INTRODUCTION LESSON PLAN
each accounting concept and
discuss its relevance and
application. Use or modify the
following situations and ask the
students how the concept
Entity – the owner of a painting company takes some paint to use in his home renovations. Is this paint recorded as a business expense?
Money-Measurement – a printing business is about to be sold to new owners who have no experience in the industry. Is this information recorded in the financial statements?
Going Concern – a company’s stock price has plummeted 70% in the past six months due to increased industry competition. Do we assume the company is still in business?
Cost – A construction company owns two excavators and is preparing to sell both of them in order to buy one brand new one. The book value of the two used excavators is $10,000, is that the price that the owner should expect to get as a trade-in value?
Dual Aspect – A company has $40,000 in assets, owes the bank $12,000, and owes creditors an additional $8,000. How much equity does the owner have in the company?
Objectivity – Have students name five different types of source documents used for accounting purposes. Invoice, checks, bank statement, purchase orders, cash receipts, bill of lading, loan certificate
– department stores often have fiscal years that end Jan 31. Ask students to explain why that is the case.
Conservatism – discuss the pros and cons of choosing to be prudent when reporting income and expenses.
Realization – if a toy manufacturer receives an order for 96,000 yoyo’s at $2 each to be delivered in equal installments over the next year, when would the revenue from the order be recorded? What would the amount(s) be?
Matching – a dry-cleaning company sells $5000 worth of services in October. They pay $3000 for their dry-cleaning fluid and supplies every quarter in March, June, September, and December. What expense, if any, would be recorded in October for dry-cleaning supplies?
Consistency – discuss the importance of consistent accounting between reporting periods.
Materiality – discuss the impracticality of accounting for every change that occurs within a business on a day-to-day basis. Use office supplies as the most obvious example.
complete worksheet. A suggested
passing grade is 70% or greater.
Lesson Printable Materials -
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