Class: Senior Secondary School 1 (SS1 / SSS 1)
Term: 3rd Term
Week: 7
Age: 15 years
Duration: 45 minutes
Subject: Book Keeping
Curriculum Theme: Trade
Previous Lesson: Trading Accounts: meaning and Purpose of Trading Account, Trading Terminologies and COGS.
Topic: Trading Accounts
Subject Matter: Trading account formats, Gross profit determination

Specific Objectives

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

Cognitive Domain:

Define a trading account.
State the purpose of preparing a trading account.
Identify the various items found in a trading account.
Explain how gross profit or gross loss is determined.
Prepare a simple trading account.

Affective Domain:

Appreciate the importance of preparing trading accounts for businesses.
Show willingness to participate in practical exercises involving trading accounts.
Develop a careful approach to calculating gross profit or loss.

Psychomotor Domain:

Draw the correct format of a trading account.
Calculate the gross profit or gross loss from given figures.

Collaborate with peers to solve problems related to trading accounts.
Discuss the components and purpose of a trading account effectively.

Reference Materials

The following resources were used in planning this lesson:

9 Years Basic Education Curriculum for Book Keeping.
State Unified Scheme of Work for Senior Secondary Schools.
Essential Financial Accounting for Senior Secondary Schools by O. A. Longe.

Instructional Materials

The teacher will teach this lesson with the aid of:

A chart showing the format of a trading account.
Whiteboard and markers/chalk.
Textbooks on Book Keeping.

Rationale for the Lesson

This lesson helps pupils understand how businesses determine the profit or loss directly from buying and selling goods. It enables them to appreciate the initial financial performance of a trading business, which is an important step in accounting.

Prerequisite/Previous Knowledge

Pupils should have prior knowledge of basic accounting terms, ledger accounts, trial balance, and the classification of accounts.

Lesson Content/Board Summary

Trading Accounts

Definition of Trading Account

A trading account is the first section of the final accounts prepared by a trading concern to determine its gross profit or gross loss for a specific accounting period. It records all direct costs and revenues related to the buying and selling of goods.

Purpose of Trading Account

The main purposes of preparing a trading account are:

To ascertain the gross profit or gross loss made during an accounting period.
To show the direct expenses incurred in bringing goods to a saleable condition.
To provide information for comparison with previous periods or other businesses.
To help in controlling direct costs and maximizing sales revenue.

Format of a Trading Account

The trading account is prepared in a ‘T’ format, with the debit side showing expenses and the credit side showing income related to trading activities.

Items in a Trading Account

The following are common items found in a trading account:

Opening Stock: The value of unsold goods at the beginning of the accounting period.
Purchases: The total cost of goods bought for resale during the period.
Returns Outwards (Purchases Returns): Goods returned by the business to its suppliers, which reduces purchases.
Carriage Inwards: Cost of transporting goods purchased into the business premises.
Sales: The total revenue generated from selling goods during the period.
Returns Inwards (Sales Returns): Goods returned by customers to the business, which reduces sales.
Closing Stock: The value of unsold goods at the end of the accounting period.

Gross Profit/Loss Determination

Gross profit or gross loss is the difference between the net sales and the cost of goods sold. The cost of goods sold is calculated as: Opening Stock + Net Purchases + Carriage Inwards – Closing Stock.

If the credit side (Sales + Closing Stock) is greater than the debit side (Opening Stock + Net Purchases + Carriage Inwards), the difference is Gross Profit.
If the debit side is greater than the credit side, the difference is Gross 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 reviews the previous lesson briefly. The teacher then introduces the topic “Trading Accounts” by asking pupils how businesses know if they made money from simply buying and selling goods.
Pupils’ Activity: Pupils respond to questions and listen attentively.
Learning Point: Pupils are prepared for the new lesson and connect it to real-world business activities.

Step 2: Definition of Trading Account

Time: 7 minutes
Teaching Skill: Explanation/Definition
Teacher’s Activity: The teacher defines a trading account, explaining it as the first part of final accounts to determine gross profit or loss. The teacher writes the definition on the board.
Pupils’ Activity: Pupils listen, take notes, and ask questions for clarification.
Learning Point: Pupils understand what a trading account is.

Step 3: Purpose of Trading Account

Time: 5 minutes
Teaching Skill: Elucidation
Teacher’s Activity: The teacher explains the various purposes of preparing a trading account, such as ascertaining gross profit/loss and aiding cost control. The teacher lists these points on the board.
Pupils’ Activity: Pupils listen and note the purposes.
Learning Point: Pupils understand why trading accounts are prepared.

Step 4: Format of a Trading Account

Time: 10 minutes
Teaching Skill: Demonstration/Illustration
Teacher’s Activity: The teacher displays the chart showing the format of a trading account and explains the ‘T’ format, indicating debit and credit sides. The teacher draws a sample format on the board.
Pupils’ Activity: Pupils observe the chart, draw the format in their notebooks, and ask questions about its structure.
Learning Point: Pupils can correctly draw the format of a trading account.

Step 5: Items in a Trading Account

Time: 8 minutes
Teaching Skill: Listing/Explanation
Teacher’s Activity: The teacher lists and explains each item typically found in a trading account, such as opening stock, purchases, sales, returns, carriage inwards, and closing stock, indicating where they appear in the format.
Pupils’ Activity: Pupils listen, take notes, and identify where each item is placed in the trading account format.
Learning Point: Pupils identify and understand the components of a trading account.

Step 6: Gross Profit/Loss Determination

Time: 5 minutes
Teaching Skill: Calculation/Problem-solving
Teacher’s Activity: The teacher explains how gross profit or gross loss is determined by comparing the total of the credit side with the total of the debit side. The teacher provides a simple numerical example.
Pupils’ Activity: Pupils follow the calculation, ask questions, and practice the example.
Learning Point: Pupils understand the process of calculating gross profit or loss.

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 a trading account.
State two purposes of preparing a trading account.
Mention four items that appear on the debit side of a trading account.
Explain how gross profit is determined.

Pupils’ Activity: Pupils answer orally and in writing.

Learning Point: Pupils demonstrate understanding of the lesson.

Step 8: Conclusion

Time: 0 minutes
Teaching Skill: Summarization
Teacher’s Activity: The teacher summarizes the key points of the lesson, reiterating the definition, purpose, and format of a trading account, and how gross profit/loss is calculated. The teacher assigns homework: prepare a trading account from a given set of figures.
Pupils’ Activity: Pupils listen to the summary and note down the homework.
Learning Point: Pupils consolidate their learning and prepare for independent practice.

Lesson Keywords

Trading Account – A financial statement showing the gross profit or loss of a business from buying and selling goods.
Gross Profit – The profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with its direct services.
Gross Loss – Occurs when the cost of goods sold is greater than the net sales revenue.
Opening Stock – Inventory available at the beginning of an accounting period.
Closing Stock – Inventory available at the end of an accounting period.
Purchases – The total value of goods bought by a business for resale.
Sales – The total revenue from goods sold by a business.
Returns Inwards – Goods returned by customers to the business.
Returns Outwards – Goods returned by the business to its suppliers.
Carriage Inwards – Transport costs incurred to bring purchased goods into the business premises.

Differentiation

For pupils who grasp concepts quickly, additional complex examples or exercises involving more intricate adjustments will be provided. For pupils who require more support, the teacher will provide simplified explanations, one-on-one guidance, and peer tutoring opportunities. Group activities will encourage collaborative learning, allowing pupils to learn from each other’s strengths.

Note for teachers using this lesson plan

Teachers should emphasize practical examples and ensure pupils understand the logical flow of items in the trading account. Encourage pupils to attempt drawing the format themselves before presenting the chart. Provide ample practice questions to build confidence in calculating gross profit/loss.