Adjusting Entries and the Common Assessment
Ms. Ortega teaches four sections of Business Finance at a suburban high school. On the unit test covering income statements and balance sheets, 26 students took the same 30-item assessment. Item analysis shows 19 of 26 missed the adjusting-entry items, 14 missed the depreciation item, and 21 correctly computed net income when given only cash receipts and payments. Eight students labeled the cash-basis statement as accrual. The department has adopted a common assessment for next month, and the principal has asked for a brief data-driven reteach plan. Ms. Ortega has three 50-minute class periods before the common assessment. Her roster includes three students with IEPs for reading and two English learners. The textbook provides a worksheet with 20 adjusting entries, but last year's reteach using that worksheet produced only modest gains. She wants students to transfer the concept to a new business, not repeat the same entries.
1. What does the item-analysis pattern most likely reveal about students' understanding, and which misconception should the reteach target first? Explain the evidence you would use.
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The pattern points to a fragile procedural understanding rather than a total lack of accounting knowledge. Most students can compute net income from cash records (21 of 26), so they can add and subtract. The failure is conceptual: they do not see why revenue and expense recognition should differ from cash timing. The 19 misses on adjusting entries and 14 on depreciation suggest that students treat adjusting entries as a list to memorize, not as a consequence of the matching principle. The eight students who labeled a cash-basis statement as accrual show a definitional confusion that may mask a deeper gap. The reteach should start with a concrete timeline of events-service performed, cash received, bill paid-and ask students to decide when the economic event occurred. Depreciation should be introduced as allocation of a long-lived cost, not as a mysterious year-end entry. I would use the item analysis as a pre-assessment and pair each adjusting entry with the question it answers: What was earned? What was used? What is still owed?
2. Design a three-day reteach sequence using the 50-minute periods. Include at least two formative checks and explain how the sequence addresses the reading and language needs on the roster.
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Day 1: Use a one-page scenario with a timeline and three colored columns for cash event, economic event, and year-end adjustment. Students work in pairs to place events on the timeline. Formative check: a three-item exit ticket asking only when revenue or expense should be recognized, not for journal entries. For reading and language support, provide a glossary with visuals, chunk the scenario into short sections, and give sentence frames such as 'The company earned the revenue in ___ because ___.'
Day 2: Compare cash-basis and accrual results for the same business. Use stations: one for unearned revenue, one for prepaid expenses, one for depreciation. Each station asks students to explain the adjustment in words before writing the entry. Formative check: a partner explanation rubric with two criteria-identifies the timing difference and names the accounts affected. English learners can use their home language for the first explanation, then report in English.
Day 3: Transfer task with a new business. Groups receive a short narrative and must identify three adjustments and defend them. The individual exit ticket uses a new context and asks students to explain why cash profit differs from accrual profit. This sequence addresses reading needs through chunking and visual supports, and language needs through structured oral rehearsal before writing.
3. Rewrite one assessment item so it tests transfer rather than memorized adjusting entries. Include the item, the expected response, and the scoring focus.
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Item: 'A new business collects $6,000 cash in December for services it will perform in January. It also pays $1,200 in December for January rent and uses equipment that depreciates $500 per month. At December 31, what adjusting entries are needed, and why? Explain how the December income statement would be affected if no adjustments were made.'
Expected response: Record $6,000 as unearned revenue rather than revenue; record $1,200 as prepaid rent rather than rent expense; record $500 depreciation expense and accumulated depreciation. The explanation should state that the cash events occurred in December but the economic events belong to January, so recognizing them in December would overstate December revenue and understate expenses. Without adjustments, December net income would be overstated and liabilities or assets would be misstated.
Scoring focus: award points for identifying the timing difference, naming the accounts, and explaining the financial-statement effect. Do not award full credit for correct account names without a correct rationale. This tests transfer because the numbers and business are new and the student must reason from the matching principle rather than recall a worksheet.