Accounting · Lesson Plan

Accrual Accounting and Adjusting Entries

Real businesses don’t collect every dollar in the same month they earn it — so accountants use accrual accounting to record revenue and expenses in the right period. This advanced lesson covers the operating cycle, the revenue-recognition and matching principles, and the adjusting entries (with sample journal entries) that accrual accounting requires.

College / Advanced Lesson Plan 45–60 minutes Free Lesson Plan Lesson & Worksheet: Full Membership

Accrual accounting and adjusting entries lesson illustration

For Teachers

Lesson at a glance

Topic: Accounting
Grade Level: College / Advanced
Resource Type: Lesson + Worksheet
Estimated Time: 45–60 minutes
Format: Lesson + worksheet
Materials: Printable lesson, worksheet, calculator

What Students Learn

Learning objectives

Describe the operating cycle
Explain why not every transaction fits one period
State the revenue-recognition principle
State the matching principle
Record basic adjusting journal entries

Materials

What you’ll need

Printed lesson and worksheet (one per student)
Calculator
Pencils

Key Terms

Vocabulary

Accrual accounting: Recording revenue and expenses when earned or incurred, not when cash moves.
Operating cycle: The continuous sequence of cash, supplies, revenue, and collection.
Revenue recognition: Recording revenue when it is earned.
Matching principle: Matching expenses to the revenue they help generate.
Adjusting entry: A journal entry that puts revenue or expense in the right period.
Accounts receivable: Money owed to the business by customers.

For Teachers

Lesson plan

Estimated time: one 45–60 minute class period.

Lesson sequence

Operating cycle (10 min). Cash → supplies → revenue → collection, and why periods overlap.
Revenue recognition (12 min). When revenue is earned vs. when cash arrives; the advance-payment case.
Matching principle (10 min). Matching expenses to the revenue they produce.
Adjusting entries (18 min). Work sample journal entries; students complete the worksheet.

Assessment

Assess the worksheet for correct adjusting entries and period placement.

Discussion

Discussion questions

What is the operating cycle?
Why can’t every transaction be accounted for in one period?
When is revenue ‘earned’ under revenue recognition?
What does the matching principle require?
Why are adjusting entries necessary?

Printable Lesson & Worksheet