Module 1 FABM2

SESSION PLAN
MODULE : REVIEW OF THE ACCOUNTING CYCLE

Sub-Module : 1. Types of Major Accounts
2. The Fundamental Accounting Equation
COURSE/SUBJECT: Fundamentals of Accountancy and Business

Management 2
DURATION : Four (4) Hours
LECTURE : Modular/Via Zoom
LEARNING OUTCOMES (LOs):

At the end of the lesson, the students will be able to:
• Classify and identify assets, liabilities, and owner’s equity as a basic
element of accounting.
• Use the accounting equation to analyze business transactions.
LEARNING AIDS:
• Laptop / Computer
• Module
• Powerpoint Presentation
REFERENCES:
• Ong, Flocer Lao. Moving up; Fundamentals of Accountancy, Business,
and Management 1 for Senior High School, 2016. Philippines: C & E
Publishing, Inc.
I. INTRODUCTION
Preparatory Activities
• Opening Prayer
• Introducing the instructor
• Leveling/Motivation
Developmental Activities
• Articulating the desired learning outcomes for the session
II. PRESENTATION (Lesson Proper)

Accounting is a service activity, its function is to provide quantitative information,
primarily financial in nature about economic entities, that is intended to be useful in
making economic decisions.
THREE ELEMENTS OF ACCOUNTING
1. Asset
2. Liabilities
3. Owner’s Equity
1. ASSETS - These are economic resources owned by the business expected for
future gain. They are property and rights of value owned by the business.
CLASSIFICATION OF ASSETS
A. CURRENT ASSETS
• These are expected to be realized, or is intended for sale or consumption in,
the entity’s normal operating cycle.
• Expected to be realized within twelve months of the balance sheet date.
EXAMPLE OF CURRENT ASSETS

➢ Cash
➢ Cash Equivalents
➢ Marketable Securities
➢ Trade and Other Receivable
- Accounts Receivable
- Notes Receivable
- Interest Receivable
- Advances to Employees
- Accrued Income
➢ Inventories
➢ Prepaid Expenses
➢ Contra-Asset Accounts
- Allowance for Bad Debts
- Accumulated Depreciation
B. NON-CURRENT ASSETS
• Expected to be realized for more than twelve months of the balance sheet date.
• These are classified as long-term when they are intended to be held for an
extended period of time.
EXAMPLE OF NON-CURRENT ASSETS

➢ Long-Term Investments
➢ Property, Plant, and Equipment
- Land
- Building
- Equipment
- Furniture and Fixtures
- Intangible Assets
2. LIABILITIES – These includes debts, economic obligations to pay, and claims of
the creditors on the assets of the business.
CLASSIFICATION OF LIABILITIES
A. CURRENT LIABILITIES
• Due to be settled in the entity’s normal operating cycle.
• Due to be settled within twelve months after the balance sheet date; or the
entity does not have an unconditional right to defer settlement of the liability
for at least twelve months after the balance sheet date.
EXAMPLE OF CURRENT LIABILITIES

➢ Trade and Other Payables
- Accounts Payable
- Notes Payable
- Loans Payable
- Utilities Payable
- Unearned Revenues
- Accrued Liabilities such as
salaries payable, taxes
payable, and interest
payable.
B. NON-CURRENT LIABILITIES
• These are long-term liabilities or obligations which are payable for a period
longer than one-year.
EXAMPLE OF NON-CURRENT LIABILITIES

➢ Mortgage Payable
➢ Bonds Payable
3. OWNER’S EQUITY – The residual interest or claim of the owner of the business
to the assets after liabilities.
ACCOUNTS AFFECTING THE OWNER’S EQUITY

A. Capital- is an account bearing the name of the owner representing the original
and additional investment of the owner of the business. It is what the owner puts
in the business and it increases owner’s equity.
B. Withdrawals/Drawings- represents the withdrawal made by the owner of the
business in cash or other assets. It is what the owner takes out of the business
and it decreases the owner’s equity.
C. Revenues/Income- It is what the company receives for sales or services
rendered. It increases the owner’s equity.
D. Expenses- It is what the company pays to operate the business and it decreases
the owner’s equity account.
FUNDAMENTAL ACCOUNTING EQUATION
Illustrative Problem:
1.) Francis invested P300,000 to start his business
ASSETS = LIABILITIES + CAPITAL
Cash Francis, Capital
P300,000 P300,000
2.) Francis borrowed P200,000 from the bank.

Cash Loans Payable Francis, Capital
P300,000 P300,000
P200,000 = P200,000
P500,000 = P200,000 + P300,000
P500,000 = P500,000
3.) Francis paid 50% of his obligation from the bank.

P300,000 P300,000
P200,000 = P200,000
(P100,000) = (P100,000)
P400,000 = P100,000 + P300,000
P400,000 = P400,000
4.) Francis withdrew P50,000 cash for personal use.

P300,000 P300,000
P200,000 = P200,000
(P100,000) = (P100,000)
(P50,000) = (P50,000) withdrawal
P350,000 P100,000 + P250,000
P350,000 = P350,000
III. ASSESSMENT
EXERCISE 1
Complete the table below.
ASSETS LIABILITIES CAPITAL
P960,000 P518,000
P6,008,000 P4,255,000
P807,000 P777,000
P3,000,000 P2,005,000
P1,123,000 P933,000
EXERCISE 2
Answer the following questions. Show your computations in good form.
1. If the owner’s equity is P125,000 and the assets have a total amount of
P550,000, how much is the total liabilities of the business?
2. The economic resources of a business amount to P600,000 and its economic

obligations amount to P285,000. What would be the total owner’s equity?
3. If the owner’s equity is P150,000 which is 40% of the total assets, how much is
the total liabilities of the business?
4. If the economic obligations of a business amount to P60,000 and its residual

interest amounts to P150,000, what would be the amount of the economic
resources of the business?
5. If the total liabilities amount to P580,000 which is ¼ of the total assets, what is
the amount of the owner’s equity?
EXERCISE 3
Analyze the following transactions under the Accounting Equation Approach.
1. Commenced business with cash P500, 000.

2. Paid salary P10,000.
3. Invested additional capital P10,000.
4. Purchased computer P15,000.
5. Withdrew P10,000 for personal use.
6. Paid utilities for P5,000.
7. Received cash from customer, P20,000.
IV. CLOSING PRAYER
Prepared by:
Mr. Christian Joel D. Pacia
Teacher
Reviewed by:
Mr. Richard John W. Hernandez
Academic Coordinator, SHS
Approved by:
Dr. Vilma V. Esparrago
Principal, Basic Education

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SESSION PLAN

MODULE : REVIEW OF THE ACCOUNTING CYCLE

COURSE/SUBJECT: Fundamentals of Accountancy and Business

DURATION : Four (4) Hours

LECTURE : Modular/Via Zoom

LEARNING OUTCOMES (LOs):

II. PRESENTATION (Lesson Proper)

EXAMPLE OF CURRENT ASSETS

EXAMPLE OF NON-CURRENT ASSETS

EXAMPLE OF CURRENT LIABILITIES

EXAMPLE OF NON-CURRENT LIABILITIES

ACCOUNTS AFFECTING THE OWNER’S EQUITY

FUNDAMENTAL ACCOUNTING EQUATION

2.) Francis borrowed P200,000 from the bank.

3.) Francis paid 50% of his obligation from the bank.

4.) Francis withdrew P50,000 cash for personal use.

2. The economic resources of a business amount to P600,000 and its economic

4. If the economic obligations of a business amount to P60,000 and its residual

1. Commenced business with cash P500, 000.

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