Preparation for Income Statement

Instructional Plan Income Statement

This instructional paper will consist of detailed instructions for preparing a simple income statement. The paper will be designed to meet the specific needs of my client (a female shoe store owner) who requires instruction in completing the income statement for her small business. As such, the instructions will be geared at the client's level of expertise in the area of accounting, and will focus largely on enabling the client to prepare her income statement with minimal assistance from professional sources such as an accountant, thus potentially reducing her expenses.

This lesson is necessary to help my client in two important areas. The first benefit is practical, as my client will save a significant amount of money by learning to develop her own income statement, rather than relying on the expertise of professional accountants. The client has currently clearly indicated to me that they do not have the specific knowledge that is required to complete this task, and I feel that this instructional paper will fulfill this pressing need. The second benefit is less immediately tangible, and is simply geared at improving my client's general understanding of the accounting practices of her firm. I believe that this instructional paper will improve her overall knowledge about her business' finances, and as such may have unforeseen benefits in helping her to manage financial aspects like cash flow, spending, and budgeting.

Students

The target student for this instructional paper is a successful entrepreneur, who owns a thriving shoe store in my local area. She is not formally schooled in accounting practices, but has an excellent intuitive and practical understanding of financial matters that relate to her business. As such, she will be quick to understand accounting concepts, but specific terms may be unfamiliar to her and should be defined, as appropriate. English is her first language, and (as noted previously), she is financially adept. As such, the level of difficulty in language and financial content will not be a barrier in writing the paper, and the level of difficulty will be aimed at an undergraduate level.

This paper will largely consist of a practical guide to preparing an income statement. While theory will be discussed, and defined where appropriate, the ultimate goal of this instructional paper will be to enable the student to complete an income statement on her own, without the assistance of professional accountants. Given this focus on practicality, the large majority of the instructional paper will focus on developing procedural, rather than declarative knowledge.

An understanding of the role of theories of behaviorism, cognition, and constructivism in instructional design is important to understanding why the procedural method may be the best instructional design targeted for this specific student and situation. The procedural method allows for a quantifiable reproduction of a specific task. The main objective for this student is the completion of a business income statement, rather than the understanding of theory underlying the process.

As such, an understanding of behaviorism in instructional design is a useful guide in creating the learning plan. Behaviorism is based on identifiable changes in behavior (such as the successful completion of an income statement). Using behaviorism as a model, a new pattern of behavior is repeated until it becomes automatic. As such, this method of teaching would recommend getting the student to repeat completing an income statement until it becomes an automatic behavior (Mergel).

Further, an understanding of cognitivism is also important in understanding the specific learning objectives and techniques used in this paper. In cognitivism, changes in behavior are linked to a series of specific and global changes that may occur in the thought processes of the learner during and after the process of learning. As such, by changing thought processes in the student (such as understanding declarative knowledge like the difference between an income statement and balance sheet), the student will be better able to complete an income statement (Mergel).

An understanding of the theory of constructivism also plays a small part in this instructional paper. The theory of constructivism effectively argues that each person creates a perspective of the world that is based on individual experience. Using constructivist theory, a learner can be prepared to solve difficult problems in specific, unclear situations (Mergel). While this theory has a limited applicability to this specific instructional paper, the student may learn how to create an income statement vs. A balance sheet in a financially ambiguous situation. However, this is not the main objective of the exercise, making an application of both behaviorism and cognitivism more applicable to the specific learning needs addressed within this paper.

Learning Goal

Students will learn how to complete a simple income statement for their small business. The instructional paper will be the main means of education, although I will be available to answer specific questions.

Declarative Knowledge

Several aspects of declarative knowledge will be included in the design for this instructional paper. Declarative knowledge is often simply referred to as the development of an understanding of the "what" of a specific subject. It often focuses on creating a number of applicable analogies and discoveries within the specific lesson. Declarative knowledge can include new materials that link to existing knowledge, new concepts, facts, lists, and elements. The most effective design is to begin with simple information, and move onto more complex material, while developing connections with earlier material and prior knowledge (Instructional Technology Services).

Clear definitions of key terms and concepts are absolutely necessary within this specific instructional paper, given the student's lack of formal training in the field of accounting theory and practice. For example, the student may be unaware that an income statement is often called a profit and loss statement or an operating statement. As such, this lack of knowledge relating to a definition of key terms could create a significant amount of confusion if not addressed early on in the instructional paper.

The student must learn the concept that whatever the term that is used for an income statement, the income statement itself is designed specifically as a way to measure the net profit or loss of a company's production over a designated period of time. This period of time is usually a year, but income statements can also be prepared quarterly, monthly, or semi-annually. In addition, many individuals commonly confuse the definition or concept of an income statement with a balance sheet (which only looks at a specific point in time), and this lesson will also include a clear differentiation of the key terms income statement and balance sheet (Dalstead and Sharp).

In addition, the instructional paper will consider such important characteristics as the time frame for inclusion within the income statement (yearly, semi-annually, or quarterly), and the process of developing an understanding of the important differences between the accrual vs. cash basis of accounting. This is a common area of confusion for many business owners, and can be addressed through learning declarative knowledge. For example, the student will learn that the cash basis of accounting includes cash revenue and expenses, and allows a great deal of flexibility, but is often not helpful for measuring business performance or true income. The accrual method is the most common, and likely the most effective for my client's needs (Dalstead and Sharp).

The instructional paper will also use declarative knowledge to impart learning that covers a wide range of specific problems that are often encountered in preparing the income statement. For example, in preparing the measurement of income and expenses, many people encounter problems like considering net income above operating expenses, and allowing for tax obligations, as well as other little-considered expenses like social security taxes, retirement allocations, and principal payment on dept.

Further, an understanding of the role of depreciation in the income statement will be considered. Depreciation is listed as an expense and subtracted from income. It is also part of the total funds available to the small business for capital replacement (Dalstead and Sharp).

Several components of conditional knowledge will also be included in this paper. Contextual knowledge teaches the student the "when" and "why" of a subject. It places the knowledge in a specific context, or condition, and allows the user to understand attitudes and circumstances that may affect the knowledge. Further, learners learn to make evaluations and often find new ways of organizing information. Examples, scenarios, role playing and metaphors are useful in transmitting contextual and conditional knowledge (Instructional Technology Services).

Conditional knowledge that is learned within this specific instructional paper will include development of an understanding of when and why the accrual and cash methods of accounting are useful. In addition, understanding why an income statement is used, rather than a balance statement, will also be conditional knowledge that is included within this specific instructional paper.

Scaffolding for Declarative Knowledge

Both theories of cognitivism and behaviorism can be incorporated successfully into teaching declarative knowledge about the preparation of an income statement. Ertmer and Newby (1993) note that in many situations, instructional theory should combine many theories of learning, while always taking into consideration the specific strengths and weaknesses of the student.

Several cognitivist techniques will be used in teaching declarative knowledge about the preparation of an income statement to the student. These instructional methods will be incorporated in teaching definitions, examples, and concepts, and will include the specific technique and attention directing. A number of techniques that fall under the behaviorist umbrella will be used in this lesson to teach both examples and definitions. Behaviorist techniques methods that will be incorporated in teaching include positive reinforcement, punishment, and feedback.

Definitions of specific words and concepts related to the income statement will be introduced in order to give the student background knowledge about the subject. Key terms to be learned will include: income statement, expense, income, profit, loss, balance, and balance sheet.

These definitions will be introduced in several ways throughout the course of the instructional paper. First, a simple definition will be provided, and the student will be asked to remember this simple definition, and assessed using a quiz. The quiz will be repeated until the student successfully knows the definition. This method of teaching incorporates the specific behaviorist techniques of feedback, positive reinforcement, and punishment (in having to retake the quiz).

Attention-directing will be used in directing the student to consider specific examples of components of an income statement, and concepts related to the income statement. Anecdotes about the importance of the income statement in small business will be given to direct the student's attention to the subject, and underline the importance of learning how to complete an income statement.

Procedural Knowledge

Several components of procedural knowledge will be incorporated in this paper. Procedural models are concerned with practice and examples, and focus on the "how" of completing a task. Students often learn to do specific tasks, including processing and relationships that exist between specific things, and creating new connections. Practice, examples and specific illustrations are useful in developing specific procedural knowledge (Instructional Technology Services).

Given that the purpose of the instruction is to teach the shoe store owner how to prepare an income statement, the owner will be given practical experience in completing a sample income statement. The sample income statement used in the instructional paper will have a simple structure, in order to reflect both the needs of my client and the needs of the business. Specifically, the sample income statement will be designed to allow the client to determine how the shoe store performed financially in the past year.

Basic instruction will also be given in how to use the software program Microsoft Excel, as this will be the core software program that the client uses in the preparation of the income statement.

The conditional knowledge important in completing this procedure will include when to know when the income statement is complete, and when to incorporate specific types of information. This can include knowing when to include items of depreciation, and specific expenses.

Scaffolding for Procedural Knowledge

Both theories of cognitivism and behaviorism can be incorporated successfully into the procedural knowledge learned in this paper. Behavioral approaches will be successful in teaching tasks that require a low degree of processing (such as what categories to include in an income statement). In contrast, cognitive approaches may be used to teach tasks that require strategies that involve reasoning and problems solving (such as deciding what specific expenses to include in an income statement) (Ertmer & Newby, 1993).

A number of specific instructional methods will be used in order to teach the procedure of completing a balance sheet. These will include demonstrating, modeling, practice, and feedback.

Demonstrating and modeling how to compete an income statement will give the learner specific procedural knowledge. It will tell the learner the specific steps in completing an income statement, as well as the order in which these steps should be completed.

Practice in completing an income statement will 'cement' the processes and techniques learned in the demonstrating and modeling approach. This practice will help the learner to apply specific knowledge to their individual situation and needs.

Feedback will take place in the form of requiring the reader to compare their practice income statement to an income statement that is correctly completed. This will allow the learner to correct their mistakes, and further, through a process of repetition, increase rote memorization of skills.