|TITLE: How Business Activities Change the Accounting Equation
TASK DEVELOPER: Sherri Holt
GRADE AND CONTENT AREA: Grade 11 - Accounting I
TARGET TEACHING DATE: September 27, 2006
SCHOOL: Mergenthaler Vocational Technical Senior High School
Goal 1: Students will know the importance of accounting and various things to consider when starting a service based business by completing the Internet Activity for Chapter 1 which is to visit the Small Business Administration website to preview information on how to start a Proprietorship.
Expectation 1. The student will demonstrate an understanding of how to start a business.
Expectation 2. The student will demonstrate an understanding of the importance of accounting in the operation of an effective business.
Goal 2: Students will know how transactions change the accounting equation by reviewing the daily transactions of a newly formed business to help them to understand the interconnection of accounting and it's effect on business activities.
Expectation 1. The student will demonstrate an understanding of the accounting equation.
Expectation 2. The student will demonstrate an understanding of how business transactions affect the accounting equation.
Real World Setting: Starting A New Business
After several years of teaching Ms. Barbara Trevino decided to fulfill her dream and start her own business. The name of her business is Encore Music and Ms. Trevino is the sole proprietor of the business. Since Encore Music is a new business it was imperative that Ms. Trevino design an accounting system that will be used to keep an accurate account of Encore Music's records and to assure that her personal financial records are kept separate from those of the business.
Real World Setting: Learning - Starting A Business.
Real World Setting: Learning - How Business Transactions Affect the Accounting Equation.
Classroom and Computer Lab
PART I - FACTORS TO CONSIDER WHEN STARTING A BUSINESS
Step 2. Instructor Review - Instructor will post transactions via LCD screen and work out solutions with the class to demonstrate how business activities change the accounting equation.
Discussion: In this transaction, Barbara Trevino uses $10,000.00 of her own money to invest in her business, Encore Music. In the accounting equation, the asset account, CASH is increased by $10,000.00 which is the amount of cash received by the business. The increase is listed on the left side of the accounting equation. The OWNER'S EQUITY account, (Barbara Trevino, Capital) is increased by $10,000.00. This increase is on the right side of the accounting equation. The increase on the right side of the accounting equation equals the $10,000.00 increase on the left side of the accounting equation.
Discussion: In this transaction, two asset accounts are changed. One asset CASH has been exchanged for another asset SUPPLIES. The asset account CASH is decreased by $1,577.00 which was the amount that was paid out. This decrease would be listed on the left side of the accounting equation under assets. The asset account SUPPLIES is increased by $1,577.00 which is the amount of supplies bought. This increase is also listed on the left side of the accounting equation. Students will see from this transaction that two assets are changed. The two changes that took place are listed on the left side of the accounting equation. Instructor will emphasize that when changes are made on only one side of the accounting equation, the equation MUST still be in balance. Therefore, if one account is increased, another account on the same side of the equation must be decreased.
Discussion: Encore Music pays $1,200.00 for insurance premiums for future insurance coverage. Insurance premiums must be paid in advance. In return for this payment, Encore Music is entitled to insurance coverage for the length of the policy. The insurance coverage is something of value owned by Encore Music, therefore it is listed as an asset.
Discussion: Encore Music needs to purchase additional supplies. The supplies are obtained from Ling Music Supplies which is located in a different city. In most businesses it is common practice to buy items and pay for them at a later date. In other words, the music supplies were purchased on credit.
Results: 95% of students performed in the 80-100% range of the scoring outlined on the rubric. 5% of students performed in the 70-79%. No student performed below 69% in this lesson.
Analyze: Students enjoyed the lesson. The Internet Activity in which students were able to visit the Small Business Administration online was an excellent resource for students to gain hands on knowledge on how to start a business.
Reflection: Reviewing transactions via the LCD and students writing their assets and debits on the board was also an excellent tool for students to demonstrate and observe first hand how transactions affect the accounting equation. Students demonstrated an outstanding understanding of the concepts outlined in the lesson.