Subject: Fundamentals of Accountancy Business

Grade Level: Grade 12

Objective: Perform vertical and horizontal analyses of financial statements of

a single proprietorship.

Learning across curriculum:

1) English - Analyzing financial statements requires strong reading comprehension

skills to understand the content and context of the statements.

2) Mathematics - Calculating financial ratios and percentages is essential in

performing vertical and horizontal analyses.

3) Economics - Understanding the financial health of a single proprietorship is crucial

in assessing its economic viability and making informed business decisions.

Review Motivation:

[Teaching Strategy: Role-Playing]

[Instructional Materials: Financial statements of a single proprietorship]

1) Divide the class into groups and assign each group a specific role, such as a
business owner, investor, or financial analyst.

2) Each group will analyze the financial statements provided and present their
findings from the perspective of their assigned role.

3) Rubric:

- Accuracy of analysis: 20 pts

- Presentation skills: 15 pts

- Ability to answer questions: 10 pts

 Assessment Questions:

1) What is the purpose of performing vertical and horizontal analyses of financial

statements?

2) How can the results of these analyses help in making business decisions?

3) What are the limitations of using financial statements for analysis?

Activity 1: Vertical Analysis of Financial Statements

[Teaching Strategy: Cooperative Learning]

Materials: Financial statements of a single proprietorship, calculators

Significance: Vertical analysis helps determine the proportion of each item in the
financial statements relative to a base item.

Instructions:

1) In groups of 4, students will be given a set of financial statements.

2) Each group will calculate the percentage of each line item relative to the total
revenue or total assets.

3) Rubric:

- Accuracy of calculations: 15 pts

- Organization of findings: 10 pts

- Ability to explain results: 10 pts

 Assessment Questions:

1) What is the purpose of vertical analysis in financial statement analysis?

2) How can vertical analysis help identify trends or anomalies in a single

proprietorship's financial performance?

3) What are the limitations of using vertical analysis?

Activity 2: Horizontal Analysis of Financial Statements

[Teaching Strategy: Problem-Based Learning]

Materials: Financial statements of a single proprietorship, calculators

Significance: Horizontal analysis helps assess the changes in financial performance

over time.

Instructions:

1) Students will work individually to analyze the financial statements provided.

2) They will calculate the percentage change in line items between two consecutive
years.

3) Rubric:

- Accuracy of calculations: 15 pts

- Interpretation of results: 10 pts

- Application of findings: 10 pts

 Assessment Questions:

1) What is the purpose of horizontal analysis in financial statement analysis?

2) How can horizontal analysis help identify trends or changes in a single

proprietorship's financial performance?

3) What are the limitations of using horizontal analysis?

Activity 3: Ratio Analysis of Financial Statements

[Teaching Strategy: Inquiry-Based Learning]

Materials: Financial statements of a single proprietorship, calculators

Significance: Ratio analysis helps assess the financial health and performance of a
single proprietorship.

Instructions:

1) Students will work in pairs to analyze the financial statements provided.

2) They will calculate key financial ratios such as liquidity ratios, profitability ratios,
and solvency ratios.

3) Rubric:

- Accuracy of calculations: 15 pts

- Interpretation of ratios: 10 pts

- Application of findings: 10 pts

 Assessment Questions:

1) What is the purpose of ratio analysis in financial statement analysis?

2) How can ratio analysis help assess the financial performance and position of a
single proprietorship?

3) What are the limitations of using ratio analysis?

ANALYSIS:

Activity 1 - Vertical Analysis: This activity allows students to determine the

proportion of each line item in the financial statements relative to a base item. It
helps identify the composition of the financial statements and potential areas of
concern.

Activity 2 - Horizontal Analysis: This activity enables students to assess the

changes in financial performance over time. It helps identify trends and changes in
the financial statements, providing insights into the single proprietorship's financial
progress.

Activity 3 - Ratio Analysis: This activity allows students to evaluate the financial
health and performance of the single proprietorship using various ratios. It provides a
comprehensive view of the company's liquidity, profitability, and solvency.

ABSTRACTION:

Performing vertical and horizontal analyses of financial statements of a single

proprietorship helps identify the proportion, trends, and changes in the financial
performance. This analysis aids in assessing the financial health, making informed
business decisions, and identifying potential areas for improvement.

APPLICATION:
[Teaching Strategy: Experiential Learning]

Task 1 - Students will choose a local single proprietorship and collect its financial
statements. They will perform vertical and horizontal analyses and present their
findings in a business report.

Task 2 - Students will create a hypothetical single proprietorship and develop

financial statements. They will then perform vertical and horizontal analyses and
propose strategies to improve the company's financial performance.

ASSESSMENT:

[Teaching Strategy: Direct Instruction]

[Instructional Materials: Sample financial statements]

Question 1: What is the main purpose of performing vertical and horizontal analyses
of financial statements? (5 pts)

Question 2: How can ratio analysis help assess the financial health and
performance of a single proprietorship? (5 pts)

Question 3: What are the limitations of using financial statements for analysis? (5
pts)

Assignment:

1) Research and write a short essay discussing the importance of financial statement
analysis in decision-making. Include examples of how vertical and horizontal
analyses can provide valuable insights. (Guiding Overview: 200 words; Assessment
Question: Explain the significance of vertical and horizontal analyses in financial
statement analysis. Provide real-world examples to support your answer.)

2) Interview a local business owner and ask about their experience in analyzing
financial statements. Write a reflection paper discussing the challenges they faced
and the benefits they gained from performing vertical and horizontal analyses.
(Guiding Overview: Interview questions; Assessment Question: Reflect on the
insights gained from the interview. How can financial statement analysis contribute to
the success of a business?)