Class: Senior Secondary School 1 (SS1, SS 1, SSS1, SSS 1)
Term: 3rd Term
Week: 8
Age: 15 years
Duration: 45 minutes
Subject: Financial Accounting
Curriculum Theme: Financial Accounting
Previous Lesson: Depreciation Account I.
Topic: DEPRECIATION ACCOUNT: Straight Line/Fixed Instalment Method
Subject Matter: Straight line depreciation meaning, formula for calculating straight line depreciation, calculation of depreciation, preparation and posting of straight line depreciation to final accounts.

Specific Objectives

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

Cognitive Domain:

Define depreciation.
State the reasons for charging depreciation.
Explain the straight line method of depreciation.
State the formula for calculating straight line depreciation.
Calculate depreciation using the straight line method.

Affective Domain:

Appreciate the importance of charging depreciation on fixed assets.
Develop accuracy in calculating depreciation.
Show interest in accounting for fixed assets.

Psychomotor Domain:

Prepare ledger accounts for depreciation and provision for depreciation.
Post straight line depreciation to the final accounts.

Work collaboratively to solve depreciation problems.
Communicate their understanding of depreciation concepts.

Reference Materials

The following resources were used in planning this lesson:

9 Years Basic Education Curriculum (Senior Secondary School Financial Accounting)
State Unified Scheme of Work for Senior Secondary Schools
Olakunori, O.K. (2018). Financial Accounting for Senior Secondary Schools. University Press Plc.
Longe, A. (2019). Simplified Financial Accounting for Senior Secondary Schools. A. Johnson Publishers.

Instructional Materials

The teacher will teach this lesson with the aid of:

Charts showing depreciation concepts and formulas.
Whiteboard and markers.
Calculators.
Sample financial statements.

Rationale for the Lesson

This lesson helps pupils understand how the value of assets decreases over time, which is important for accurate financial reporting. Knowing about depreciation enables pupils to correctly calculate the profit or loss of a business and understand the true value of its assets.

Prerequisite/Previous Knowledge

Pupils should have a basic understanding of fixed assets, their acquisition, and the concept of business expenses.

Lesson Content/Board Summary

DEPRECIATION ACCOUNT: Straight Line/Fixed Instalment Method

Meaning of Depreciation

Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. It represents the fall in the value of a fixed asset over time due to wear and tear, obsolescence, or usage.

Reasons for Charging Depreciation

The following are reasons why depreciation is charged on fixed assets:

Wear and Tear: Physical deterioration from usage.
Obsolescence: Becoming outdated due to new technology or changes in fashion.
Passage of Time: Certain assets, like leases, expire over time.
Depletion: Reduction in the quantity of natural resources.
Inadequacy: Asset no longer meets the growing needs of the business.

Methods of Depreciation

The common methods of calculating depreciation include:

Straight Line Method (Fixed Instalment Method)
Reducing Balance Method (Diminishing Balance Method)
Revaluation Method
Sum-of-the-Years’ Digits Method
Machine Hour Method

Straight Line Depreciation Method

The straight line method charges a fixed amount of depreciation each year throughout the useful life of the asset. This method assumes that the asset provides equal benefits over its entire useful life.

Formula for Calculating Straight Line Depreciation

The formula for calculating straight line depreciation is:

Depreciation per annum = (Cost of Asset – Salvage Value) / Estimated Useful Life
Alternatively, Depreciation per annum = (Cost of Asset – Salvage Value) x Rate of Depreciation
Rate of Depreciation = (1 / Estimated Useful Life) x 100%

Where:

Cost of Asset: Original purchase price plus any expenses to bring the asset to its working condition.
Salvage Value (Scrap Value/Residual Value): The estimated value of the asset at the end of its useful life.
Estimated Useful Life: The period over which the asset is expected to be used by the entity.

Accounting Treatment of Straight Line Depreciation

Depreciation is treated in the books of accounts as follows:

1. Journal Entries:

Debit: Depreciation Account
Credit: Provision for Depreciation Account (or Accumulated Depreciation Account)

2. Ledger Accounts:

Depreciation Account: Debited annually with the depreciation charge. Closed to the Profit and Loss Account at year-end.
Provision for Depreciation Account: Credited annually with the depreciation charge. It accumulates depreciation over the asset’s life and is a contra-asset account.
Asset Account: Remains at its original cost.

3. Final Accounts:

Income Statement (Profit and Loss Account): The annual depreciation charge is shown as an expense.
Statement of Financial Position (Balance Sheet): The fixed asset is shown at its original cost, and the accumulated provision for depreciation is deducted from it to arrive at the Net Book Value (NBV).

Net Book Value (NBV) = Cost of Asset – Accumulated Provision for Depreciation

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 the meaning of fixed assets and give examples. The teacher then introduces the topic of depreciation by asking if fixed assets retain their value forever.
Pupils’ Activity: Pupils respond to questions about fixed assets and listen attentively to the introduction.
Learning Point: Pupils recall previous knowledge and are introduced to the concept of depreciation.

Step 2: Explanation of Depreciation

Time: 10 minutes
Teaching Skill: Explanation/Lecture
Teacher’s Activity: The teacher defines depreciation and explains the reasons for charging it, using examples relevant to everyday life (e.g., a car losing value). The teacher also mentions different methods of depreciation.
Pupils’ Activity: Pupils listen, take notes, and ask questions for clarification.
Learning Point: Pupils understand the meaning of depreciation and the reasons for its application.

Step 3: Introduction to Straight Line Method

Time: 7 minutes
Teaching Skill: Explanation/Demonstration
Teacher’s Activity: The teacher introduces the straight line method, explaining its assumption of constant usage and how it charges an equal amount each year. The teacher writes the formula for straight line depreciation on the board and explains each component (cost, salvage value, useful life).
Pupils’ Activity: Pupils copy the formula and its components into their notebooks.
Learning Point: Pupils grasp the concept and formula of the straight line depreciation method.

Step 4: Calculation Demonstration

Time: 8 minutes
Teaching Skill: Demonstration/Problem Solving
Teacher’s Activity: The teacher works through a practical example of calculating depreciation using the straight line method, showing step-by-step calculations on the board. For example: “A machine was bought for N100,000, with a salvage value of N10,000 and a useful life of 5 years. Calculate annual depreciation.”
Pupils’ Activity: Pupils observe the calculation, ask questions, and attempt similar calculations.
Learning Point: Pupils learn to apply the straight line formula to calculate depreciation.

Step 5: Ledger Account Preparation

Time: 5 minutes
Teaching Skill: Demonstration
Teacher’s Activity: The teacher demonstrates how to prepare the Depreciation Account and Provision for Depreciation Account in the ledger, showing the entries for one year.
Pupils’ Activity: Pupils observe and try to replicate the ledger entries.
Learning Point: Pupils learn how to record depreciation in ledger accounts.

Step 6: Posting to Final Accounts

Time: 5 minutes
Teaching Skill: Demonstration
Teacher’s Activity: The teacher shows how the annual depreciation charge is transferred to the Income Statement (Profit and Loss Account) and how the asset and accumulated depreciation are presented in the Statement of Financial Position (Balance Sheet).
Pupils’ Activity: Pupils note down the presentation in final accounts.
Learning Point: Pupils understand the impact of depreciation on final accounts.

Step 7: Evaluation/Review

Time: 5 minutes

Teaching Skill: Questioning/Assessment

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

Define depreciation.
State any three reasons why depreciation is charged on fixed assets.
State the formula for calculating straight line depreciation.
A company bought equipment for N500,000 with an estimated useful life of 10 years and no salvage value. Calculate the annual straight line depreciation.

Pupils’ Activity: Pupils answer orally and in writing.

Learning Point: Pupils demonstrate understanding of the lesson.

Step 8: Conclusion

Time: 5 minutes
Teaching Skill: Summarization/Recap
Teacher’s Activity: The teacher summarizes the key points of the lesson, reiterating the definition of depreciation, the straight line method, its calculation, and its accounting treatment. The teacher assigns homework involving calculating and posting depreciation.
Pupils’ Activity: Pupils listen to the summary and copy down the homework.
Learning Point: Pupils consolidate their learning and are prepared for further practice.

Lesson Keywords

Depreciation – The fall in the value of a fixed asset over time due to wear and tear, obsolescence, or usage.
Fixed Assets – Long-term tangible assets used in a business to generate income, not for resale (e.g., land, buildings, machinery).
Straight Line Method – A depreciation method that charges an equal amount of depreciation each year over the asset’s useful life.
Salvage Value – The estimated residual value of an asset at the end of its useful life.
Useful Life – The estimated period an asset is expected to be used by a business.
Book Value (Net Book Value) – The cost of an asset minus its accumulated depreciation.

Differentiation

For pupils who grasp concepts quickly, the teacher can provide additional complex problems involving changes in useful life or salvage value. For pupils needing more support, the teacher can provide simpler, step-by-step examples and offer individual guidance during practice exercises.

Note for teachers using this lesson plan

Ensure that pupils have access to calculators for practical exercises. Encourage active participation by asking pupils to explain concepts in their own words. Emphasize the practical relevance of depreciation in real-world business scenarios. Provide ample practice on ledger entries and final account presentation.