Usefulness of Intro Accounting for Law

[ZooBoingKnight]

Hello, Canlawforum. Longtime reader, first time poster here. It’s a pleasure to write to you all!

So here’s my question: how useful do you think that taking an introductory, undergraduate accounting course is for legal work? (For example, http://www.sfu.ca/outlines.html?2023/spring/bus/251/d100.) I’ve heard some lawyers say that they need to understand an entity’s accounting documents in order to do their job, so I’m thinking about taking a first year financial accounting course to get a bit ahead. I know that I want to be a lawyer, I’m leaning quite a bit toward corporate law, but I haven’t set my heart on tax law yet. I’d love to hear your advice or opinions!

[Hegdis]

It would be a great idea in my opinion quite apart from law. But if you become a sole practitioner you’ll be glad for the background as well. 
 

I say do it. 

[Turtles]

1 hour ago, ZooBoingKnight said:

Hello, Canlawforum. Longtime reader, first time poster here. It’s a pleasure to write to you all!

So here’s my question: how useful do you think that taking an introductory, undergraduate accounting course is for legal work? (For example, http://www.sfu.ca/outlines.html?2023/spring/bus/251/d100.) I’ve heard some lawyers say that they need to understand an entity’s accounting documents in order to do their job, so I’m thinking about taking a first year financial accounting course to get a bit ahead. I know that I want to be a lawyer, I’m leaning quite a bit toward corporate law, but I haven’t set my heart on tax law yet. I’d love to hear your advice or opinions!

I have heard a couple partners at Davies highly recommend transactional lawyers / interested students take an accounting course to better understand financial statements, financial ratios, EBITDA (and related) calculations, the implications of various covenants, etc. 

I definitely wouldn't say it's necessary, but is it helpful to better understand the context and meaning of what you're reading/writing? I think so. 

[Byzantine]

I took that exact course at SFU and found it quite interesting! I can't comment on how useful it will be for practice, but I'd say go for it. 

[Ramesses]

i took a few accounting courses in undergrad when i was considering being an accountant. the stuff you learn makes being a lawyer/law student a little easier but doesnt make or break your experience. learning is important but so is your GPA when you are an applicant. take that into consider when deciding whether you want to take the course. 

[ZooBoingKnight]

Thank you all for taking the time to respond. It sounds like taking intro accounting is a good idea for law. I’m just hoping for some more description/explanation now. In particular:

@Turtles Can you please share about how a little accounting might help one understand their material?

@Ramesses Can you please explain how accounting makes being a lawyer/law student a little easier? 

[Jaggers]

I never took any accounting, and have never felt that was something lacking in terms of doing my job. However, I'm on a few boards, and some accounting would really be helpful for that. It's just good to know in general.

[LMP]

While I agree with the comments here I think that the benefits of a single financial accounting course might be a bit overstated.

I'm open to correction but I don't think a lot of time will be spent rooting around in your undergrad course list. And if it is a entry level accounting class is unlikely to turn any heads.

Having said that I'd agree that taking the course is a good idea. It is good practical knowledge but more importantly it'll be a nice springboard into a more advanced class.

Most schools offer some variety of accounting for x course, with x being various roles or professions. And having this foundation will provide access to that type of course. Which I think would be a far more intresting addition to your CV as well as being quite helpful in the future. 

[Turtles]

1 hour ago, ZooBoingKnight said:

Thank you all for taking the time to respond. It sounds like taking intro accounting is a good idea for law. I’m just hoping for some more description/explanation now. In particular:

@Turtles Can you please share about how a little accounting might help one understand their material?

@Ramesses Can you please explain how accounting makes being a lawyer/law student a little easier? 

A basic Intro to Accounting course should generally cover reading financial statements (what things mean and why they're important), understanding how financial statements are made (incl. assumptions and the art behind it, aka how they can be manipulated and when to be skeptical), calculating ratios and what they mean and when they make sense to use for a particular business and how they can be manipulated, different types of inventory systems and how that affects the financial statements and ratios, etc. Useful for general personal finance, useful for investing your own money, useful for understanding the financial component of transactions in the context of securities or M&A and what you're looking at during due diligence. Depending on your strengths, may even be a bird course (was for me because I like numbers).

Again, not a necessity, but helpful to have a foundation in the subject matter and devlop life skills rather than trying to learn it piecemeal on the fly when someone is negotiating inventory ratio financial covenants that don't make any sense based on your client's inventory management system, or tying default to EBITDA/debt ratios that can be easily manipulated by moving cash around temporarily or changing how expenses are incurred to artificially appear better financially, putting your client at heightened risk without realizing it. Even if you only develop a baseline foundation, it would be ideal to be able to spot major issues so you know when to call in an expert, rather than be blind to it.

Edited November 1, 2022 by Turtles

[Ramesses]

20 hours ago, ZooBoingKnight said:

Thank you all for taking the time to respond. It sounds like taking intro accounting is a good idea for law. I’m just hoping for some more description/explanation now. In particular:

@Turtles Can you please share about how a little accounting might help one understand their material?

@Ramesses Can you please explain how accounting makes being a lawyer/law student a little easier? 

@Turtles did an amazing job explaining already so I will just add on my personal experience.

In school, when you take M&A and corporate finance the accounting stuff pops up all the time and having the fundamental understanding of accounting allows you to better understand the materials. In securities, I find it is less important in school but in practice I find the accounting principles did help. When you practice business law you are going to have to review accounting documents so having the fundaments help. Even if you are a litigator, you are running a business and having the accounting basics is important.

But like I said previously, these are things you can learn later (taking an accounting for lawyers course in law school or when you practice) as oppose to doing it now if it will affect your GPA. 

[ZooBoingKnight]

Alright! So intro financial accounting will probably provide me with reasonable benefits in law school and law practice. I really appreciate everyone’s contribution. It’s nice knowing why I probably won’t be wasting dozens of hours studying accounting next semester. Thank you so much. I hereby conclude this topic 👏!