Fundamentals of SENIOR

Accountancy, Business HIGH

and Management 1 (FABM 1) SCHOOL

Self-Learning
Module

Expanded Accounting Equation 9

666
Quarter 3
Fundamentals of Accountancy, Business and Management 1
Quarter 3 – Self-Learning Module 9: Expanded Accounting Equation
First Edition, 2020

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 Fundamentals of
SENIOR
Accountancy, Business HIGH
and Management 1 SCHOOL

(FABM 1)

Self-Learning
Module

9
Quarter 3

Expanded Accounting Equation

Introductory Message

For the facilitator:

Welcome to the Senior High School – Fundamentals of Accountancy, Business

and Management 1 Self Learning Module on Expanded Accounting Equation!

This Self-Learning Module was collaboratively designed, developed and

reviewed by educators from the Schools Division Office of Pasig City headed by its
Officer-in-Charge Schools Division Superintendent, Ma. Evalou Concepcion A.
Agustin, in partnership with the City Government of Pasig through its mayor,
Honorable Victor Ma. Regis N. Sotto. The writers utilized the standards set by the K
to 12 Curriculum using the Most Essential Learning Competencies (MELC) in
developing this instructional resource.

This learning material hopes to engage the learners in guided and independent
learning activities at their own pace and time. Further, this also aims to help learners
acquire the needed 21st century skills especially the 5 Cs, namely: Communication,
Collaboration, Creativity, Critical Thinking, and Character 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

This contains helpful tips or strategies that
will help you in guiding the learners.

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 their own learning. Moreover, you are expected to encourage and assist the
learners as they do the tasks included in the module.
 For the learner:

Welcome to Fundamentals of Accountancy, Business and Management 1 Self

Learning Module on Expanded Accounting Equation!

This module was designed to provide you with fun and meaningful
opportunities for guided and independent learning at your own pace and time. You
will be enabled to process the contents of the learning material while being an active
learner.

This module has the following parts and corresponding icons:

Expectations - This points to the set of knowledge and skills

that you will learn after completing the module.

Pretest - This measures your prior knowledge about the lesson

at hand.

Recap - This part of the module provides a review of concepts

and skills that you already know about a previous lesson.

Lesson - This section discusses the topic in the module.

Activities - This is a set of activities that you need to perform.

Wrap-Up - This section summarizes the concepts and

application of the lesson.

Valuing - This part integrates a desirable moral value in the

lesson.

Posttest - This measures how much you have learned from the
entire module.
 EXPECTATIONS

After going through this module, you are expected to:

1. understand the concept of expanded accounting equation ;
2. analyze problems involving expanded accounting equation; and
3. solve cases on the expanded accounting equation.

PRETEST

Directions: Write TRUE if the statement is correct, and FALSE if otherwise.

1. The expanded accounting equation provides fewer details for the owner's
equity amount shown in the basic accounting equation.

2. The expanded accounting equation does not demonstrate the relationship

between the balance sheet and the income statement by seeing how revenues
and expenses flow through into the equity of the company.
3. The concept of the expanded accounting equation extends to the asset and
liability sides of the accounting equation.
4. The expanded accounting equation splits equity into owner’s capital, owner’s
withdrawals, revenues, and expenses.
5. The expanded accounting equation reveals all of the components of the
shareholder’s equity part of the accounting equation.

RECAP

Directions: Fill in the blanks.

1. The accounting equation shows that
ASSETS = ____________ + _____________.
 2. If assets are ₱250, 000 and the business has no debt, owner’s equity
is recorded at ₱ _____________.

3. If a company keeps accurate records, the accounting equation is

always in _______________.

4. Stated differently, the accounting equation is Lilabilities =

_____________.
5. An accounting equation is also equal to Owner’s Equity = _____________.

LESSON

In the expanded accounting equation, the equity account is split into four main
elements: owner’s capital, owner’s withdrawal, revenues, and expenses. The asset
and the liability sections both remain the same in the expanded accounting equation.
The expanded accounting equation also demonstrates the relationship between
the balance sheet and the income statement by seeing how revenues and expenses
flow through into the equity of the business.

The Expanded Accounting equation for:

A.Sole Proprietorship

DEBIT CREDIT

Assets = Liabilities + Owner’s Equity(capital)-Withdrawals+Revenues-Expenses

B. Partnership

DEBIT CREDIT

Assets = Liabilities + Members’ Capital - Distributions

+ Revenues - Expenses
C. Corporation
DEBIT CREDIT

Assets = Liabilities + Common Stock - Dividends + Paid In Capital

- Treasury Stock + Revenues - Expenses

It is important to note that in all accounting equations, assets and liabilities remain
the same, only the ownership accounts are changed.

Normal account increases and decreases

Normal Balance Increase through Decrease through

Assets Debit Debit Credit
Liabilities Credit Credit Debit
Owner’s Equity
a. Owner’s
Capital Credit Credit Debit
b. Owner’s
Drawing Debit Debit Credit
Revenues Credit Credit Debit
Expenses Debit Debit Credit
Contra-valuation
accounts
a. Allowance for
Doubtful Accounts Credit Credit Debit
b. Accumulated
Depreciation Credit Credit Debit
Illustration

R & B Company was incorporated on March 1, 2020, with a paid-up capital of 25,000
shares with a value of ₱ 1,250. During the first three months of its operations, R &
B Company had the following transactions:

DATE TRANSACTIONS

March 1 Invested initial capital of ₱1,250,000

6 Paid ₱250,000 for furniture and computers

15 Purchase cash ₱125,000 for machinery and equipment; ₱25,000 for

purchase of raw materials

22 Incurred ₱5,000 for marketing and advertising

30 Paid salaries of employees worth ₱325,000

30 Paid rent and telephone bill for ₱375,000

April 13 Earned through sales worth ₱875,000

18 Paid payment through petty cash and bills worth₱ 37,500

31 Paid salaries ₱325,000 to employees

31 Paid rent and telephone bills worth ₱337,500

May 5 Received advance payment from a customer worth ₱700,000

26 Purchase raw materials on credit worth ₱125,000

31 Paid salaries to employees worth ₱325,000

31 Paid rent and telephone bills worth ₱425,000

31 Paid ₱25,000 as dividend

31 Paid miscellaneous worth ₱75,000

Segregation of transactions

Date Nature Assets Paid Up Liabilities Income Expenses Dividends

Capital

₱1,250,000 (₱1,250,000)
March Capital and
Asset
1

6 Expenses (₱250,000) (₱250,000)

and Asset

15 Expenses (₱125,000) (₱125,000)

and Asset

15 Expenses (₱25,000) (₱25,000)

and Asset

22 Expenses (₱5,000) (₱5,000)

and Asset

30 Expenses (₱325,000) (₱325,000)

and Asset

30 Expenses (₱375,000) (₱375,000)

and Asset

April Expenses ₱875,000 ₱875,000

and Asset
13

18 Expenses (₱37,500) (₱37,500)

and Asset

31 Expenses (₱325,000) (₱325,000)

and Asset

31 Expenses (₱337,500) (₱337,500)

and Asset

May Revenue ₱700,000 ₱700,000

and Asset
5

26 Expenses (₱125,000) (₱125,5000)

and Asset
 31 Revenue (₱325,000) (₱325,000)
and Asset

31 Revenue (₱425,000) (₱425,000)

and Asset

31 Dividend (₱25,000) (₱25,000)

and Asset

31 Revenue (₱75,000) (₱75,000)

and Asset

₱45,000 ₱1,250,000 ₱0 ₱1,575,000 ₱2.755,000 (₱25,000)

ACTIVITIES

Activity 1: Caselets
Directions: Analyze and solve.
A. Compute for total assets if the owner’s initial contribution for opening a business is
₱150,000. Three months after, he made an additional investment of ₱200,000. During
the 2nd quarter of the fiscal year, the business spent ₱100,000 to buy equipment for the
business. Within the normal operations of the business, total revenues amounted to
₱500,000. The business did not incur any present obligations.
B. HBC Printing Press owes ₱500,000 from XYZ bank. The company’s total assets are
₱5,000,000 and within the normal operation of the business, total revenue is ₱2,400,000
and total expenses amounted to ₱1,800, 240. Compute for the owner’s equity if there
were no withdrawals made within the normal operation of the business.

Activity 2: Supply What Is Missing

Directions: Complete the table below.

ASSETS LIABILITIES OWNER’S (WITHDRAWALS) REVENUES (EXPENSES)

EQUITY
₱150,000 ₱50,000 0 1. ₱25,000 ₱15,500
2. ₱75,000 ₱15,200 ₱8,000 ₱16,800 ₱24,00
₱156,000 0 3. ₱22,400 ₱80,000 ₱54,000
₱280,000 ₱15,500 ₱25,000 ₱24,000 ₱60,000 4.
₱800,000 5. ₱77,500 ₱17,500 ₱24,800 ₱30,000
 WRAP-UP

To summarize what you have learned in the lesson, answer the following
questions:

1. The expanded accounting equation affect five elements of accounting and these
are __________, _________, ___________, ___________ and ____________.
2. How were you able to make use of expanded accounting equation to analyze
more complex accounting cases?
3. If a company keeps accurate records, the accounting equation is always in
“balance”. Were you able to use this in solving more complex cases? How?

VALUING

Reflect on this!

"Remain self-funded, as long as possible." – Garrett Camp

POSTTEST

Directions: Analyze, solve, and provide what is required.

Roberto Car Repair Shop started the business with total assets of ₱200,000 and
total liabilities of ₱100,000 on January 1, 2019. During the year, the business
recorded ₱140,000 in car repair revenue, ₱170,000 in expenses, and Filemon
withdraw ₱24,000.
Required:
A. Compute for the correct balance of Roberto’s Car Repair Shop for the year
ended Dec. 31, 2019.
B. Compute for the correct change in Roberto, Capital during the year 2019.
C. Compute for the correct change in Roberto, Capital account from the
beginning of the year to the end of the year.
 KEY TO CORRECTION

ASSETS -LIABILITIES 5.
ASSETS-OWNER’S EQUITY 4.
BALANCE 3.
₱250,000 2. 5. ₱745,000
EQUITY 4. ₱203,500
LIABILITIES,OWNER’S
1. 3. ₱152,400
RECAP 2. ₱75,000
5. TRUE 1. ₱90,500
4. TRUE ACTIVITY 2 C. ₱186,000
3. FALSE B. ₱86,000
2. FALSE B. ₱3,900,240 A. ₱110,000
1. FALSE A. ₱750,000
PRETEST ACTIVITY 1: POSTTEST

References
Ballada, W. 2017. Fundamentals of Accountancy, Business, and Management 1.
VDomDane Publishers.

Banggawan, RB. Asuncion, DJ. 2017. Fundamentals of Accountancy, Business, and

Management 1. Real Excellence Publishing.

Feme, PM. Cabuñag, HP. 2017. Fundamentals of Accountancy, Business and Management 1.
Fastbooks Educational Supply, Inc

Ferrer, RC. Millan, CV. 2017. Fundamentals of Accountancy, Business, and Management
1. Bandolin Enterprise. San Juan, DA. 2018. Fundamentals of Accounting.
Elmoer Publishing

Rabo, JS. Tugas,FC.Salendrez, HE. 2016. Fundamentals of Accountancy, Business, and

Management 1. Vibal Group Inc.

"What Is the Expanded Accounting Equation?: AccountingCoach." AccountingCoach.com.

Accessed on July 24, 2020. https://www.accountingcoach.com/blog/expanded-
accounting-equation#:~:text=Definition of Expanded Accounting Equation,in the
basic accounting equation.&text=The expanded accounting equation for a corporation
is: Assets = Liabilities,Expenses – Dividends – Treasury Stock.

Bragg, Steven. "The Expanded Accounting Equation." AccountingTools. January 09, 2020.
Accessed on July 24, 2020. https://www.accountingtools.com/articles/what-is-the-
expanded-accounting-equation.html.

"Expanded Accounting Equation - Examples: Concept: Explanation." My Accounting

Course. Accessed on July 24, 2020.
https://www.myaccountingcourse.com/accounting-basics/expanded-
accounting-equation.

"Expanded Accounting Equation - AccountingVerse." Accountingverse.com. Accessed on

July 24, 2020. https://www.accountingverse.com/ accounting-basics/expanded-
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