Legal Accountancy

Academics

Article Index Legal Accountancy

LECTURE I: THE BASIC ACCOUNTING PRINCIPLES

LECTURE II: CASH BOOK AND BANK RECONCILIATION STATEMENT

LECTURE III- ACCOUNTS FOR ONE-MAN BUSINESS/SOLE PROPRIETORSHIP

LECTURE IV- PARTNERSHIP ACCOUNTS

LECTURE V- FINAL ACCOUNTS OF LIMITED LIABILITY COMPANIES

LECTURE VI- ACCOUNTING STANDARDS

LECTURE VII- INVESTMENT RATIOS

All Pages

Introduction: Why lawyers should learn accounting. What is accounting. Users of accounting information/stakeholders Standard setting Introduction to double entry bookkeeping.

The accounting equation and the balance sheet The double entry system for assets, liabilities and capital The asset of stock. Effects of transactions on the balance sheet Books of Original/Prime Entry Transactions and documentary evidence Types of books of original/prime entry Cash book Purchases day book Sales day book Returns inwards day book Returns outward day book

General journal NOTE: This topic seeks to explain to students what accounting is about; explain the relationship between bookkeeping and accounting. Students are to know the main users of accounting information and what accounting information they are interested; and the relationship between the various components that make up the accounting equation. The format of Two-Column and Three-Column Cash Book Use of folio column for cross-reference purposes. Direct debit Contra entry

Bank Reconciliation Statement Differences between the cash book and bank statement Timing differences Informational differences Adjusted cash book NOTE: This topic seeks to explain to students why bank reconciliations are prepared; how dishonoured cheques are dealt with in the ledger accounts. Expenditure and Revenue Trial Balance Approaches to balancing off to trading and profit and loss account Treatment of depreciation

Fixed assets Distinction between capital expenditure and revenue expenditure Causes of depreciation Methods of depreciation Treatment of depreciation on disposal of assets Preparation of trading, profit and loss accounts and balance sheet. Horizontal presentation Vertical presentation

NOTE: This topic seeks to explain to students how to profit is calculated through the preparation of Trading and Profit and Loss Account of a sole proprietorship and how to transfer net profit and drawings to the capital account at the end of the period. This will help students at least keep proper books of accounts in the future practice if they go solo. Features/advantages of a partnership Matters to be stated in a partnership agreement Illustration of profit and loss sharing Fixed and fluctuating capital Treatment of goodwill Types of goodwill Personal goodwill Adherent or cat goodwill Fugitive or rate goodwill Methods of calculating goodwill

Goodwill on admission of a new partner Goodwill on change in profit sharing ratio Goodwill on introduction of new partner Where goodwill is written off Where goodwill is to be maintained in the books Revaluation

NOTE: This topic seeks to let students understand the nature of partnerships and the regulations governing them; how to prepare partnership accounts and how to make changes and adjustments to partnership accounts on the admission of a partner, on a partner leaving the firm or where there are changes in the profit sharing ratios. This will help students in their practices in future when they enter into partnerships.

Income Statement (formerly Trading, Profit and Loss Account) Balance Sheet. Discussion of: Stated capital Ordinary shares Preference shares Surplus Income surplus Capital surplus Share deals account Cash Flow Statement A statement of changes in equity Directors Report Auditors Report Discussion of dividends Bonus issue of shares factors to consider in making bonus issue of shares Rights issue Discussion of gearing  debt:equity capital mix NOTE: Under this topic the student is introduced to the different types of companies; the different types of long-term funds they can raise in order to finance their activities and how to understand prepared financial statement of a company. This will help students when they have become company secretaries or board members of companies to appreciate financial statements submitted for approval by the board.

One set of financial statements for all purposes Accounting standards and the legal framework Underlying accounting concepts The historical cost concept The money measurement concept The business entity concept The dual aspect concept The time interval concept Fundamental accounting concepts Going concern Consistency Prudence The accruals concept Separate determination Substance over form Materiality The assumption of stability of currency NOTE: The topic assists students understand some of the agreed practices that underpin the preparation of accounting information, and about some of the regulations that have been developed to ensure that they are adhered to.

The need for ratios How to use ratios Users of ratios Categories of ratios Profitability ratios Return on capital employed (ROCE) Gross profit as a percentage of sales Net profit as a percentage of sales Liquidity ratios Current ratio Acid test ratio Efficiency ratios Stock turnover Debtor/sales ratio Creditor/purchases ratio Shareholder ratios Earnings per share (EPS) Price/earnings ratio (P/E) Dividend yield Dividend cover Capital structure ratios -Gearing Legal Profession Act, 1960 (Act 32) Legal Profession (Professional Conduct and Etiquette) Rules, 1969 (LI 613) Clients Accounts Office account Clients account Clients cash book Profit and loss account Introduction to Budgeting and budgetary control

NOTE: With the background of accounting so far students should be able to calculate some basic ratios to enable them have explanations for changes in the financial information given them as lawyers at board meetings and also when investors have sought advice from them on investment options. Students are also taken through the requirements of the Legal Profession Act, Act 32 as well as LI 613 so they can maintain good ethical standards as regards their clients money. With an introduction to budgeting and budgetary control students would be able to better managed and control expenditure in their firms in future. Recommended Text Wood, Frank & Sangster, Alan: Frank Woods Business Accounting Vol. 1, Tenth Edition.

Statutes Legal profession Act, 1960 (Act 32) Legal Profession (Professional Conduct and Etiquette) Rules, 1969 (LI 613)