Account Third Term Scheme of Work and Lesson Note for Senior Secondary School Two( SSS 2)

SCHEME OF WORK SSS 2

Acquisition/ purchase of Business

Purchase consideration & Good will

Meaning, Reasons for acquisition, format of new business account.

Purchase of a new business- format, preparation of a new business account
Company Amalgamation- Reasons, process and working exercise
Companies formation, private, public, quoted and unquoted companies
Nigeria financial system- meaning, component, features, operators, money market and capital market functions
Type of shares, issues of shares, distinctions between classes of shares, issue of at par, discount and premium
Preparation of account for issue of shares at par, discount and premium bonus shares, right issues
Loan capital- debentures, types, distinction between shares and debenture, preparation of accounts relating to issuing of all classes of shares
capital market- Requirement for enlisting in capital market, second tier, security market

Advantages of capital market to individuals, investors, government, economy, companies.

Revision
Examination

CLASS- SS2

DURATION- 40M/P

NOS OF PERIOD- 4

TOPIC- ACQUISITION AND PURCHASE OF A BUSINESS

OBJECTIVES: The student should be able to:

Explain the meaning of acquisition of business
Identify and explain terminologies use in the purchase of business
State the accounting entries in purchase of business

PREVIOUS KNOWLEDGE: The students are familiar with the sales and acquisition of fixed asset

INSTRUCTIONAL MATERIAL: White board and marker

REFERENCE MATERIALS: Simplified and Amplified book-keeping and Accounting by Longe Femi, Essential financial Accounting for SS3 by R.A Kazeem and O.A. Longe

CONTENT:

Purchase at a business is the process involved in the acquisition of an existing business in a company.

TERMINOLOGY:

Purchase consideration: This is the money paid by the purchaser to the vender in order to acquire his business
Vendor: The person or firm that sales its business to another firm company
Goodwill: Goodwill is the excess of the purchase consideration over the value of asset
Capital Reserve: capital reserve is the excess of identifiable assets or net value of assets over the purchase consideration
Promoter: the person or firm that acquire a business and sells it to another company at a profit

ACCOUNTING ENTRIES

Agreed purchase price

Dr: Business purchase accounting

Cr: Vendor accounting with agreed price

Take over value of assets

Dr: Assets account

Cr: Business purchase with the value of assets taken over

Agreed valuation of liabilities taken over

Dr: Business purchase account and

Cr: Liabilities account with agreed valuation of liabilities taken over

Excess of purchase consideration over net assets

Dr: Goodwill account

Cr: Business purchase account

Settlement of the vendor’s account with cash:

Dr: Vendor account

Cr: Bank account

Excess of assets over consideration

Dr: Business purchase account

Cr: Capital reserve account

Settlement of vendor’s account with shares

Dr: Vendor account

Cr: Shares capital account

FORMAT:

Dr Vendor Account Cr

N Bank X Shares X XX

N Purchase consideration X _____ XX

Business Purchase Account

N Liabilities take over X Purchase price X Capital reserve X XX

N Assets take over X Goodwill ______ XX

Liabilities Account

N	N Business Purchase Plc

Assets Account

N Business Purchase x

Bank Account

N	N Vendor x

Share Capital Account

N	N Amount paid to vendor x

Goodwill Account

N Business Purchase A/C x

Capital Reserve Account

N	N Purchase A/C x

Balance sheet as at year ended

N Capital x Capital reserve x Creditors x x

N Fixed Assets x Current Assets x Good will x x

Assets: Fixtures Motor van Debtors Stock Goodwill Liabilities Creditors Purchase consideration Asset and Liabilities taken over	Dr x x x x x	Cr x x
Purchase of business Vendor A/C Agreed purchase price	x	x
Vendor A/C Bank A/C Share Capital A/C Cash or share paid in full settlement	x	x x

Presentation:

Step 1: Revision of last term work

Step 2: Introduction of the new topic

Step 3: Explanation of the new topic

Step 4: General Class discussion

Step 5: Summary of the lesson

EVALUATION

What is acquisition of business?
Mention at least four terminologies used in purchase of business
What is the accounting entries of purchase of business paid by cash?

Assignment

Explain the following terms
Goodwill (b) purchase price (c) promoter (d) Vendor

(e) State the accounting entries for the following

(a) Purchase consideration

(b) Assets taken over

(d) Payment of purchase price with share.

Conclusion: The teacher summarizes the lesson and gives the students note on the subject matter.

CLASS – SS2

DURATION – 40 M/P

NUMBER OF PERIOD – 4

TOPIC – PURCHASE OF BUSINESS

OBJECTIVES – The students should be able to:

Solve problems relating to purchase of business

PREVIOUS KNOWLEDGE – The students have been taught the meaning and accounting entries in purchase of a business.

INSTRUCTIONAL MATERIALS – White board and marker

REFERENCE MATERIAL – Essential financial Accounting for SSS 1- 3 BY R.A. Kazeem and O.A. Longe

CONTENT

Bolu and Bassey entered into partnership sharing profit and losses equally to acquire the business carried on by Yakubu- The business was taken over on 1/1/2015 which is shown below.

Balance sheet

N N Capital 260,000 Current liabilities Creditors 34,000 294,000

N N Fixed Assets: Premises 142,000 Plant & machine 81,000 Furniture 6000 229000 Current Assets Stock 4100 Debtors 24000 65000 294,000

Additional Information:

The purchase consideration consideration/price agreed was N280,000 and was paid equally by Bola and Bassey direct to Yakubu.
Bank account was opened in the name of the firm into which each partners paid the sum of N10,000.
For the purpose of the partnership, the assets were revealed and the following reduction in value were made.

Plant and machine 5000

Furniture and fittings 2000

Stock 4500

You are required to prepare

The necessary journal entries to record the above transaction
A balance sheet as at the commencement of the new partnership.

Solution

Purchase consideration 280,000

Assets taken over:

Plant & machine (8100-5000) 76,000

Furniture & fittings (6000 – 2000) 4,000

Stock (41000-4500) 14,200

Premises 27,000

282,000

Less liabilities 34,000

Net Assets 248,000

Goodwill – Purchase Consideration – Net Assets

=N280,000 – N248,500

= N31,500

JOURNAL

Purchase of a biz Vendor	N 280,000	N 280,000
Agreed purchase price Plant & machine Furniture & fittings Stock Debtors Premises Goodwill Purchase consideration Creditors	76000 4000 36500 24000 142000 31500	280,000 34,000
Bank Bola Bassey Being cash introduced	20,000	10,000 10,000
Vendor Capital – Bola Bassey Being payment for purchase of biz	280,000	140,000 140,000

Balance sheet

Capital N N

Bola 150,000 Goodwil 31,500

Bassey 150,000 freehold 142,000

Current liabilities furniture 4,000

Creditor 34,000 plant and machine 76,000

Current Asset

Stock 36500

Debtor 24000

Cash 20,000 80,000

33,4000 334000

Presentation:

Step i. The teacher revision the previous lesson

Step ii. Introduces the new topic

Step iii. Gives a comprehensive example.

Step iv. General class discussion

Assignment:

Simplified and amplified page 4×4 ex 1

Assignment:

Simplified page 485 EX 2x and page 487 EX 6

CONCLUSION:

Teacher summarizes the lesson and gives student note

CLASS – SS2

DURATION – 40 M/P

NUMBER OF PERIOD – 4

TOPIC – COMPANY’S AMALGAMATION

OBJECTIVES- The students are expected to:

State the meaning of Amalgamation
Differentiate between business purchase and amalgamation
Prepare an amalgamation income.

PREVIOUS KNOWLEDGE – The students had been taught about purchase of business previously.

REFERENCES MATERIAL – Simplified and Amplified Book Keeping and Accounting for SS1-3 by Femi Longe.

CONTENT:

Amalgamation is the combination of two or more firm into a new firm formal for that purpose. The reasons for amalgamation range from desire to gain larger share of the market to desire to attain synergy.

ILLUSTRATION:

Kola and Bola have been friends and they both agreed to amalgamation their sole trading business and form a partnership with effect from 31^st March. Their balance sheets are as follows:

Bola’s Balance sheet

N N

Capital 111,000 Land & Building 60,000

Fixtures 15000

Stock 2020000

Creditors 15000 debtors 27000

Bank 6000

126,000 126,000

Kola’s Balance sheet

N N

Capital 129,000 Fixtures 90,000

Stock 24,000

Debtors 21,000

Bank 3,000

138,000 138,000

Additional information:

Kola is to be credited with goodwill of N21,000
Bola’s land and building to be valued at N75,000 stock at N16,500
Kola’s fixtures to be valued at N99,000, Debtors N20,200, Stock N21,600
All other assets and liabilities are taken over as per the balance sheet. You are required to prepare the opening balance sheet of the new partnership.

SOLUTION:

Adjusted Kola’s Balance sheet

N Capital 154,800 Creditors 9,000 163,800

N Goodwill 21,000 Fixtures 99,000 Debtors 20,200 Stock 21600 Bank 3000 163,800

Adjusted Bola’s Balance sheet

N Capital 124,500 Creditors 15,000 139,500

N Land& Building 75,000 Fixtures 15,000 Stock 16,500 Debtors 27,000 Bank 6000 139,500

Balance sheet of the partnership

N Capital Kola 154,800 Bola 124,500 Creditors 24,000 303,300

N Goodwill 21,000 Land&Building 75,000 Fixtures 114,000 Stock 38,100 Debtors 46,200 Bank 9000 303,300

Presentation:

Step 1: The teacher revises the previous topic

Step 2: Introduction to the new topic

Step 3: Explanation of cogent points

Step 4: Practical illustration

Assessment:

Differentiate between business purchase and amalgamation
What are the reasons for amalgamation?

Assignment:

Simplified and Amplified page 486 EX 4X and 6X.

Conclusion: The teacher summarizes the lesson and gives students note.

CLASS- SS2

DURATION – 40 MIP

NUMBER OF PERIOD -4

TOPIC – NIGERIAN FINANCIAL SYSTEM

OBJECTIVES:- The students should be able to:

Explain the term financial system
Identify the components of the financial system
State the functions and features of each component

PREVIOUS KNOWLEDGE: the student has been taught about company

INSTRUCTIONAL MATERIALS: Essential financial accounting for SS1-3 by R.A Kazeem etal

CONTENT:

Financial market or system can be defined as an organized mechanic that allow the coming together of buyers and sellers to trade in and shares, bounds, and warrants using the stock exchange or directly between buyers and sellers.

COMPONENT OF THE FINANCIAL SYSTEM

The financial system is composed of all person, group, bodies and association that are involved one way or the other in the operation of the system.

The component provide legal basic of operation, the market venue where sellers and buyers meet, the market products that are sold in the market, and the very support services which ensures that the market operates safely and satisfactorily.

The financial market is subdivided into two namely

The money market
The capital market

The money market is a market for short term mediations of funds.

FUNCTIONS OF THE MONEY MARKET

Provision of short-term capital to investor in both private and public holiday
Mobilization of saving for investors
Provision of investment, technical and managerial advise
Provision of appropriates for the public to participate in the management of the economy

Capital market is the market where long term capital are produced. It is the market for the intermediation of long term capital or investment.

FUNCTIONS OF THE CAPITAL MARKET

Provision of long term capital to investors
Mobilization of saving for investment
Encourage the growth of merchant banking
Provision of investment advise

Presentation:

Step 1. The teacher revises the previous lesson

Step 2. Introduction to the new lesson

Step 3. Explanation of salient points

Step 4. General class discussion

Assessment:

Differentiate between the money market and the capital market
Explain the following terms
Stock exchange
Listed security
Custodian

Assignment:

List and explain at least six terminology used in the capital market

CLASS- SS2

DURATION – 40 M/P

NUMBER OF PERIOD – 4

TOPIC – SHARES

OBJECTIVES – The student should be able to:

State the meaning and types of shares
Differentiate between classes of shares
State the right and advantages of being a share holder

PREVIOUS KNOWLEDGE: The students had been taught about instrument used in the capital market

INSTRUCTIONAL MATERIALS: Charts

REFERENCE MATERIALS: simplified and amplified book-keeping & accounting by Femi Longe

Content: shares are units of ownership of a limited company. They are small units, each of equal amount into which the capital of a company is divided

TYPES OF SHARES

Ordinary shares
Preference shares

CLASSES OF PREFERENCE SHARES

Redeemable preference shares
Irredeemable preference shares
Cumulative preference shares
Non- cumulative preference shares
Deferred or founders shares

DIFFERENCES BETWEEN PREFERENCE SHARES AND ORDINARY SHARE HOLDERS

Preference Ordinary

1. 2. 3. 4. 5.

Fixed rate of divided No voting right Shares are redeemable Received dividend first Not part of the owner of the company

Rate of dividend is not fixed Has voting right Shares are not redeemable Received dividend last Real owners of the company

Presentation:

Step 1. The teacher summarizes the last topic

Step 2. Introduces the new topic

Step 3. Explanation of cogent point

Step 4. General class discussion

ASSESSMENT:

What is a share?
List and explain the type of share
List and explain the classes of preference share

Assignment:

State the right and advantages of being a share holder
Give detail feature of the ordinary share and preference share

Conclusion:

The teacher summarizes the lesson and gives students note.

CLASS- SS2

DURATION – 40 M/P

NOS OF PERIOD – 4

TOPIC – ISSUES OF SHARES

SUB-TOPIC – ACCOUNT PREPARATION

OBJECTIVES: The student should be able to:

Prepare all ledger entries for shares issued at per, premium and discount
State the reasons why shares are issued at per, premium and discount

PREVIOUS KNOWLEDGE: The students have been introduced to share and types of shares capital previously.

REFERENCE MATERIALS: simplified and amplified book-keeping and accounting by Femi Longe

Content:

Example: ABC ltd offer for sales 100,000 ordinary shares were fully subscribe for and payment made as follows

Application – 40k

Allotment – 30k

1^st call – 20k

Final cell – 10k

You are required

You are required to prepare the necessary ledger entry and the journal for the above transaction working (sol)

Application = 100,000 x 0.4 = 40,000

Allotment = 100,000 x = 30,000

1^st cell = 100,000 x 0.2 = 20,000

Final cell = 100,000 x 0.1 = 10,000

N100,000

Ledger

Appl. Account

S. Cap 40,000

Bank 40,000

Share Capital Account

Bal. 100,000

N Appl. 40,000 Allot. 30,000 1^st call 20,000 Final call 10,000 100,000

Allotment

S. cap. 30,000

Bank 30,000

1^st cell account

S. cap. 20,000

Bank 20,000

Financial Account

S. cap. 10,000

Bank 10,000

Bank Account

Appl. 40,000 Allot 30,000 1^st call 20,000 Final cell 10,000 100,000 Bal. 100,000

Bal. 100,000 ___________ 100,000

Presentation:

Step 1. The teacher revises the last lesson

Step 2. Introduces the new topic

Step 3. Explanation of cogent point

Step 4. General class discussion

Assessment:

Write a short note on the following
Application
Allotment
Cells
Share premium
Over and under subscription

Assignment:

Simplified and amplified accounting page 444/445 Exc. 2 and 9x

Conclusion:

The teacher summarizes the lesson and gives student note.

CLASS – SS2

NO OF PERIOD – 4

DURATION – 40 M/P

TOPIC – LOAN CAPITAL

SUB-TOPIC – DEBENTURES

OBJECTIVES – The students should be able to:

State the meaning of debenture
List and explain the types of debenture
State the effect of debenture on organization.

PREVIOUS KNOWLEDGE: – The students have been taught about documents used in company’s formation and share capital.

INSTRUCTIONAL MATERIAL – Charts

REFERENCE MATERIAL – Financial Accounting made simple by Robert O. Igben

CONTENT:

Debenture is a written acknowledgment of a debt owed by a company executed under the common seal of the company. Debenture is a loan obtained by a company from investors through the capital market only. Only a company has access to this kind of loan. Some incorporated companies such as partnership and sole proprietorships do not.

TYPES OF DEBENTURE

Secured Debenture secure debenture are those which carry a charge or mortgage on the assets of the company. This can either be:
A friend charge – This is a mortgage on a specific assets.
A floating charge: This is a mortgage on all or a class of the present and future assets of the company.
Unsecured debenture (Simple or naked debenture).
Redeemable debenture
Irredeemable debenture (perpetual debenture)
Convertible debenture

Presentation:

Step 1. The teacher summarizes the previous topic

Step 2. Introduces to the new topic

Step 3. Detail complication on the new topic

Step 4. General class discussion

Assessment:

Define the following
Loan
Debenture
State and explain the various type of debenture

Assignment:

What are the conductions to be fulfilled before a loan is grated either to a company or individual

Conclusion: the teacher summarizes the lesson and gives the student note

CLASS – SS2

DURATION – 40 M/P

NUMBER OF PERIOD – 4

TOPIC – CAPITAL MARKET

OBJECTIVES – The students should be able to:

State the meaning of capital market
List and explain the operators in the capital market
State the advantages of the capital market.

PREVIOUS KNOWLEDGE:- The student had been taught about the Nigeria financial system.

INSTRUCTIONAL MATERIAL – Chart

REFERENCE MATERIAL – Simplified and Amplified financial Accounting for SS1-3 by Femi Longe.

Content:

Capital market is the market for buying and selling of long term debt or equity backed security. It is made up of institutions, structures where by intermediation of medium and long term funds take place.

Capital market is for investing funds in debenture, stock and shares. The capital market can be sub-divided into two:

Primary market
Secondary market

Primary market is the market where new shares or bonds are sold to the investors

FEATURES OF PRIMARY MARKET

Market for new long term securities
Primary issues or setting up a new business for expansion
The organization receives money and issues certificate
The method of capital are public issue offered for sales, offered for subscriptions
It has no particular place of operation.

SECONDARY MARKET:- This is a market where existing shares are traded among investors. It is controlled by the Nigeria stock exchange market.

Features

It deals with sales and purchases of existing shares.
It has a particular place of trading called stock exchange market
It creates liquidity and securities because it can be easily converted to cash.

Operators of the capital market

Individual investors
Traders
Pension fund
Insurance companies
Pension fund administration
Mortgage institution

Advantages of capital market

It serves as an avenue to invest fund by the investors
It creates wealth for individuals corporate body and government
It offers bonus shares to existing share holders
It can be use as a collateral security to obtain loan from the bank
It serves as an exchange avenue for economic growth and development
It creates employment opportunities
It improves the standard of living of operators and that of the general public’s since it create wealth.
It attracts foreign capital and investors in the country’s economy.

Advantages to companies

It enables company to raise capital
It ensures the popularity of the company
It ensures the perpetuity of a limited company
It is a base of measuring the company performance.

Regulation of the capital market

Regulation is the process of controlling the activities of the participants in the market to ensure accountability, transparency, farmers and efficiency.

Types of Regulation