Lesson Note on Trading Account for SS1 (SSS 1)

Class: Senior Secondary School 1 (SS1, SS 1, SSS1, SSS 1)
Term: 2nd Term
Week: 8
Age: 15 years
Duration: 45 minutes
Subject: Financial Accounting
Curriculum Theme: Financial Accounting
Previous Lesson: Accounting Concepts.
Topic: TRADING ACCOUNT
Subject Matter: meaning of trading account, trading account terminologies, items in trading account, preparation of trading account

Specific Objectives

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

Cognitive Domain:

• Define a trading account.
• Identify key terminologies associated with the trading account.
• List various items found in a trading account.

Affective Domain:

• Appreciate the importance of preparing a trading account to determine gross profit or gross loss.
• Recognise the role of a trading account in evaluating business performance.

Psychomotor Domain:

• Prepare a simple trading account from given information.
• Demonstrate the correct placement of items within a trading account.

Social Domain:

• Collaborate with peers to discuss and understand trading account concepts.

Reference Materials

The following resources were used in planning this lesson:

• 9 Years Basic Education Curriculum (Senior Secondary Financial Accounting)
• State Unified Scheme of Work for Senior Secondary Financial Accounting
• Financial Accounting for Senior Secondary Schools by O.A. Longe
• https://www.accountingcoach.com/trading-account/explanation
• https://www.youtube.com/watch?v=example_trading_account_video

Instructional Materials

The teacher will teach this lesson with the aid of:

• A chart showing a sample trading account format.
• Whiteboard and markers.
• Financial Accounting textbook.
• Projector (optional) to display a trading account.

Rationale for the Lesson

Understanding the trading account helps pupils learn how businesses calculate their initial profit or loss from buying and selling goods. This knowledge is important for evaluating business performance and making informed financial decisions.

Prerequisite/Previous Knowledge

Pupils should have basic knowledge of accounting concepts such as assets, liabilities, income, expenses, and the double-entry system.

Lesson Content/Board Summary

TRADING ACCOUNT

Meaning of Trading Account

A trading account is a financial statement prepared by a business to determine the gross profit or gross loss from buying and selling goods over a specific accounting period.

Trading Account Terminologies

The following are common terminologies associated with a trading account:

• Opening Stock: The value of unsold goods at the beginning of an accounting period.
• Purchases: The total value of goods bought by the business for resale during the period.
• Returns Outwards (Purchase Returns): Goods returned by the business to its suppliers. This reduces the value of purchases.
• Carriage Inwards: Expenses incurred in transporting goods purchased to the business premises. It is a direct expense.
• Sales: The total revenue generated from selling goods during the period.
• Returns Inwards (Sales Returns): Goods returned by customers to the business. This reduces the value of sales.
• Closing Stock: The value of unsold goods remaining at the end of an accounting period.
• Gross Profit: The profit a business makes after deducting the cost of goods sold from net sales.
• Gross Loss: The loss incurred if the cost of goods sold is greater than net sales.

Items in a Trading Account

A trading account has two sides: the Debit side and the Credit side. Items are placed as follows:

• Debit Side (Left-hand side):
  • Opening Stock
  • Purchases (less Returns Outwards)
  • Carriage Inwards
  • Gross Profit (if the credit side total is higher)
• Credit Side (Right-hand side):
  • Sales (less Returns Inwards)
  • Closing Stock
  • Gross Loss (if the debit side total is higher)

Preparation of Trading Account

The trading account is prepared by bringing together all direct incomes and direct expenses related to the buying and selling of goods. The format is typically as follows:

Trading Account for the Year Ended [Date]

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 questions related to profit and loss in business. For example, “How do businesses know if they are making money from selling goods?” or “What is the first step in calculating a business’s profit?”
Pupils’ Activity: Pupils respond to the questions, linking to their prior knowledge of business activities.
Learning Point: Pupils are introduced to the concept of determining profit/loss from sales and purchases.

Step 2: Meaning of Trading Account

Time: 5 minutes
Teaching Skill: Explanation
Teacher’s Activity: The teacher defines a trading account as a statement prepared to find out the gross profit or gross loss of a business over a period. The teacher explains that it deals only with direct costs and revenues related to goods bought and sold.
Pupils’ Activity: Pupils listen attentively and take notes on the definition of a trading account.
Learning Point: Pupils understand what a trading account is and its primary purpose.

Step 3: Trading Account Terminologies

Time: 10 minutes
Teaching Skill: Explanation/Clarification
Teacher’s Activity: The teacher explains and clarifies key terminologies such as opening stock, purchases, sales, returns inwards, returns outwards, carriage inwards, and closing stock, using simple examples. The teacher uses the chart to point out where these terms appear.
Pupils’ Activity: Pupils identify and ask questions for clarification on the terminologies, ensuring they understand each term’s meaning.
Learning Point: Pupils gain a clear understanding of the specific terms used in a trading account.

Step 4: Items in a Trading Account

Time: 10 minutes
Teaching Skill: Listing/Demonstration
Teacher’s Activity: The teacher lists and explains the specific items that appear on the debit side and credit side of a trading account. The teacher uses the chart to show the layout and placement of each item.
Pupils’ Activity: Pupils observe the chart, listen to the explanations, and note down the items and their respective sides.
Learning Point: Pupils learn the components of a trading account and their correct positions.

Step 5: Preparation of Trading Account

Time: 10 minutes
Teaching Skill: Demonstration/Guidance
Teacher’s Activity: The teacher demonstrates how to prepare a simple trading account using a hypothetical example or a problem from the textbook. The teacher guides pupils through each step, from listing the opening stock to calculating the gross profit or loss.
Pupils’ Activity: Pupils observe the demonstration, follow the steps, and may attempt to prepare a similar account individually or in pairs.
Learning Point: Pupils learn the practical steps involved in constructing a trading account.

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. Define a trading account.
2. Mention three terminologies associated with the trading account.
3. List four items found on the debit side of a trading account.
4. State the main purpose of preparing a trading account.
5. Explain how gross profit is determined in a trading account.

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

Step 7: Conclusion

Time: 5 minutes
Teaching Skill: Summarization
Teacher’s Activity: The teacher summarises the key points of the lesson, reinforcing the importance of the trading account in determining gross profit or loss. The teacher gives homework by asking pupils to solve a simple trading account problem from their textbook.
Pupils’ Activity: Pupils listen to the summary, ask any final questions, and note down the homework.
Learning Point: Pupils consolidate their understanding and are given an opportunity for practice.

Lesson Keywords

• Trading Account – A financial statement to determine gross profit or gross loss.
• Opening Stock – Value of goods on hand at the start of an accounting period.
• Closing Stock – Value of goods on hand at the end of an accounting period.
• Purchases – Goods bought for resale.
• Sales – Revenue from goods sold.
• Gross Profit – Revenue from sales less cost of goods sold.
• Carriage Inwards – Cost of transporting purchased goods.

Differentiation

For pupils who grasp concepts quickly, the teacher can provide more complex trading account problems involving adjustments. For pupils who need more support, the teacher will offer one-on-one guidance and simpler examples, breaking down the steps further.

Note for teachers using this lesson plan

Ensure that pupils understand the distinction between direct and indirect expenses, as the trading account focuses only on direct costs. Emphasise the practical application of preparing a trading account for real-world businesses.