The accounts module is a compulsory part of the LPC syllabus but the majority of students view it with a mixture of fear and suspicion. After all, you were rotten at maths at school, werent you? Thats why you did law. So now how are you going to cope?
First, lets settle a couple of fundamentals:
Accounts is not about maths. Admittedly, it helps if you know how to work out a few basics such as percentages. And being able to use a calculator is also an advantage. But thats not really maths its very basic numeracy.
You cannot get through life in the legal profession saying: I hated maths please ask someone else. Clients will expect you to have the basic skills mentioned above.
So what can help you with LPC accounts? First of all, get kitted out.
Invest in a decent calculator do not rely on your mobile phone.
Buy some of those biros that you can rub out for a bit.
Assemble pencils, rubbers and so on.
Put them all in a pencil case so youve got an accounts kit to hand. I know this sounds anal but it really will make a difference.
The LPC accounts module has two aspects and each is examined separately:
Engaging with final accounts of individuals, partnerships and companies
So what are final accounts? There are basically two components:
Profit and loss accounts. They help you work out whether the firm has made a profit or a loss. They take into account the income of the firm and deduct the expenses incurred in making that income.
Balance sheets. These work out the financial position of the firm at the end of the trading period what it is worth (assets) and what it owes liabilities and capital.
After a while you start to realise that accounts do not just exist for the owners of the firms to work out these things they also exist so that outsiders, such as investors and creditors, can judge the financial health of the firm. So partnership, and especially company, accounts address these issues.
Most LPC providers will ask you to do a complete set of final accounts during the assessment. It takes about an hour and a half and in theory it should balance. If it does, it is one of the few exams where you know you have got pretty much the right answer. And if it doesnt? Take some comfort from the fact that you can still pass the assessment if you get the process right, even if not the final outcome.
Most LPC providers will give you plenty of practice in preparing accounts. The fundamentals are:
A little and often: dont let accounts stack up thats when they bite you.
Keep up with the practice.
Make a point of keeping your accounts tidy. Nearly everyone can turn in work with a few mistakes. The dangerous ones are those whose layout and format make it impossible to detect that it was only a few mistakes.
Generally, stick with the notes and documents given to you by your course provider. Buying an accounts book might seem like a good idea but even the basic ones tend to show accounts in different layouts and forms, which may confuse you. These are perfectly correct but lawyers tend to have to learn one rat run through accounts and get on top of that before they are able to deal with them in different configurations.
Handling client money without stealing or losing any of it
This requires an understanding of the rules set out in the Solicitors Accounts Rules. The Solicitors Regulation Authority (SRA) wants you to understand that the buck stops with you so theres no question of saying it was the cashiers fault youre the solicitor. For this part of the course you tend to have to conduct a range of fictional transactions dealing with client funds. These are some of the things that may go wrong:
You could overdraw one client (all the others are then bailing that client out).
You could pay money belonging to your firm into a client account (usually not good).
You could pay the clients money into your firms account (usually even worse).
And of course there are endless ways in which life can make things tricky for you client cheques can bounce, for instance.
Most LPC providers test you by getting you to record the posting entries for a range of events. The SRA sets requirements for the assessment 2 hours in length and with three basic components: posting of events (about 80 per cent of the paper); a statement of account (about 20 per cent; and some short answer or multiple choice questions (about 20 per cent).
This second requirement reflects the fact that trainees and junior solicitors do not find communication with clients through figures very easy. And yet it has to be done all the time.
Generally though, its a question of learning how the Solicitors Accounts Rules work and how to handle a variety of situations. Its clearly in the interests of the providing institution to give you that training and the appropriate practice. The same principles apply as before: keep up with it.
Overall, you should enjoy accounts as it is a break from the law. And, believe it or not, most students say it was one of the things they found the most fun.
Bob White is the LPC director at Nottingham Law School