Polytechnic University of the Philippines Mabini Campus, Sta.

Mesa, Manila COLLEGE OF EDUCATION

Lesson Plan in Bookkeeping (CHAPTER 4: Measuring Business Income) I. TARGETS

At the end of the lesson, the students will be able to: 1. Identify the difference between the cash basis of accounting and accrual basis of accounting. 2. Determine the importance of the accounting period in any business entity. 3. Explain the revenue principle and the expense principle of accounting as well the framework it has for the preparation and presentation of financial statements. 4. Generalize the significance of the time-period concept in a business. II. CONCEPT Measuring Business Income SUBCONCEPT: Cash vs. Accrual Basis of Accounting Accounting Period Revenue Principle Expense Principle Time-Period Concept MATERIALS:

Projector Laptop

Cartolina and score cards Chalk / Whiteboard Marker REFERENCE: Hernane, Milagros. Principle in Financial Accounting, pages 101-103

III.

STRATEGIES A. PREPARATION 1. Routine Activities Greeting the class, prayer, passing of assignments (if they have) and ask them to keep all their notes away. 2. Review

Show them the illustration in the cartolina paper which indicates the table of debit and

credit rules and let the whole class answer for the corresponding exercise. Ask one of the students for each right answer to write the correct answer in the board. DEBIT AND CREDIT RULES Increase ASSETS **Debit Credit Credit Debit Credit Debit Decrease Credit Debit Debit Credit Debit Credit Balance Credit Credit Debit Credit Debit Debit Norm

LIABILITIES CAPITAL Drawing EXPENSE 3. Motivation Owners,

REVENUE

**the shaded part shown in this table will be eliminated in the actual material.

A student has the tendency to divert his/her attention in some other stuff during the

discussion especially in a math class. Throughout the discussion this motivation would play part. The class will be divided into two groups. The name of the game is Pick Your Luck. Each group should have different representative to answer the questions throughout the discussion. The first player who raises his hand will be given the chance to answer the question. If the

player got the correct answer then, he will choose a number of his want in the score board then he will reveal whats inside it and the points will be added to the groups score. Take note that the score cards in the score board has special powers that can get the rivals point, import chance to answer the next question or they can share scores. one of the member of the other group and neutralizes the opponent so that it cannot get the

B. PRESENTATION Cash Basis of Accounting Cash vs. Accrual Basis of Accounting

Recognizes revenue when cash is received. Recognizes expense when cash is paid. Under the cash basis, service rendered in current year (2013) for which cash is

collected in the next year (2014) would be treated as 2014 revenue. the next year (2014) is 2014 expense.

Under the cash basis, expense incurred in current year (2013) for which cash is disbursed in Because of these improper assignments of revenues and expenses, the cash basis of

accounting is generally considered unacceptable. There is no need for adjusting entries under the cash basis of accounting. Accrual Basis of Accounting cash is received.

Recognizes revenue when sales are made or services are performed, regardless of when Recognizes expense as incurred, whether or not cash is paid out.

Under the accrual basis of accounting, adjusting entries are prepared to bring the accounts

up-to-date for an economic activity that has taken place but has not been recorded. Accounting Period Accounting period is the period of time: One month One year One quarter Into which an entitys life is arbitrarily divided for financial statement purposes. Every

business prepares Annual Financial Statements. Fiscal Year Twelve month accounting period used by an entity. Used by most companys coincides with the calendar year which ended on (some other) December 31.

Revenue Principle is the basis for recording revenues Tells accountants when to record revenue and the amount of revenue to record. Says to record revenue when it has been earned-but not before.

Revenue Principle

Framework for the Preparation and Presentation of Financial Statements States that Income or Revenue is recognized in the income statement when an increase in future economic benefit related to an increase in an asset or a decrease of a liability has risen that can be measured reliably. The Matching Principle Matching Principle guides accounting for expense. Identifies all expenses incurred during the period, measure the expenses, and match them against the revenue earned during the same time period. The Framework for the Preparation and Presentation of Financial Statements Expenses are recognized in the income statement when a decrease in future economic benefit related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably. Time-Period Concept Ensures that information is reported at regular intervals. Fire insurance policies, for example, cover a period of 12 months. If a company prepares

monthly income statements, a portion of the cost of such policy should be allocated to the cost months. building, furniture & fixtures, machine & equipment provides benefits to the business over all the years in which such an asset is used. Not all transaction can be precisely divided by the accounting periods. The purchase of a

of insurance expense each month that is policy is in force. Cost of the policy=total cost/12

estimate objectively the number of accounting period. Accounting principle require that the expenditure be charge immediately to expense. C. APPLICATION 1. How many months does the fiscal year has? Ask questions to the students about the topic that has been discussed.

For some expenditures, such as advertising/employee training programs it is not possible to

2. State the basic principle of revenue in your own words. 3. State the basic principle of expense in your own words. 4. For you, which is better? Cash or Accrual basis of accounting?

D. EVALUATION E. AGREEMENT See attached paper Before dismissing the class, ask them to read ahead the next topic. Reference: Hernane, Milagros. Principle in Financial Accounting, pages 103-106

Polytechnic University of the Philippines Mabini Campus, Sta. Mesa, Manila COLLEGE OF EDUCATION

Name: _________________________________ Course, Year & Section: ___________________

Date: _______________ Miss Christine Garcia

GENERAL INSTRUCTIONS: Erasures and any form of alterations are invalid and will be considered wrong. I. IDENTIFICATION: Write on the spaces provided the term that is being described

______________1. Tells accountants when to record revenue and the amount of revenue to record. ______________2. Twelve month accounting period used by an entity. ______________3. Ensures that information is reported at regular intervals. ______________4. Recognizes revenue when cash is received. ______________5. Recognizes in the income statement when an increase in future economic benefit related to an increase in an asset or a decrease of a liability has risen that can be measured reliably. ______________6. Recognizes in the income statement when a decrease in future economic benefit related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably. ______________7. Identifies all expenses incurred during the period, measure the expenses, and match them against the revenue earned during the same time period. ______________8. Into which an entitys life is arbitrarily divided for financial statement purposes. Every business prepares Annual Financial Statements. ______________9. Recognizes expense as incurred, whether or not cash is paid out. ______________10. Recognizes expense when cash is paid.