## Finance and Accounts 1: Basic Principles - Lesson Plan: 3 x 1 hour lessons

A series of 'off the shelf' lesson plans and resources for use in the classroom. These lessons deal with Finance and Accounts and are relevant to the following specifications:

• AQA: Module 1, 10.4
• Edexcel: Unit 3, Sections 1
• OCR: Modules 2872 and 2875

### Aim:

The purpose of this lesson is to introduce the subject of finance and accounts by looking at some basic principles behind this area. One of the biggest problems faced in dealing with accounts and finance is the bewildering array of terminology that is used and the fear with which many students approach the idea of manipulating numbers, especially with regard to ratio analysis and using balance sheets and profit and loss accounts.

These lessons, therefore, will look at the profit and loss account and the balance sheet and attempt to distinguish between the two and to offer the opportunity for some preliminary analysis.

### Learning Objectives:

At the end of the session, students should be able to:

• Distinguish between the terms 'cost' and 'revenue'
• Understand the meaning of the concept 'profit'
• Understand the difference between a profit and loss account a balance sheet
• Understand the key components of each and what they tell the viewerabout a business

### Lesson 1

1. Begin with a 'sorting exercise'. Give out the sorting cards to students and ask them to sort out the cards into groups under the following headings:Income, Expenditure, Assets, Liabilities. The aim here is to get students thinking in categories but the intention is also to make them realise that some of the items can belong in more than one category - for example, a computer represents an item of expenditure but also an asset. (15 minutes)
2. At the end of the sorting exercise, ask students to discuss which of the items in the expenditure category represent variable costs and which represent fixed costs. Discuss how these two categories influence the level of profit. (10 minutes)
3. Discuss the factors that the group has classified as assets and liabilities and ask what is the distinguishing feature that characterises each - this should give some form of definition of assets and liabilities, which can be posted on the whiteboard or around the room. (10 minutes)
4. Introduce the PowerPoint Presentation to reinforce the work done on costs and revenues (slides 1 - 9). (15 minutes)
5. Ask students to consider the reasons why a business would want to keep and to publish accounts. (5 minutes)
6. Review main points of the lesson and provide marker for the next lesson, which will focus on the two main accounting documents - profit and loss account and balance sheet. (5 minutes)

### Lesson 2

1. Review main points from the last lesson on the difference between costs, revenue and the nature of profit. (5 minutes)
2. Ask students to consider what would happen to a business if it made a loss. The intention is to get students to understand that losses do not automatically mean that a business will close down! This leads to a consideration of how we can judge the performance of a business and the two key accounting documents - profit and loss account and balance sheet. (15 minutes)
3. Use the Powerpoint Presentation to look in more detail at these documents (slides 10 - 19). (20 minutes)
4. Ask students, in the light of what they have seen, to write down what they think is the key difference between the two documents. Briefly discuss the outcome and ensure that the difference is clarified. (10 minutes)
5. Set the scene for the next lesson by referring to the Activity and explaining the task. (5 minutes)
6. Final review of the learning objectives of the lesson. (5 minutes)

### Lesson 3

1. Review the outcome of the last lesson and set students to work on the Activity. (5 minutes)
2. Students work on the Activity. (40 minutes)
3. Go over the answers to the Activity. (10 minutes)
4. Review overall learning objectives. (5 minutes)
Related mind map: