WEEK: 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:

Define profit and loss account
Mention the items in profit and loss account
Solve practical examples on profit and loss account.

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

TRail Balance

This lesson includes:

Lesson Content

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