Principles of Accounts · JC 1

Active learning ideas

Profitability and Liquidity Ratios

The preparation of financial statements is the culmination of the accounting cycle. Students learn to synthesize everything they have learned into two primary reports: the Statement of Comprehensive Income and the Statement of Financial Position. This requires a high level of accuracy and an understanding of how year-end adjustments like accruals, prepayments, and depreciation fit together.

• MOE Syllabus Outcomes
• SEAB 9755 LO 7.1: Calculation of profitability ratios
• SEAB 9755 LO 7.2: Calculation of liquidity ratios

• 30–50 min
• Small Groups
• 3 activities

Activity 01

• Inquiry Circle
• 50 min · Small Groups

Inquiry Circle: The Giant Adjustment Board

Give groups a trial balance and a set of adjustment cards. They must work together to update the figures and place them into a large-format Income Statement and Balance Sheet on the wall.

How do gross profit margin and return on equity measure a company's profitability?

• Analyze
• Evaluate
• Create
• Self-Management
• Self-Awareness

Activity 02

• Peer Teaching
• 30 min · Small Groups

Peer Teaching: Adjustment Experts

Assign each group one type of adjustment (e.g., Prepayments, Depreciation, Bad Debts). They must create a 'how-to' guide and teach other groups how their adjustment affects both statements.

What do the current ratio and quick ratio indicate about liquidity?

• Understand
• Apply
• Analyze
• Create
• Self-Management
• Relationship Skills

Activity 03

• Stations Rotation
• 40 min · Small Groups

Stations Rotation: The Financial Statement Audit

Set up stations with partially completed financial statements containing deliberate errors. Students rotate to find the mistakes and correct the final profit and asset totals.

How can a business improve its liquidity position?

• Remember
• Understand
• Apply
• Analyze
• Self-Management
• Relationship Skills

A few notes on teaching this unit

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Watch Out for These Misconceptions

• Adjustments only affect one financial statement.

  Every year-end adjustment has a dual effect, usually affecting one income statement account and one balance sheet account. A 'Dual Effect' checklist helps students ensure they haven't missed the second half of the entry.

• The order of items in the financial statements doesn't matter.

  Proper classification (e.g., current vs. non-current) and order (e.g., liquidity) are required by standards. A 'Classification Sort' activity helps students practice the correct layout before they start writing.

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Methods used in this brief

• Inquiry Circle
• Peer Teaching
• Stations Rotation