Class: Senior Secondary School 2 (SS2 / SSS2)
Term: 2nd Term
Week: 8
Age: 16 years
Duration: 45 minutes
Subject: Financial Accounting
Curriculum Theme: Financial Accounting
Previous Lesson: Incomplete Records: Meaning, Features and Profit from Two Balance Sheets.
Topic: INCOMPLETE RECORDS
Subject Matter: Preparation of statement of affairs, calculation of profit
Specific Objectives
By the end of the lesson, pupils should be able to:
Cognitive Domain:
- Define incomplete records.
- Explain the purpose of a statement of affairs.
- State the formula for calculating profit or loss from incomplete records.
Affective Domain:
- Appreciate the importance of keeping proper financial records.
- Develop an interest in analyzing financial data from incomplete records.
Psychomotor Domain:
- Prepare a statement of affairs to determine capital.
- Calculate the profit or loss of a business from incomplete records.
Social Domain:
- Collaborate with peers to solve problems related to incomplete records.
- Communicate financial information derived from incomplete records.
Reference Materials
The following resources were used in planning this lesson:
- Senior Secondary Schools Education Curriculum
- State Unified Scheme of Work
- Oyebola, A. (2018). Financial Accounting for Senior Secondary Schools 2. Learn Africa Plc.
Instructional Materials
The teacher will teach this lesson with the aid of:
- A chart showing a sample statement of affairs.
- A chart displaying the formula for calculating profit/loss from incomplete records.
Rationale for the Lesson
This lesson enables pupils to understand how to determine the financial position and performance of businesses that do not maintain complete double-entry records. It helps them to apply accounting principles in situations where information is limited, which is common for many small businesses.
Prerequisite/Previous Knowledge
Pupils are expected to have prior knowledge of basic accounting concepts, assets, liabilities, capital, and the double-entry system of bookkeeping.
Lesson Content/Board Summary
INCOMPLETE RECORDS
Meaning of Incomplete Records
Incomplete records refer to a system of bookkeeping where a business does not keep full and proper accounting records based on the double-entry system. This often happens in small businesses, sole proprietorships, or partnerships that lack formal accounting knowledge or resources.
Statement of Affairs
A Statement of Affairs is a financial statement that shows the assets and liabilities of a business on a specific date. It is similar to a Balance Sheet and is used to determine the capital of a business when complete double-entry records are not available.
Format of a Statement of Affairs:
Statement of Affairs as at [Date]
Assets:
- Cash at Bank
- Cash in Hand
- Debtors
- Stock
- Furniture and Fittings
- Motor Vehicle
- Premises
- (Total Assets)
Less Liabilities:
- Creditors
- Bank Overdraft
- Loans
- (Total Liabilities)
Capital (Assets – Liabilities)
Calculation of Profit or Loss from Incomplete Records
When complete records are not kept, profit or loss is determined by comparing the capital at the beginning and end of an accounting period, after adjusting for drawings and additional capital introduced.
Formula:
Profit/Loss = Closing Capital + Drawings – Additional Capital – Opening Capital
Where:
- Opening Capital: Capital at the beginning of the accounting period.
- Closing Capital: Capital at the end of the accounting period.
- Drawings: Money or goods withdrawn by the owner for personal use.
- Additional Capital: Extra capital introduced into the business by the owner during the period.
Worked Examples
Example 1: Calculating Capital using Statement of Affairs
Mr. Adamu’s business had the following balances on 31st December 2023:
Cash N50,000; Bank N120,000; Debtors N80,000; Creditors N45,000; Stock N60,000; Furniture N75,000; Bank Overdraft N30,000.
Calculate Mr. Adamu’s Capital as at 31st December 2023.
Solution:
Statement of Affairs as at 31st December 2023
Assets:
- Cash N50,000
- Bank N120,000
- Debtors N80,000
- Stock N60,000
- Furniture N75,000
- Total Assets N385,000
Less Liabilities:
- Creditors N45,000
- Bank Overdraft N30,000
- Total Liabilities N75,000
Capital (N385,000 – N75,000) N310,000
Example 2: Calculating Profit or Loss
Mr. Bako’s capital on 1st January 2023 was N200,000. On 31st December 2023, his capital was N280,000. During the year, he made drawings of N50,000 and introduced additional capital of N30,000.
Calculate Mr. Bako’s profit or loss for the year ended 31st December 2023.
Solution:
Step 1: State the formula.
Profit/Loss = Closing Capital + Drawings – Additional Capital – Opening Capital
Step 2: Identify the given values.
- Closing Capital = N280,000
- Drawings = N50,000
- Additional Capital = N30,000
- Opening Capital = N200,000
Step 3: Substitute values into the formula.
Profit/Loss = N280,000 + N50,000 – N30,000 – N200,000
Step 4: Calculate the result.
Profit/Loss = N330,000 – N30,000 – N200,000
Profit/Loss = N300,000 – N200,000
Profit/Loss = N100,000 (Profit)
Note: A positive result indicates a profit, while a negative result indicates a loss.
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 to recall what they understand by ‘capital’ in accounting. The teacher then explains that some businesses do not keep complete accounting records.
Pupils’ Activity: Pupils respond to the question about capital and listen to the teacher’s introduction.
Learning Point: Pupils are reminded of previous knowledge and introduced to the concept of incomplete records.
Step 2: Explanation of Incomplete Records
Time: 5 minutes
Teaching Skill: Explanation
Teacher’s Activity: The teacher defines incomplete records and explains why some businesses may keep them, using simple examples.
Pupils’ Activity: Pupils listen attentively and ask questions for clarification.
Learning Point: Pupils understand the meaning and common reasons for incomplete records.
Step 3: Statement of Affairs
Time: 10 minutes
Teaching Skill: Demonstration/Explanation
Teacher’s Activity: The teacher explains what a Statement of Affairs is and its purpose. The teacher then uses the chart to demonstrate the format of a Statement of Affairs, highlighting assets and liabilities.
Pupils’ Activity: Pupils observe the chart, listen to the explanation, and copy the format into their notebooks.
Learning Point: Pupils learn the structure and components of a Statement of Affairs.
Step 4: Calculation of Capital from Statement of Affairs
Time: 7 minutes
Teaching Skill: Problem Solving
Teacher’s Activity: The teacher guides the pupils through Example 1 from the board summary, demonstrating how to prepare a Statement of Affairs to calculate capital.
Pupils’ Activity: Pupils follow the steps, ask questions, and solve the example problem with the teacher.
Learning Point: Pupils practice calculating capital by preparing a Statement of Affairs.
Step 5: Calculation of Profit or Loss
Time: 7 minutes
Teaching Skill: Explanation
Teacher’s Activity: The teacher explains the formula for calculating profit or loss from incomplete records, defining each component (opening capital, closing capital, drawings, additional capital). The teacher uses the chart to show the formula.
Pupils’ Activity: Pupils listen, take notes, and ensure they understand each term in the formula.
Learning Point: Pupils learn the formula and its components for calculating profit or loss.
Step 6: Worked Example for Profit/Loss
Time: 4 minutes
Teaching Skill: Demonstration
Teacher’s Activity: The teacher guides pupils through Example 2 from the board summary, demonstrating how to apply the profit/loss formula with given figures.
Pupils’ Activity: Pupils follow the calculation steps and confirm their understanding.
Learning Point: Pupils apply the formula to calculate profit or loss from given information.
Step 7: Evaluation/Review
Time: 5 minutes
Teaching Skill: Questioning/Assessment
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