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Fundamentals of Accountancy,
Business and Management 1
Third Quarter – Module 6

DEBIT AND CREDIT

MELC: Analyze common business transactions using the rules of debit and credit; solve simple
problems and exercises in the analyses of business transaction

MARIA MOHANNA T. CALICA, MBA

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PART 1: DISCUSSION
I. INTRODUCTION

Accounting has the reporting function where all the gathered financial information are used to
create financial statements to analyze and understand the financial health and performance of the
business. It’s pretty straightforward, almost all people can understand this definition at first look, but
what confuses everybody is the concept of Debit and Credit. Now to set things clear, let’s learn about
debit and credit.

II. DISCUSSION OF CONCEPTS

➢ WHAT IS DEBIT AND CREDIT?

Debit and Credit is designed to represent the duality of a single transaction. For example,
if you received cash for a product or service, you’ll write debit Cash and Credit Sales. Why?
Because receiving cash increases Assets and it also increases Sales which affects Equity. In
short, you debit cash because it increase your asset and you credit Sales because it increases
your Equity.

DEBIT - is an Accounting entry that increases Assets and decreases Liabilities and
Owner’s Equity.

CREDIT - is an Accounting entry that decreases Assets and increases Liabilities and
Owner’s Equity.

➢ NORMAL BALANCES AND INCREASES AND DECREASES

It is important that you master the normal balances of each major account and two of
the contra-asset accounts.

Normal Increase Decrease

Balance Through Through

Assets Debit Debit Credit

Liabilities Credit Credit Debit

Owner’s equity :

▪ Owner, Capital

▪ Owner, Drawing Credit Credit Debit

Debit Debit Credit

Revenues Credit Credit Debit

Expenses Debit Debit Credit

Contra-asset
accounts:

▪ Allowance for Credit Credit Debit

Doubtful
Accounts
Credit Credit Debit
▪ Accumulated
Depreciation

PART 2: ACTIVITY

ACTIVITY 1. RULES OF DEBIT AND CREDIT

Directions: Complete the table below. The first item has been done for you.
List of Accounts Classification Normal Increased by Decreased by
Balance
(Asset, Liabilities, (Debit/ (Debit/
Owner’s Equity (Debit/ Credit) Credit) Credit)
,Revenue,
Expense)

1 Cash Asset Debit Debit Credit

2 Accounts Receivable

3 Merchandise Inventory

4 Prepaid Insurance

5 Supplies

6 Office Equipment

7 Transportation
Equipment

8 Building

9 Land

10 Intangible Assets

11 Accounts Payable

12 Notes Payable

13 Salaries Payable
14 Utilities Payable

15 Cervantes,Capital

16 Cervantes.Withdrawal

17 Sales

18 Interest Income

19 Cost of Sales

20. Purchases

ACTIVITY 2. RULES OF DEBIT AND CREDIT

Directions: Underline the correct word to complete the sentences.

1. If I want to increase the asset account, I will (debit, credit) the asset account.
2. If I want to decrease the asset account, I will (debit, credit) the asset account.
3. If I want to increase the liability account, I will (debit, credit) the liability account.
4. If I want to decrease the liability account. I will (debit, credit) the liability account.
5. If I want to increase the owner’s equity account, I will (debit, credit) the owner’s equity account.
6. If I want to decrease the owner’s equity account, I will (debit, credit )the owner’s equity account
7. If I want to increase the revenue account, I will (debit, credit) the revenue account.
8. If I want to decrease the revenue account, I will (debit, credit) the revenue account.
9. If I want to increase my expense account, I will (debit, credit) the expense account.
10.If I want to decrease my expense account , I will (debit, credit) the expense account

PART 3. ASSESSMENT
A. ESSAY
Directions: Answer the following questions:

1. What are the five major types of accounts?

_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
2. When to debit or credit the accounts?
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________

Scoring Rubric:

Advanced Competent Developing Beginner

-Learners got 90% - Learners got 85- - Learners got 75- - Learners got 74%
and above of the 89% of the total 84% of the total and below
total items items. items. show less
- Learners show - Learners show poor
Understanding
Learner shows understanding of the understanding of the
of the
mastery of the competency. Competency
competency
competency (17)
(14) (10)
(20)

B. WORK SHEET ACTIVITY

B. 1. BUSINESS TRANSACTION/NON-BUSINESS TRANSACTION

DIRECTIONS: On the space provided, indicate BT if the statement is a business

transaction and NBT if the statement is not a business transaction.

____________1. Bill received from Masaya Spa, Inc. for the massage service rendered.
____________2. Promotion of a car supervisor to a managerial position.
____________3. Paid salaries of employees.
____________4. Transferred some furniture from home to business.
____________5. Received cash from GSIS as educational loan.
____________6. Paid balance due on bank loan.
____________7. Paid taxes and other business permits.
____________8. Opened a checking account in business name.
____________9. Purchase 50 boxes of can goods intended for sale.
____________10. Hired new employees.
____________11. Closed a contract for the construction of building.
____________12. Bought spa supplies and equipment.
B. 2. ACCOUNTING MASTER 1
The Problem:
Refer to the business transactions relating to Mr. Jose Dela Cruz – a house cleaning
service business in Makati.

Bank Account Delivery Expenses Account Bank Cleaning Capital

Receivable Payable Loan Fees
101 +10,000 +10,000
102 -5,000 +5,000
103 -4,000 +4,000
104 +20,000 +20,000
105 -12,000 +2,000 -10,000
106 -5,000 -5,000
107 -11,000 -12,000 +1,000
108 -14,000 -140,000 +126,000

Directions: Describe each transactions made by Mr. Jose Dela Cruz using the table below.

Transaction Description
E.g. 101 Received P 10,000 cash for cleaning fees.
B.3. ACCOUNTING MASTER 2
Ms. Maria Soriano, an accountant by profession is engaged in Malaya Transport Co., a service
based company. She completed the following transactions from this business’s current
month.

1. Purchased equipment on account for P 15,500, payment due within the month.
2. Receives P8, 200 cash in advance from a customer for services not yet rendered.
3. Provides P12, 000 in transport services to a customer who ask to be billed for the services.

Directions: Analyze each transaction then complete the table below by the necessary data.

Transaction No.1:____________________________________________________________________

Assets = Liabilities + Owner’s Equity

Transaction No.2:____________________________________________________________________

Assets = Liabilities + Owner’s Equity

Transaction No.3:____________________________________________________________________

Assets = Liabilities + Owner’s Equity

 REFERENCES:

A. F.Tugas, H. Salendrez, J. Rabo. Fundamentals of Accountancy, Business and

Management 1 Textbook. Vibal Group Inc.

B. https://www.accountingcoach.com/accounting-basics/explanation

C. Andres, C.S., et al.(2016) ‖Teaching Guide for Senior High School Fundamentals
of Accountancy, Business and Management 1‖ – Published by Commission on Higher
Education in collaboration with the Philippine Normal University

D. Ferrer R.C. et.al. (2017). Fundamentals of Accountancy, Business and Management part 1,
Bandolin Enterprise, (Publishing and Printing) Bakekang Sur, Baguio City

KEY ANSWER:

Activity 1 Rules of Debit and Credit

List of Accounts Classification(Asset, Liabilities, Normal Increased by Decreased by

Owner’s Equity ,Revenue, Balance Debit/ Credit Debit/ Credit
Expense)
(Debit/
Credit)

1 Cash Asset Debit Debit Credit

2 Accounts Receivable Asset Debit Debit Credit

Merchandise
3 Asset Debit Debit Credit
Inventory

4 Prepaid Insurance Asset Debit Debit Credit

5 Supplies Asset Debit Debit Credit

6 Office Equipment Asset Debit Debit Credit

Transportation
7 Asset Debit Debit Credit
Equipment

8 Building Asset Debit Debit Credit

9 Land Asset Debit Debit Credit

10 Intangible Assets Asset Debit Debit Credit

11 Accounts Payable Liability Credit Credit Debit

12 Notes Payable Liability Credit Credit Debit

13 Salaries Payable Liability Credit Credit Debit

14 Utilities Payable Liability Credit Credit Debit

15 Liam,Capital Owner’s Equity Credit Credit Debit

16 Liam.Withdrawal Owner’s Equity Debit Debit Credit

17 Sales Revenue Credit Credit Debit

18 Interest Income Revenue Credit Credit Debit

19 Cost of Sales Expenses Debit Debit Credit

20 Purchases Expenses Debit Debit Credit

Activity 2. Rules of Debit and Credit

1. Debit
2. Credit
3. Credit
4. Debit
5. Credit
6. Debit
7. Credit
8. Debit
9. Debit
10. Credit

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