Class: Senior Secondary School 2 (SS2 / SSS2)
Term: 2nd Term
Week: 2
Age: 16 years
Duration: 45 minutes
Subject: Financial Accounting
Curriculum Theme: Business Accounting
Previous Lesson: Partnership Account: Meaning, Terms and Capital Accounts.
Topic: PARTNERSHIP ACCOUNT
Subject Matter: Trading account of partnership, profit and loss account of partnership, partners’ profit and loss appropriation account
Specific Objectives
By the end of the lesson, pupils should be able to:
Cognitive Domain:
- Define a partnership and its accounting purpose.
- Explain the purpose of a partnership trading account.
- State the purpose of a partnership profit and loss account.
- Identify the items found in a partners’ profit and loss appropriation account.
Affective Domain:
- Appreciate the importance of proper accounting for partnerships.
- Participate actively in class discussions on partnership accounts.
Psychomotor Domain:
- Prepare a simple format for a partnership trading account.
- Prepare a simple format for a partnership profit and loss account.
- Prepare a simple partners’ profit and loss appropriation account.
Social Domain:
- Collaborate with peers to understand the distribution of profits in a partnership.
Reference Materials
The following resources were used in planning this lesson:
- Senior Secondary Schools Education Curriculum
- State Unified Scheme of Work
- Essential Financial Accounting for Senior Secondary Schools by O. A. Longe
Instructional Materials
The teacher will teach this lesson with the aid of:
- Charts showing formats of partnership trading, profit and loss, and appropriation accounts.
- Flashcards of key accounting terminologies.
- Prepared example questions on partnership accounts.
Rationale for the Lesson
This lesson helps pupils understand how businesses owned by two or more people prepare their final accounts. It enables them to learn how profits are shared among partners, which is important for understanding business structures and financial reporting.
Prerequisite/Previous Knowledge
Pupils have prior knowledge of preparing final accounts for sole proprietorships and basic accounting principles.
Lesson Content/Board Summary
PARTNERSHIP ACCOUNT
A partnership is a business owned by two or more persons, usually not exceeding twenty, who agree to share profits or losses in an agreed ratio.
Trading Account of Partnership
The Trading Account for a partnership is prepared to determine the Gross Profit or Gross Loss of the business for an accounting period. It is similar to that of a sole proprietorship, focusing on direct costs and revenues from sales.
Format (Simplified):
Partnership Trading Account for the year ended ... Dr. Cr. ----------------------------------------------------------------------------------- | Particulars | Amount (₦) | Particulars | Amount (₦) | ----------------------------------------------------------------------------------- | Opening Stock | XXX | Sales | XXX | | Purchases | XXX | Less: Sales Returns | (XXX) | | Less: Purchase Returns| (XXX) | | ---------- | | | ---------- | | XXX | | Cost of Goods Sold | XXX | Closing Stock | XXX | | Direct Expenses | XXX | | | | Gross Profit c/d | XXX | | | ----------------------------------------------------------------------------------- | | XXX | | XXX | -----------------------------------------------------------------------------------
Profit and Loss Account of Partnership
The Profit and Loss Account for a partnership is prepared to determine the Net Profit or Net Loss of the business after considering all indirect revenues and expenses. The net profit from this account is then transferred to the Appropriation Account.
Format (Simplified):
Partnership Profit and Loss Account for the year ended ... Dr. Cr. ----------------------------------------------------------------------------------- | Particulars | Amount (₦) | Particulars | Amount (₦) | ----------------------------------------------------------------------------------- | Rent Expense | XXX | Gross Profit b/d | XXX | | Salaries Expense | XXX | Discount Received | XXX | | Depreciation | XXX | Commission Received | XXX | | Other Operating Exp. | XXX | | | | Net Profit c/d | XXX | | | ----------------------------------------------------------------------------------- | | XXX | | XXX | -----------------------------------------------------------------------------------
Partners’ Profit and Loss Appropriation Account
This account shows how the net profit (or loss) of the partnership is distributed among the partners according to their partnership agreement. It includes items like interest on capital, interest on drawings, partners’ salaries, and the final distribution of residual profit or loss.
The following are common terminologies and items in an appropriation account:
- Interest on Capital: An allowance paid to partners for the capital they invested in the business. It is an appropriation of profit.
- Interest on Drawings: A charge made to partners for money or goods they withdraw from the business for personal use. It increases the profit available for distribution.
- Partners’ Salaries: Fixed amounts paid to partners for services rendered to the partnership. This is also an appropriation of profit.
- Partners’ Commission: A percentage of profit or sales given to a partner for special efforts.
- Profit Sharing Ratio: The agreed ratio in which the remaining profit or loss is shared among partners after all other appropriations.
Format (Simplified):
Partners' Profit and Loss Appropriation Account for the year ended ... Dr. Cr. ----------------------------------------------------------------------------------- | Particulars | Amount (₦) | Particulars | Amount (₦) | ----------------------------------------------------------------------------------- | Interest on Capital: | | Net Profit b/d | XXX | | A | XXX | Interest on Drawings: | | | B | XXX | A | XXX | | | ---------- | B | XXX | | | XXX | | ---------- | | Partners' Salaries: | | | XXX | | A | XXX | | | | B | XXX | | | | | ---------- | | | | | XXX | | | | Share of Profit: | | | | | A | XXX | | | | B | XXX | | | | | ---------- | | | | | XXX | | | ----------------------------------------------------------------------------------- | | XXX | | XXX | -----------------------------------------------------------------------------------
Worked Example: Partners’ Profit and Loss Appropriation Account
Ade and Bala are partners sharing profits and losses in the ratio 3:2. Their net profit for the year was ₦100,000. Interest on capital is 5% per annum. Ade’s capital is ₦120,000, and Bala’s capital is ₦80,000. Interest on drawings: Ade ₦2,000, Bala ₦1,000. Ade is entitled to a salary of ₦10,000 per annum.
Step 1: Calculate Interest on Capital
- Ade: 5% of ₦120,000 = ₦6,000
- Bala: 5% of ₦80,000 = ₦4,000
Step 2: Calculate Total Profit Available for Distribution
- Net Profit + Total Interest on Drawings – Total Interest on Capital – Partners’ Salaries
- Net Profit: ₦100,000
- Add: Interest on Drawings (Ade ₦2,000 + Bala ₦1,000) = ₦3,000
- Less: Interest on Capital (Ade ₦6,000 + Bala ₦4,000) = ₦10,000
- Less: Ade’s Salary = ₦10,000
- Profit available for distribution = ₦100,000 + ₦3,000 – ₦10,000 – ₦10,000 = ₦83,000
Step 3: Distribute Residual Profit
- Total residual profit: ₦83,000
- Profit sharing ratio: Ade 3/5, Bala 2/5
- Ade’s share: 3/5 * ₦83,000 = ₦49,800
- Bala’s share: 2/5 * ₦83,000 = ₦33,200
Step 4: Prepare Appropriation Account
Partners' Profit and Loss Appropriation Account for the year ended ... Dr. Cr. ----------------------------------------------------------------------------------- | Particulars | Amount (₦) | Particulars | Amount (₦) | ----------------------------------------------------------------------------------- | Interest on Capital: | | Net Profit b/d | 100,000 | | Ade | 6,000 | Interest on Drawings: | | | Bala | 4,000 | Ade | 2,000 | | | ---------- | Bala | 1,000 | | | 10,000 | | ---------- | | Partners' Salaries: | | | 3,000 | | Ade | 10,000 | | | | | | | | | Share of Profit: | | | | | Ade | 49,800 | | | | Bala | 33,200 | | | | | ---------- | | | | | 83,000 | | | ----------------------------------------------------------------------------------- | | 103,000 | | 103,000 | -----------------------------------------------------------------------------------
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, reviews the previous lesson on sole proprietorship final accounts, and introduces the concept of partnership as another form of business ownership.
Pupils’ Activity: Pupils respond to greetings, briefly recall previous knowledge, and listen attentively to the introduction.
Learning Point: Pupils connect prior knowledge to the new topic and understand the context of partnership accounts.
Step 2: Partnership Trading Account
Time: 7 minutes
Teaching Skill: Explanation/Demonstration
Teacher’s Activity: The teacher explains the meaning and purpose of a partnership trading account, emphasizing its similarity to that of a sole proprietorship. The teacher displays a chart showing a simplified format.
Pupils’ Activity: Pupils observe the chart, listen to the explanation, and ask questions for clarity.
Learning Point: Pupils understand how to prepare a partnership trading account to determine gross profit or loss.
Step 3: Partnership Profit and Loss Account
Time: 7 minutes
Teaching Skill: Explanation/Illustration
Teacher’s Activity: The teacher explains the meaning and purpose of a partnership profit and loss account, highlighting how it leads to net profit before appropriation. The teacher displays another chart with a simplified format.
Pupils’ Activity: Pupils pay attention, take notes, and relate the information to the trading account.
Learning Point: Pupils understand how to prepare a partnership profit and loss account to determine net profit or loss.
Step 4: Partners’ Profit and Loss Appropriation Account
Time: 7 minutes
Teaching Skill: Explanation/Concept Development
Teacher’s Activity: The teacher explains that the net profit of a partnership is distributed among partners using an appropriation account. The teacher displays a chart showing the format and discusses key elements like interest on capital, interest on drawings, and partners’ salaries.
Pupils’ Activity: Pupils listen, observe the format, and note down the key elements and their treatment.
Learning Point: Pupils understand the concept and general format of the partners’ profit and loss appropriation account.
Step 5: Terminologies in Appropriation Account
Time: 5 minutes
Teaching Skill: Definition/Clarification
Teacher’s Activity: The teacher defines and explains the meaning of important terminologies used in the appropriation account, such as interest on capital, interest on drawings, partners’ salaries, and profit sharing ratio, using flashcards.
Pupils’ Activity: Pupils actively participate by defining terms and asking for further clarification.
Learning Point: Pupils gain a clear understanding of the specific terms used in partnership appropriation.
Step 6: Worked Example for Appropriation Account
Time: 6 minutes
Teaching Skill: Demonstration/Guided Practice
Teacher’s Activity: The teacher guides the pupils through a step-by-step preparation of a partners’ profit and loss appropriation account using a simple example. The teacher ensures pupils follow each calculation.
Pupils’ Activity: Pupils actively follow the teacher’s steps, make calculations, and prepare the appropriation account in their notebooks.
Learning Point: Pupils practice preparing a partners’ profit and loss appropriation account with a practical example.
Step 7: Evaluation/Review
Time: 5 minutes
Teaching Skill: Questioning/Assessment
Teacher’s Activity: The teacher evaluates the learning by asking the following questions:
- What is the main purpose of a partnership trading account?
- State two items that appear on the debit side of a partnership profit and loss account.
- Explain the meaning of “Interest on Capital” in partnership accounts.
- If partners share profits and losses in a ratio of 2:1, and the residual profit is ₦60,000, how much will each partner receive?
Pupils’ Activity: Pupils answer orally and in writing.
Learning Point: Pupils demonstrate understanding of the lesson.
Step 8: Conclusion
Time: 3 minutes
Teaching Skill: Summarization
Teacher’s Activity: The teacher briefly summarizes the key points of the lesson, reiterating the importance of understanding partnership final accounts. The teacher assigns homework for further practice.
Pupils’ Activity: Pupils listen to the summary and copy down the assigned homework.
Learning Point: Pupils consolidate their learning and prepare for independent practice.
Lesson Keywords
- Partnership – A business owned by two or more individuals.
- Trading Account – Prepared to calculate Gross Profit or Gross Loss.
- Profit and Loss Account – Prepared to calculate Net Profit or Net Loss.
- Appropriation Account – Shows how net profit is distributed among partners.
- Interest on Capital – Allowance to partners for their capital contribution.
- Interest on Drawings – Charge to partners for personal withdrawals.
- Profit Sharing Ratio – The agreed proportion for distributing residual profit/loss.
Differentiation
The teacher will provide additional support to struggling learners by offering simplified examples and one-on-one guidance, while advanced learners will be challenged with more complex problems involving various appropriation clauses.
Note for teachers using this lesson plan
Teachers should ensure that pupils understand the distinction between the partnership profit and loss account and the appropriation account. Emphasize that the appropriation account deals with the distribution of profit, not its calculation.
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