Class: Senior Secondary School 1 (SS1, SS 1, SSS1, SSS 1)
Term: 3rd Term
Week: 10
Age: 15 years
Duration: 45 minutes
Subject: Financial Accounting
Curriculum Theme: Financial Accounting
Previous Lesson: Depreciation Account Diminishing Balance Method.
Topic: REVISIT ADJUSTMENT
Subject Matter: bad and doubtful debts provision, distinction between bad debts and provision for bad debts, discount allowed, discount received, recurring prepayments, recurring accruals, solving adjustment problems in ledger and final accounts

Specific Objectives

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

Cognitive Domain:

Define bad debts and provision for doubtful debts.
Distinguish between bad debts and provision for bad debts.
Explain the accounting treatment for discount allowed and discount received.
State the meaning of recurring prepayments and recurring accruals.

Affective Domain:

Appreciate the importance of making adjustments in financial statements.
Recognize the impact of adjustments on true and fair view of financial position.

Psychomotor Domain:

Prepare ledger accounts for bad debts, provision for doubtful debts, discounts, prepayments, and accruals.
Solve adjustment problems and present them in final accounts.

Collaborate with peers to solve adjustment problems.

Reference Materials

The following resources were used in planning this lesson:

Senior Secondary School Curriculum for Financial Accounting.
State Unified Scheme of Work for Senior Secondary Schools.
Simplified Financial Accounting for Senior Secondary Schools by O. A. Longe.
Essential Financial Accounting for Senior Secondary Schools by O. F. Fagbohun.

Instructional Materials

The teacher will teach this lesson with the aid of:

Charts showing examples of ledger entries for adjustments.
Whiteboard and markers.
Textbooks on Financial Accounting.
Prepared sample financial statements.

Rationale for the Lesson

This lesson helps pupils understand how to adjust accounts to reflect the true financial position of a business at the end of an accounting period. It enables them to correctly calculate profits and assets, which is important for making informed business decisions.

Prerequisite/Previous Knowledge

Pupils are expected to have prior knowledge of basic accounting concepts, ledger postings, trial balance preparation, and the preparation of simple final accounts.

Lesson Content/Board Summary

REVISIT ADJUSTMENT

Bad Debts and Provision for Bad Debts

Bad debts are amounts owed to a business that are considered irrecoverable. They represent a loss to the business.

Provision for doubtful debts is an estimate of the amount of debts that may become irrecoverable in the future. It is a contra-asset account and reduces the value of debtors.

Distinction between Bad Debts and Provision for Bad Debts

The key differences are:

Bad Debts: These are actual debts confirmed to be irrecoverable and written off from the books. They are a definite loss.
Provision for Bad Debts: This is an estimate of potential future bad debts. It is not an actual loss but an anticipated loss, created to match expenses with revenue.

Discount Allowed and Discount Received

Discount Allowed: This is a reduction in the amount payable by a debtor, offered by the business to encourage prompt payment. It is an expense to the business.

Discount Received: This is a reduction in the amount payable by the business to its creditors, obtained for prompt payment. It is an income to the business.

Recurring Prepayments

Prepayments (or prepaid expenses) are expenses paid in advance for a period that extends beyond the current accounting period. Examples include prepaid rent, prepaid insurance, or prepaid subscriptions. The portion relating to the future period is an asset.

Recurring Accruals

Accruals (or accrued expenses) are expenses incurred but not yet paid at the end of the accounting period. Examples include accrued salaries, accrued electricity bills, or accrued interest. These represent a liability to the business.

Solving Adjustment Problems in Ledger and Final Accounts

Adjustments are made at the end of an accounting period to ensure that the final accounts reflect the true financial performance and position. These adjustments affect both the income statement and the statement of financial position.

The steps involved typically include:

Identifying items requiring adjustment from additional information.
Making appropriate ledger entries for the adjustments (e.g., creating provision, adjusting expense/income accounts).
Transferring adjusted balances to the Income Statement and Statement of Financial Position.

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 reviews the previous lesson briefly. The teacher then asks pupils what they understand by “adjustments” in everyday life, linking it to the need for corrections in accounting before preparing final statements. The topic for the day, “Revisit Adjustment,” is then introduced.
Pupils’ Activity: Pupils respond to questions and listen attentively.
Learning Point: Pupils are prepared for the lesson and understand its relevance.

Step 2: Bad Debts and Provision for Bad Debts

Time: 8 minutes
Teaching Skill: Explanation/Demonstration
Teacher’s Activity: The teacher defines bad debts and provision for doubtful debts, explaining why each is necessary in accounting. The teacher uses a chart to illustrate simple ledger entries for writing off bad debts and creating a provision for doubtful debts.
Pupils’ Activity: Pupils listen, take notes, and ask questions for clarification.
Learning Point: Pupils understand the concepts and initial accounting treatment of bad debts and provision.

Step 3: Distinction between Bad Debts and Provision for Bad Debts

Time: 5 minutes
Teaching Skill: Comparison/Discussion
Teacher’s Activity: The teacher leads a discussion on the key differences between bad debts and provision for bad debts, emphasizing that one is an actual loss while the other is an estimate. The teacher uses examples to clarify the distinction.
Pupils’ Activity: Pupils participate in the discussion and note down the distinctions.
Learning Point: Pupils can differentiate between bad debts and provision for bad debts.

Step 4: Discount Allowed and Discount Received

Time: 5 minutes
Teaching Skill: Explanation/Illustration
Teacher’s Activity: The teacher explains the terms discount allowed and discount received, describing their nature as expense or income respectively. The teacher shows simple ledger entries for recording these discounts.
Pupils’ Activity: Pupils listen and copy the examples.
Learning Point: Pupils understand how to account for discounts.

Step 5: Prepayments and Accruals

Time: 8 minutes
Teaching Skill: Explanation/Examples
Teacher’s Activity: The teacher defines recurring prepayments and recurring accruals, providing practical examples for each. The teacher explains their treatment as assets or liabilities and demonstrates how to adjust related expense/income accounts.
Pupils’ Activity: Pupils listen, ask questions, and note down definitions and examples.
Learning Point: Pupils understand the concepts and accounting treatment of prepayments and accruals.

Step 6: Solving Adjustment Problems

Time: 8 minutes
Teaching Skill: Demonstration/Problem Solving
Teacher’s Activity: The teacher works through a simple problem involving one or two adjustments (e.g., bad debts and a prepayment) on the board. The teacher demonstrates how these adjustments affect ledger accounts and how they are presented in the income statement and statement of financial position.
Pupils’ Activity: Pupils observe the demonstration, ask questions, and attempt to follow the steps.
Learning Point: Pupils learn how to apply adjustments to ledger and 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 bad debts.
State two differences between bad debts and provision for bad debts.
Explain what is meant by discount allowed.
Mention one example of a recurring prepayment and one example of a recurring accrual.

Pupils’ Activity: Pupils answer orally and in writing.

Learning Point: Pupils demonstrate understanding of the lesson.

Step 8: Conclusion

Time: 1 minute
Teaching Skill: Summarization
Teacher’s Activity: The teacher summarizes the key points of the lesson, emphasizing the importance of adjustments for accurate financial reporting. The teacher assigns homework for pupils to practice solving adjustment problems.
Pupils’ Activity: Pupils listen and note down the homework.
Learning Point: The lesson is reinforced and learning is extended.

Lesson Keywords

Bad Debts – Amounts owed to a business that are deemed irrecoverable.
Provision for Doubtful Debts – An estimate of debts that may become irrecoverable in the future.
Discount Allowed – A reduction given to debtors for prompt payment.
Discount Received – A reduction obtained from creditors for prompt payment.
Prepayments – Expenses paid in advance for a future accounting period.
Accruals – Expenses incurred but not yet paid at the end of an accounting period.
Adjustments – Entries made at the end of an accounting period to bring accounts up to date.

Differentiation

For pupils who grasp concepts quickly, the teacher can provide more complex adjustment problems to solve. For those who require more support, the teacher will provide simplified examples and offer individual guidance, focusing on one type of adjustment at a time. Peer tutoring can also be encouraged.

Note for teachers using this lesson plan

Ensure that pupils have a strong foundation in basic ledger postings before introducing adjustments. Use clear and simple examples, and allow ample time for practice, as this topic can be challenging. Visual aids such as T-accounts on charts can be very helpful for demonstrating entries. Encourage pupils to explain their reasoning when solving problems.