discount if

collected within 5 days.

Rule: Debit, _________ in Asset and Credit , decrease in _________

3. Collected the account of R. Company, 66,500 ans was given a 2% discount.

Rule: Debit, increase in________; decrease in ____________ and Credit ,

decrease in _________

4. Sold merchandise on account , P10,000 to C. Company.

Rule: Debit, increase in ______ and Credit , decrease in _________

5. Paid cash on freight of merchandise sold, 3,000.

Rule: Debit, increase in ______ and Credit , decrease in _________

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What I Can Do

Directions: Indicate a “check mark” as to the effect on the balance of each of the
following accounts. Write your answer on a separate sheet of paper.

Increased Decreased
1. Accounts Receivable account was credited.
2. Service Income account was credited.
3. Account payable account was debited.
4. Cris Biore, Capital account was credited
5. Sales account was credited
6. Freight In account was debited.
7. Salaries Expense was debited.
8. Prepaid Insurance account was credited.
9. Purchase account was debited.
10. Sales Returns & Allowances account was debited.

Assessment

Directions: Analyze the presented problem using the rules of debit and credit. Write
your answer on separate sheet of paper.

The T-Account were taken Cris Jumawan Merchandising

Cash In Bank(1) Account Receivable (2)

Dr. Cr. Dr. Cr.

1) 900,000 4) 67,000 8) 100,000 9) 5,000

10) 93,000 6) 1,000 10) 95,000
7) 25,000
11) 4,000
Cris, Jumawan, Capital
Accounts Payable (3)
(4)(4)
Dr. Cr. Dr. Cr.
3) 10,000 2) 80,000 1) 900,000
4) 70,000 5) 50,000

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Sales (6)
Cris, Jumawan, Drawing (5)
Dr. Cr. Dr. Cr.

7) 25,000 8) 100,000

Sales Return & Allowances (8)

Sales Discounts (7) (8)
Dr. Cr. Dr. Cr.

10) 2, 000 9) 5,000

Purchased Discounts(10)(6)
Purchases (9)
Dr. Cr. Dr. Cr.

2) 80,000 4) 3,000
5) 50,000

Freight In(12)
Purchase Returns & Allowances (11)
Dr. Cr. Dr. Cr.

3) 10,000 6) 1,000

Freight Out (13)

Dr. Cr.

11) 4,000

Required:

1. Total the debit and credit balances of each T-account and determine their
respective balances.
2. Prepare listings of account with open balances and total the same.
3. Reconstruct the debit and credit entries of each account by matching the
transaction number.

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Additional Activities

Directions: Make a balance sheet and income Statement about the T-Account from
Cris Jumawan Merchandising. Write your answer on a separate sheet
of paper.
Rubrics for Scoring

Points
Criteria Advanced Proficient Approaching Developing Beginning
Proficient
(10) (8) (6) (4) (2)
Understanding Applied all Applied Applied two Applied 1 Needs
and application concepts several concepts concept improvement
of concept concepts
Effort and Completed Completed Completed Incomplete Needs
Perseverance work and work with work but with work with improvement
show much good effort minimal minimal
effort effort effort
Time Submitted Submitted Submitted Submitted Needs
Management works on works on late but late and improvement
time time but complete incomplete
incomplete

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ANALYSES
Transaction Value Received or Debit Amount Value Parted With or Credit Amount
No.
1 Cash 250,000 Mr. Raymundo, Capital 250,000
2 Mr. Raymundo, Drawing 5,000 Cash 5,000
3 Cash 4,000 Service Income 4,000
4 Office Supplies 2,000 Account Payable 2,000
5 Mr. Raymundo, Drawing 8,000 Cash 8,000
6 Mr. Raymundo, Drawing 5,000 Cash 5,000
7 Mr. Raymundo, Drawing 1,000 Cash 1,000
8 Account Receivable 3,500 Service Income 3,500
9 Mr. Raymundo, Drawing 10,000 Cash 10,000
10 Cash 2,000 Account Receivable 2,000
Total P290, 500 P 290, 500
Lesson 1: What’s More ! Fill me In.
Lesson 1: What I have Learned
2,000 Answer may vary.
Lesson 1: What’s In Lesson 1: What I Know
1. Journal A. Multiple Choice
2. Journal

150,000
1,200
1. B
3. Ledger 2. C
4. Ledger 3. D
5. Journal 4. A

600,000
600,000
150,000
5. B
What’s New 6. A
7. A
1. 8. A
2. / 9. A
3./ 10. B

Credit, Capital
Credit, Cash
Credit, Freight In
Credit, Purchases Return and Allowance
4./
5./ B. True or False

Debit, Cash 1,200

Debit,Cash
Debit, Purchases
Debit, Cash 2,000
11. True

Lesson 1: ASSESSMENT
1.
2.
3.
4.
12. True
Answer Key
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Lesson 2: What’s More
Lesson 2: What I Can Do
Lesson 2: What I have
Activity.1
[Link] 6. increased
Learned
2. increased 7. increased 1.F 6. T
3. decreased 8. decreased 1. sales, asset 2. T 7. T
4. increased 9. increased 2. increase, sales 3. T 8. T
5. increased [Link] 3. asset, sales revenue, asset 4. T 9. T
4. asset, sales 5. T 10. F
5. expense, asset
Lesson 2: What’s New
Transaction 1
Analysis: Debit, Account Receivabl of 50,000, Credit, Sales of 50,000
Rule: Debit, increase Asset , Credit increase Revenue/Income
Lesson 1: Additional Activities Lesson 1: What I Can Do
Debit Credit Debit Credit
A-1 Cash L. A, Capital
1. / _______ A-2 L. A, Drawing ____Cash_______
2. / _______ B-1 Supplies Account Payable
B-2 Inventory ___Cash________
3. / _______
C-1 Account Payable ____Cash_______
4. _______ /
C-2 Account Receivable Service Income
5. _______ / _
ANALYSES
Date Value Received or Account Value Parted With or Credit Account
Debit Classification Classification
1 Cash Asset Rosalina, Capital Owner’s Equity
3 Account Receivable Asset Service Income Income
5 Cash Asset Note Payable Liability
8 Cash Asset Service Income Income
10 Drawing Owner’s Cash Asset
Equity
Lesson 1: Activity 3: CLASSIFY ME!
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LESSON 2: ADDITIONAL ACTIVITIES
Asset = Liabilities + Owner’s Equity
Cash in Bank, 896,000 = 50,000 + 900,00
(25,000)
875,000
+ 93,000 (Sales Revenue)
- 118, 000 (Cost)
- 4,000 (Expense)
- 29,000
Lesson 2: Assessment
Debit Credit
Asset Cash in Bank 896,000
50,000
Liability Accounts Payable
Owner’s Equity C. Jumawan, Capit 900,000
C. Jumawan , Drawing 25,000
Income Sales 100,000
Sales Discount 2,000
Sales Return & Allowance 5,000
Cost Purchases 130,000 3,000
Purchases Discount 10,000
Purchase Return and Allowances
Freight In 1,000
Expense Freight Out 4,000
Total P 1, 063,000 P 1, 063,000
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References

Brag Steven. (2019) . AccountingTools. ACCOUNTING CPE COURSES & BOOK.

Copyright 2020 retrieved on June 5, [Link]://[Link].

com/articles/2017/5/17/debits-and-credits

Lopez, R. Jr. 2016. Fundamentals of Accountancy 1st Edition. Davao: MS Lopez Printing
and Publishing.

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DISCLAIMER
This Self-Instructional Learning Material (SILM) was developed by the Schools
Division of Cotabato. It aims to provide learners with materials that could be
used in the new normal and is based on the modality preferred by most
parents and learners. It is hoped that through this, the education of the
children in the Province of Cotabato shall continue. This shall likewise be
used by the learners of all public schools in the schools division beginning SY
2020-2021. Furthermore, the process of LR development was observed in the
production of this module. This is version 1.0. We highly encourage feedback,
comments, and recommendation.

For inquiries or feedback, please write or call:

Department of Education – Schools Division of Cotabato

Learning Resource Management System (LRMS)

DepEd-Cotabato Division, Capitol Compound, Amas, Kidapawan City

Telefax No.: (064) 577-7017

Email Address: lrcotabato@[Link]

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