Lesson Note on Final Accounts: Profit and Loss Preparation and Balance Sheet Basics for SSS 2

Class: Senior Secondary School 2 (SS2 / SSS2)
Term: 1st Term
Week: 9
Age: 16 years
Duration: 45 minutes
Subject: Store Management
Curriculum Theme: Store Records and Accounts
Previous Lesson: Final Accounts: Meaning, Trading Account and Profit and Loss.
Topic: Final Account cont.
Subject Matter: Meaning of final accounts, profit and loss account (preparation, determination of profit or loss), balance sheet (meaning, types: T format, straight line format), balance sheet (items used in preparing the balance sheet).

Specific Objectives

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

Cognitive Domain:

• Define final accounts.
• Explain the purpose of a profit and loss account.
• State the meaning and types of balance sheet.
• Identify items used in preparing a balance sheet.

Affective Domain:

• Appreciate the importance of preparing accurate final accounts for a store.
• Develop interest in the financial health and reporting of a business.

Psychomotor Domain:

• Prepare a simple profit and loss account to determine profit or loss.
• Prepare a simple balance sheet using either the T format or straight-line format.

Social Domain:

• Work collaboratively to understand and solve practical accounting problems related to final accounts.
• Understand the ethical implications of transparent financial reporting.

Reference Materials

The following resources were used in planning this lesson:

• Senior Secondary Schools Education Curriculum
• State Unified Scheme of Work
• Oyebola, M. (2018). Simplified Store Management for Senior Secondary Schools. Ibadan: University Press PLC.
• https://www.investopedia.com/terms/f/final-accounts.asp
• https://www.accountingcoach.com/balance-sheet/explanation

Instructional Materials

The teacher will teach this lesson with the aid of:

• Chart showing ruling for a balance sheet.
• Sample balance sheet figures for demonstration.
• Whiteboard and markers.

Rationale for the Lesson

This lesson helps pupils understand how businesses determine their financial performance and position at the end of an accounting period. It enables them to interpret and prepare key financial statements, which is essential for effective store management and decision-making.

Prerequisite/Previous Knowledge

Pupils are expected to have prior knowledge of basic accounting concepts, the purpose of final accounts, and introductory aspects of the profit and loss account from previous lessons.

Lesson Content/Board Summary

Final Accounts (Continuation)

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.

Profit and Loss Account

The Profit and Loss Account is a financial statement that shows the revenues, costs, and expenses over a period of time. Its primary purpose is to determine the net profit or net loss made by the business during that period.

Determination of Profit or Loss:

• Gross Profit: Sales Revenue – Cost of Goods Sold
• Net Profit/Loss: Gross Profit + Other Income – Operating Expenses

Balance Sheet

The Balance Sheet is a financial statement that provides a snapshot of a company’s financial position at a specific point in time. It shows what a company owns (assets), what it owes (liabilities), and the owners’ equity (capital).

Types of Balance Sheet Formats

There are two main formats for preparing a Balance Sheet:

• T-Format (Account Form): This format presents assets on the left side and liabilities and capital on the right side, resembling a ‘T’ account.
• Straight-Line Format (Report Form): This format presents assets first, followed by liabilities, and then capital, all in a single column.

Items Used in Preparing the Balance Sheet

The Balance Sheet is composed of three main elements:

• Assets: These are resources owned by the business that have future economic value.
  • Fixed Assets: Long-term assets used for operations and not intended for resale (e.g., Land, Building, Machinery, Furniture).
  • Current Assets: Short-term assets that can be converted into cash within one year (e.g., Cash in hand, Cash at bank, Debtors, Inventory/Stock).
• Liabilities: These are financial obligations or debts owed by the business to external parties.
  • Long-Term Liabilities: Debts payable over a period longer than one year (e.g., Long-term Loans, Debentures).
  • Current Liabilities: Debts payable within one year (e.g., Creditors, Bank Overdraft, Accrued Expenses).
• Capital (Owner’s Equity): This represents the owner’s investment in the business. It is calculated as Assets minus Liabilities.
  • Opening Capital + Net Profit – Drawings = Closing Capital

Balance Sheet Equation

Assets = Capital + Liabilities

Worked Example: Preparation of a Simple Balance Sheet (T-Format)

The following balances were extracted from the books of XYZ Stores as at 31st December, 2023:

• Cash: N50,000
• Bank: N120,000
• Debtors: N80,000
• Stock: N150,000
• Creditors: N70,000
• Bank Loan (long-term): N100,000
• Furniture: N200,000
• Building: N500,000
• Capital: N930,000

XYZ Stores
Balance Sheet
As at 31st December, 2023

Note: The total of Liabilities + Capital must always equal the Total Assets.

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 reviews the previous lesson on final accounts and briefly recaps the purpose of the profit and loss account. The teacher then introduces the balance sheet as a continuation of final accounts.
Pupils’ Activity: Pupils respond to questions about the previous lesson and listen attentively to the introduction.
Learning Point: Pupils recall prior knowledge and are prepared for the new topic.

Step 2: Meaning of Final Accounts and Profit and Loss Account

Time: 8 minutes
Teaching Skill: Explanation/Recap
Teacher’s Activity: The teacher re-explains the meaning of final accounts and clarifies how profit or loss is determined using the profit and loss account, providing a simple verbal example.
Pupils’ Activity: Pupils listen, ask questions for clarification, and contribute to the discussion on profit/loss determination.
Learning Point: Pupils reinforce their understanding of final accounts and profit/loss calculation.

Step 3: Meaning and Types of Balance Sheet

Time: 8 minutes
Teaching Skill: Explanation/Illustration
Teacher’s Activity: The teacher defines the balance sheet as a statement of financial position and explains its purpose. The teacher then introduces and explains the two main types of balance sheet formats: T-format and straight-line format, using the chart if available.
Pupils’ Activity: Pupils listen, take notes, and observe the illustrations of the balance sheet formats.
Learning Point: Pupils understand the concept of a balance sheet and its different presentation styles.

Step 4: Items Used in Preparing the Balance Sheet

Time: 8 minutes
Teaching Skill: Listing/Explanation
Teacher’s Activity: The teacher explains the key components of a balance sheet: Assets (fixed and current), Liabilities (long-term and current), and Capital. The teacher provides examples for each category.
Pupils’ Activity: Pupils listen, identify the different items, and ask questions about their classification.
Learning Point: Pupils can correctly identify and classify items that appear in a balance sheet.

Step 5: Demonstration of Balance Sheet Preparation

Time: 10 minutes
Teaching Skill: Demonstration/Practical
Teacher’s Activity: Using the sample balance sheet figures and the chart, the teacher demonstrates the step-by-step preparation of a simple balance sheet (preferably in T-format) on the board. The teacher emphasizes the balancing aspect.
Pupils’ Activity: Pupils observe carefully, copy the example into their notes, and ask questions about specific entries.
Learning Point: Pupils learn the practical steps involved in preparing a balance sheet and understand the accounting equation.

Step 6: Evaluation/Review

Time: 5 minutes

Teaching Skill: Questioning/Assessment

Teacher’s Activity: The teacher evaluates the learning by asking the following questions:

1. What are final accounts?
2. State two types of balance sheet formats.
3. Mention two fixed assets and two current liabilities.
4. Explain the balance sheet equation.

Pupils’ Activity: Pupils answer orally and in writing.

Learning Point: Pupils demonstrate understanding of the lesson.

Step 7: Conclusion

Time: 1 minute
Teaching Skill: Summarization
Teacher’s Activity: The teacher summarizes the key points of the lesson, reiterating the importance of final accounts for assessing a store’s financial health.
Pupils’ Activity: Pupils listen and confirm their understanding.
Learning Point: Pupils consolidate their learning.

Lesson Keywords

• Final Accounts – Financial statements prepared at the end of an accounting period to show profit/loss and financial position.
• Profit and Loss Account – A financial statement showing revenues, costs, and expenses to determine net profit or loss.
• Balance Sheet – A financial statement showing a company’s assets, liabilities, and capital at a specific point in time.
• Assets – Resources owned by the business that have future economic value.
• Liabilities – Financial obligations or debts owed by the business.
• Capital – The owner’s investment in the business (Owner’s Equity).
• T-format – A balance sheet presentation where assets are on the left and liabilities/capital are on the right.
• Straight Line Format – A balance sheet presentation where assets, liabilities, and capital are listed in a single column.

Differentiation

For pupils who grasp concepts quickly, they will be encouraged to prepare a balance sheet using the straight-line format for the given example. For pupils needing more support, the teacher will provide additional guidance during the demonstration and allow them to copy the board summary at their own pace, offering one-on-one assistance.

Note for teachers using this lesson plan

Ensure that pupils have a strong foundational understanding of debits and credits and the accounting equation before proceeding with balance sheet preparation. Provide clear, simple examples, and encourage pupils to practice regularly. Emphasize that the balance sheet must always balance, as it is a key check of accuracy.