Active learning ideas
End of Year Adjustments are where the 'art' of accounting meets the 'science.' Students learn to adjust the trial balance figures to reflect the true financial position, incorporating accruals (expenses owed), prepayments (expenses paid in advance), depreciation, and bad debts. These adjustments ensure that the financial statements comply with the Accruals and Prudence concepts. For a 5th Year student, mastering these is the difference between a passing grade and a high honor in the Leaving Cert.
Activity 01
Four stations are set up: Accruals, Prepayments, Depreciation, and Bad Debts. At each station, students must solve one adjustment and record the 'dual effect' on a mini P&L and Balance Sheet card.
Why are end-of-year adjustments necessary?
Activity 02
Students are given a scenario where a business buys a machine. They must decide whether to use Straight Line or Reducing Balance depreciation and explain how each choice would affect the profit in Year 1 versus Year 5.
How do we account for depreciation of fixed assets?
Activity 03
Groups analyze a debtor's ledger and decide which accounts should be written off as bad debts and which need a 'provision.' They must then draft the journal entries to show the impact on the final accounts.
What is the impact of accruals on the profit and loss account?
A few notes on teaching this unit
Watch Out for These Misconceptions
Depreciation is a way of saving up cash to buy a new asset.
Depreciation is an accounting entry to spread the cost of an asset; it does not involve a cash movement. Peer discussion about 'non-cash expenses' helps students separate accounting profit from bank balances.
A prepayment is an income because the money has already been paid.
A prepayment is a Current Asset because the business is 'owed' a service it has already paid for. Using a role play of a tenant paying rent in advance helps students see why it is an asset to the tenant.
Methods used in this brief