Class: Senior Secondary School 2 (SS2 / SSS 2)
Term: 1st Term
Week: 8
Age: 16 years
Duration: 45 minutes
Subject: Store Management
Curriculum Theme: Business Accounting
Previous Lesson: Cash Book: Two Column and Three Column Cash Book.
Topic: Final account.
Subject Matter: Meaning of final accounts, stages of final accounts, trading account (meaning, items, preparation), profit and loss account (meaning, items).

Specific Objectives

By the end of the lesson, pupils should be able to:

Cognitive Domain:

Define final accounts.
State the stages involved in preparing final accounts.
Explain the meaning of a trading account.
Identify items used in preparing a trading account.
Explain the meaning of a profit and loss account.
Identify items used in preparing a profit and loss account.

Affective Domain:

Appreciate the importance of preparing accurate final accounts.
Show interest in the process of preparing financial statements.

Psychomotor Domain:

Prepare a simple trading account.
Prepare a simple profit and loss account.

Collaborate with peers in discussing accounting principles.

Reference Materials

The following resources were used in planning this lesson:

Senior Secondary Schools Education Curriculum
State Unified Scheme of Work
Egbe, A. (2018). Simplified Accounting for Senior Secondary Schools. Lagos: Learnwell Publishers.
https://www.education.gov.ng/curriculum-resources/
https://www.waeconline.org.ng/

Instructional Materials

The teacher will teach this lesson with the aid of:

A chart showing the ruling of a trading account and a profit and loss account.
Sample figures for purchases, sales, stock, and expenses.

Rationale for the Lesson

This lesson helps pupils understand how businesses determine their financial performance and position. It enables them to grasp the fundamental statements used to show profit or loss and the overall financial health of an organisation, which is important for future business studies and careers.

Prerequisite/Previous Knowledge

Pupils should have prior knowledge of basic accounting concepts such as ledgers, debits, credits, and the accounting equation.

Lesson Content/Board Summary

Final Accounts

Meaning of Final Accounts

Final accounts are financial statements prepared at the end of an accounting period (usually a year) to show the financial performance (profit or loss) and financial position (assets, liabilities, and capital) of a business. They summarise all transactions recorded in the ledgers.

Stages of Final Accounts

The preparation of final accounts typically involves the following stages:

Preparation of Trial Balance.
Preparation of Trading Account.
Preparation of Profit and Loss Account.
Preparation of Balance Sheet.

Trading Account

A trading account is the first part of the final accounts prepared to determine the Gross Profit or Gross Loss of a business during an accounting period. It primarily deals with direct costs and revenues related to buying and selling goods.

The following are key items found in a trading account:

Opening Stock: The value of unsold goods at the beginning of the accounting period.
Purchases: The total cost of goods bought for resale during the period.
Returns Outwards (Purchases Returns): Goods returned to suppliers.
Sales: The total revenue from goods sold during the period.
Returns Inwards (Sales Returns): Goods returned by customers.
Closing Stock: The value of unsold goods at the end of the accounting period.

Preparation of a Simple Trading Account

Example 1: Prepare a Trading Account from the following information for the year ended 31st December 2023:

Opening Stock: N10,000
Purchases: N80,000
Sales: N120,000
Closing Stock: N15,000

Step 1: List all direct expenses (Opening Stock, Purchases) on the Debit (left) side.

Step 2: List all direct revenues (Sales, Closing Stock) on the Credit (right) side.

Step 3: Calculate the difference to find Gross Profit or Gross Loss.

TRADING ACCOUNT
For the Year Ended 31st December 2023

| Debit                          N  | Credit                         N   |
|----------------------------------|------------------------------------|
| To Opening Stock            10,000 | By Sales                   120,000 |
| To Purchases                80,000 | By Closing Stock            15,000 |
| To Gross Profit c/d         45,000 |                                    |
|----------------------------------|------------------------------------|
|                             135,000 |                             135,000 |
|----------------------------------|------------------------------------|

Profit and Loss Account

A profit and loss account is the second part of the final accounts prepared to determine the Net Profit or Net Loss of a business during an accounting period. It takes the Gross Profit (or Loss) from the trading account and adjusts it with other incomes and all operating expenses.

The following are key items found in a profit and loss account:

Gross Profit b/d: The Gross Profit transferred from the Trading Account.
Operating Expenses: Costs incurred in running the business (e.g., salaries, rent, electricity, advertising, depreciation, insurance).
Other Incomes: Revenues not directly related to the main trading activity (e.g., discount received, rent received, commission received).

Preparation of a Simple Profit and Loss Account

Example 2: Using the Gross Profit from Example 1 (N45,000) and the following expenses, prepare a Profit and Loss Account:

Salaries: N15,000
Rent: N5,000
Electricity: N3,000

Step 1: Bring down the Gross Profit to the Credit (right) side.

Step 2: List all operating expenses on the Debit (left) side.

Step 3: Calculate the difference to find Net Profit or Net Loss.

PROFIT AND LOSS ACCOUNT
For the Year Ended 31st December 2023

| Debit                          N  | Credit                         N   |
|----------------------------------|------------------------------------|
| To Salaries                 15,000 | By Gross Profit b/d         45,000 |
| To Rent                      5,000 |                                    |
| To Electricity               3,000 |                                    |
| To Net Profit c/d           22,000 |                                    |
|----------------------------------|------------------------------------|
|                             45,000 |                             45,000 |
|----------------------------------|------------------------------------|

Teaching Methods/Instructional Techniques

Discussion, Lecture, Demonstration, Question and Answer, Visual Aids

Instructional Procedures

Step 1: Introduction

Time: 5 minutes
Teaching Skill: Set Induction
Teacher’s Activity: The teacher greets the pupils and asks them what they understand by profit and loss in a business context.
Pupils’ Activity: Pupils respond by sharing their ideas on profit and loss.
Learning Point: Pupils recall basic business concepts related to financial outcomes.

Step 2: Final Accounts: Meaning and Stages

Time: 7 minutes
Teaching Skill: Explanation/Definition
Teacher’s Activity: The teacher defines final accounts and explains their purpose. The teacher then lists the main stages involved in preparing final accounts, using the board.
Pupils’ Activity: Pupils listen attentively, take notes, and ask questions for clarification.
Learning Point: Pupils understand the definition and sequential steps of final accounts.

Step 3: Trading Account: Meaning and Key Items

Time: 8 minutes
Teaching Skill: Explanation/Listing
Teacher’s Activity: The teacher explains the meaning of a trading account and its purpose. The teacher then lists and explains key items such as opening stock, purchases, sales, and closing stock, using the chart.
Pupils’ Activity: Pupils listen, observe the chart, and copy the definitions and items into their notebooks.
Learning Point: Pupils learn the purpose and components of a trading account.

Step 4: Trading Account: Preparation (Example 1)

Time: 10 minutes
Teaching Skill: Demonstration/Illustration
Teacher’s Activity: The teacher demonstrates how to prepare a simple trading account using sample figures on the board or chart, explaining each step of posting the items.
Pupils’ Activity: Pupils observe the demonstration, ask questions, and practice preparing the trading account in their notes.
Learning Point: Pupils gain practical skills in preparing a trading account and calculating gross profit/loss.

Step 5: Profit and Loss Account: Meaning and Key Items

Time: 7 minutes
Teaching Skill: Explanation/Listing
Teacher’s Activity: The teacher explains the meaning of a profit and loss account and its purpose. The teacher then lists and explains key items like operating expenses and other incomes, referring to the chart.
Pupils’ Activity: Pupils listen, observe the chart, and take notes on the meaning and items of a profit and loss account.
Learning Point: Pupils understand the purpose and components of a profit and loss account.

Step 6: Profit and Loss Account: Preparation (Example 2)

Time: 6 minutes
Teaching Skill: Demonstration/Illustration
Teacher’s Activity: The teacher demonstrates how to prepare a simple profit and loss account using the gross profit from the previous example and additional sample expenses on the board or chart.
Pupils’ Activity: Pupils observe the demonstration, ask questions, and practice preparing the profit and loss account in their notes.
Learning Point: Pupils gain practical skills in preparing a profit and loss account and calculating net profit/loss.

Step 7: Evaluation/Review

Time: 5 minutes
Teaching Skill: Questioning/Assessment
Teacher’s Activity: The teacher evaluates the learning by asking the following questions:

What are final accounts?
List two stages of final accounts.
Explain the purpose of a trading account.
Mention three items found in a trading account.
What is the purpose of a profit and loss account?

Pupils’ Activity: Pupils answer orally and in writing.
Learning Point: Pupils demonstrate understanding of the lesson.

Step 8: Conclusion

Time: 3 minutes
Teaching Skill: Summarization
Teacher’s Activity: The teacher briefly summarises the main points of the lesson, reinforcing the importance of final accounts. The teacher then gives pupils an assignment to prepare a simple trading and profit and loss account from given figures.
Pupils’ Activity: Pupils listen to the summary and copy down the assignment.
Learning Point: Pupils consolidate their understanding and are prepared for further practice.

Lesson Keywords

Final Accounts – Financial statements showing a business’s profit/loss and financial position.
Trading Account – Account prepared to calculate Gross Profit or Gross Loss.
Profit and Loss Account – Account prepared to calculate Net Profit or Net Loss.
Purchases – Cost of goods bought for resale.
Sales – Revenue from goods sold.
Stock – Goods available for sale or used in production.
Expenses – Costs incurred in running a business.

Differentiation

For pupils who grasp concepts quickly, the teacher can provide more complex examples involving returns, carriage, and discounts. For struggling pupils, the teacher will provide simplified examples and offer one-on-one guidance during practice sessions.

Note for teachers using this lesson plan

Ensure pupils understand the distinction between direct costs (trading account) and indirect costs/other incomes (profit and loss account). Emphasise the double-entry principle as items are posted to the accounts. Encourage pupils to practice regularly with different sets of figures to reinforce their understanding and preparation skills.