TOTAL CHILD SCHOOL, PORT HARCOURTWEEK: 7
TOPIC: TRADING, PROFIT AND LOSS ACCOUNT
CLASS: JSS3
GENDER: MIXED
AVERAGE AGE: 12 YEARS
DURATION: 2 PERIODS (40min. for each period)
REFERENCE: WABP junior secondary business studies book 3 and
Classic business studies book 3
BEHAVIOURAL OBJECTIVES: By the end of the lesson, students should be able to:
PREVIOUS KNOWLEDGE: the students have been taught trial balance.
Biblical Objective: To accurately determine business performance through proper trading and profit and loss accounts, ensuring honesty, accountability, and wise decision-making.
Biblical Truth: God expects faithfulness and integrity in measuring gains and losses, using results wisely rather than deceitfully.
Bible Verse: “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?” — Luke 14:28 (NIV)
LESSON CONTENT
STEP 1: PROFIT AND LOSS: The main purpose of profit and loss account is to determine the net profit or net loss for a certain trading period.
It is an account that shows the net profit or net loss of an organization.
Income or gains are credited, while expenses are debited.
The difference between the credit side and the debit side is the net profit or net loss.
If the debit side is greater, then we have net loss and if the credit side is greater, there is profit.
NET PROFIT: This is the profit arrived at after the deduction of all expenses incurred in a period.
Net profit = Gross profit + other income – expenses
STEP 2 ITEMS OF PROFIT AND LOSS ACCOUNT
N N
Wages and salaries x Gross profit b/d x
Telephone x Discount received x
Bad debts x Bank interest x
Increase in provision for bad debt x Reduction in provision for bad debt x
Motor expenses x Commission received x
Stationery x Profit on sales of assets x
Bank charges x Recovery of bad debt x
Loss on sales of assets x
Advertising x
Light and heating x
Repairs x
Postages x
Rent x
Rate x
Discount allowed x
General expenses x
Depreciation x
Net profit x
Xx xx
The profit and loss account balances being net profit or loss is deducted from the capital account.
STEP 3: ILLUSTRATION
Prepare profit and loss account from the following information
N
Gross profit 7,165
Carriage outwards 200
Salaries and wages 3862
Rent 304
Insurance 78
Sundry expenses 664
Advertising 216
General expenses 480
SOLUTION
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31/12/1996
N EXPENSES Carriage outwards 200 Salaries and wages 3862 Rent 304 Insurance 78 Sundry expenses 664 Advertising 216 General expenses 480 Net profit 1361 7165 | N Gross profit b/d 7165
7165 |
ILLUSTRATION 2
From the following information prepare Iyanu’s trading, profit and loss account for the year ended 31st March 2000.
N
Purchases 5,000
Opening stock 1,500
Sales 11,000
Return inwards 500
Closing stock 2,000
Carriage inwards 200
Returns outward 1,000
Electricity 300
Rent 500