Lesson Plan

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Lesson Plan
Grade: Date: 25/02/2026
Subject: Accounting
Lesson Topic: recognise the importance of valuation of inventory and the effect of an incorrect valuation of inventory on gross profit, profit for the year, equity and asset valuation
Learning Objective/s:
  • Describe why accurate inventory valuation is critical for financial statements.
  • Explain how over‑ or under‑valued closing inventory affects COGS, gross profit, profit for the year, equity and asset values.
  • Apply the “lower of cost or NRV” rule to determine the correct inventory amount.
  • Calculate COGS and gross profit from given data and identify errors caused by incorrect valuation.
  • Evaluate the impact of valuation errors on retained earnings and business decision‑making.
Materials Needed:
  • Projector or interactive whiteboard
  • Printed worksheet with numerical examples
  • Calculator for each student
  • Inventory valuation handout (cost, NRV, lower of cost or NRV)
  • Whiteboard and markers
  • Exit‑ticket cards
 Introduction:
Imagine a business that reports $5,000 higher profit simply because it over‑valued its stock. This short exercise will remind students how such errors ripple through the profit‑and‑loss account and balance sheet. Review prior knowledge of COGS and profit calculations, then state that today’s success criteria are to analyse valuation errors and calculate their financial impact.
Lesson Structure:
  1. Do‑now (5') – Quick quiz on inventory definitions and basic formulas.
  2. Mini‑lecture (10') – Importance of correct valuation; introduce cost, NRV and “lower of cost or NRV” rule.
  3. Guided practice (15') – Work through the correct valuation example (calculate COGS, gross profit, profit for the year).
  4. Group activity (15') – Teams recalculate scenarios with overstated and understated closing inventory; record effects on COGS, profit, equity and assets.
  5. Class discussion (10') – Share findings, link errors to decision‑making and financial statement reliability.
  6. Check for understanding (5') – Exit‑ticket question: “If closing inventory is overstated by $X, how does profit for the year change?”
Conclusion:
Recap the chain of impact from inventory valuation through to equity and asset figures. Collect exit tickets to gauge immediate understanding, and assign homework to complete a worksheet that includes a real‑world case study of inventory misvaluation. Remind students that accurate stock counts and applying the lower‑of‑cost‑or‑NRV rule safeguard financial integrity.