Lesson Plan for Year 12 – Accounting: Understanding Bad Debts and Doubtful Debts

Subject: Accounting

Curriculum Level: NCEA Level 2

Lesson Duration: 30 minutes

Class Size: 30 students

Learning Intentions

• Understand the concepts of bad debts and doubtful debts.
• Learn how to create general journal entries and ledger accounts for bad debts and doubtful debts.
• Adjust the trial balance to reflect bad debts and doubtful debts.

Key Competencies

• Thinking: Students will use critical processes to examine financial scenarios.
• Using language, symbols, and texts: Students will create accurate accounting entries.
• Managing self: Students will engage in an independent scenario-based task.
• Participating and contributing: Students will collaborate in groups to discuss real-world examples.

Resources

• Whiteboard and markers
• Accounting textbooks (specific to NCEA Level 2)
• Workbooks
• Laptops/tablets for students (if available)
• Printed scenario worksheets
• General Journal, Ledger, and Adjusted Trial Balance templates

Lesson Outline

Introduction (5 minutes)

1. Welcome and Roll Call: Quickly greet students and mark attendance.
2. Learning Objective Introduction: Explain to students that today's lesson will focus on understanding bad debts and doubtful debts, creating related journal entries, and adjusting the trial balance.
3. Hook: Present a relatable scenario to capture interest. Example: “Imagine you are running a small business and a customer owes you $500, but there are suspicions they might not pay. How would you handle this in your accounts?”

Main Teaching (10 minutes)

1. Definition and Explanation:
   • Bad Debts: Debts that are deemed uncollectable and are written off as an expense.
   • Doubtful Debts: Debts that may potentially become uncollectable and thus are estimated as a percentage of accounts receivable.
   • Use real-world examples relevant to New Zealand.
2. Journal Entries:
   • Bad Debts: Demonstrate how to write off bad debts in the general journal.

     Journal Entry:
     Bad Debt Expense  Dr.  $500
       Accounts Receivable    Cr.  $500
     

   • Doubtful Debts: Show how to create allowance for doubtful accounts.

     Journal Entry:
     Doubtful Debt Expense  Dr. $200
       Allowance for Doubtful Accounts Cr. $200
     

3. Ledgers and Adjusted Trial Balance:
   • Use whiteboard to illustrate transferring figures from the general journal to the ledger accounts.
   • Explain and demonstrate how to adjust the trial balance.

Activity (10 minutes)

1. Scenario Distribution: Give each student a worksheet with a specific scenario involving bad debts and doubtful debts.
2. Group Work: Break students into small groups and have them discuss and solve their scenarios. Each group will:
   • Identify the correct journal entries.
   • Transfer figures to the ledger accounts.
   • Adjust the trial balance.
3. Guided Practice: Monitor and assist groups as needed.

Conclusion (5 minutes)

1. Review: Summarize the key points covered about bad debts and doubtful debts.
2. Group Sharing: Have one group share their scenario and solution with the class.
3. Q&A: Allow time for any final questions from students.
4. Homework Assignment: Ask students to find a real-life example of a company dealing with bad debts and write a short paragraph on how they managed it.

Assessment

• Formative Assessment: Monitor group discussions and provide feedback during the activity.
• Summative Assessment: Evaluate the accuracy of journal and ledger entries, and the adjusted trial balance in the scenario worksheets.

Links to Useful Resources

• NCEA Accounting Resources
• Introduction to Bad Debts and Doubtful Debts – Use this as a guideline for explaining taxation implications in New Zealand.

Real-World Scenario Example

Scenario: Your local grocery store, "Kiwi Grocers," has a customer who has been invoiced $400 but shows no intention of paying. You decide to write off this amount as a bad debt. Meanwhile, you estimate 5% of your accounts receivable ($10,000) may become uncollectable and create an allowance for doubtful debts.

Journal Entries:

1. Write-off bad debt

   Bad Debt Expense  Dr.  $400
     Accounts Receivable    Cr.  $400
   

2. Allowance for Doubtful Debts

   Doubtful Debt Expense  Dr.  $500
     Allowance for Doubtful Accounts Cr.  $500
   

Ledgers:

• Record transactions from journal entries to ledger accounts.

Adjusted Trial Balance:

• Reflect new figures for Bad Debt Expense and Allowance for Doubtful Accounts in the adjusted trial balance template.

---

By following this detailed lesson plan, teachers can deliver a structured and engaging lesson on bad and doubtful debts, complete with real-world applications and specific to New Zealand's educational standards.