Finance and Accounting for Lawyers, 2nd Edition

September 2020 Hardcover

Brian Brinig

Business Valuation Resources, LLC

The 2nd edition of this textbook serves as an introductory text for attorneys working with accounting and the business valuation world. It is the textbook used for a law school course of a similar title.

Please note the PDF format is available now, and print copies will ship late October.

The principles of accounting and finance directly extend to contract issues, torts, business and securities matters, taxation issues, partnership disputes, gift and estate matters, to name only a partial list. These areas of jurisprudence are often based significantly on substantive financial questions, and their measurement can be the heart of the entire matter. The application of broad accounting principles to countless business transactions requires an understanding of the objectives of financial reporting and the needs of the users of financial information.

Contrary to popular belief, accounting is not a mathematical formula or calculation, but rather an organized system that logically summarizes business transactions into useable information that is meaningful to management, creditors, business investors and other stakeholders. This text takes readers through the system of accounting and the development of financial statements. Complexities and limitations of accounting information are explored, culminating in a study of ratio analysis of financial statements to glean relevant insights. The objective of this introductory study of accounting is to provide a broad, workable knowledge base that will facilitate the use of accounting information as it relates to the practice of law.

The finance and valuation chapters present concepts and calculations of simple and compound interest, present value and  annuities.  In the area of business valuation, the reader is exposed to Revenue Rulings 59-60 and 68-609, two seminal rulings on business valuation issues as well as a complete example and explanation of a small business valuation analysis.

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Additional Details

 

Highlights of this expanded and updated text include:

  • Three chapters on damages covering definitions, legal concepts underlying damages analyses and classifications of damages (general, special, economic, non-economic and punitive)

  • A chapter devoted to personal economic loss calculations and another focuses on commercial damages

  • A chapter dedicated to determining personal income

  • A chapter on opinion evidence and expert testimony with consideration of the legal privileges applicable to experts and techniques for taking effective expert depositions and cross-examining experts at trial

Table of Contents

 

About the Author

Brian Peter Brinig, JD, CPA


Chapter 1. Accounting, Finance, and the Law

Introduction

A Quick History of Accounting

Introduction to Finance

Finance, Accounting, and the Law

Chapter 2. Accounting: An Introduction

Introduction

Overview

The Accounting Process

Generally Accepted Accounting Principles

Limitations of Accounting Information

Conclusion

Chapter 3. Double Entry Accounting System

Introduction

The Transaction

The Account

Debits and Credits

Double Entry Accounting System

Recording a Transaction

Posting to the General Ledger

Preparing the Trial Balance

Finalizing the Bookkeeping Process and Preparing Financial Statements

Preparing Financial Statements

Closing the Books

Further Discussion

Proprietorships Versus Corporations

The Relationship Between the Balance Sheet and the Income Statement

Conclusion

Chapter 4. Accrual Accounting

Introduction

Accrual Basis Accounting

The Realization Principle—The Theory Behind Revenue Recognition

The Matching Principle—The Theory Behind Expense Recognition

Violating the Realization Principle and the Matching Principle

Cash Basis vs. Accrual Basis

Accounts Receivable and Revenue Recognition

Converting From Cash to Accrual and From Accrual to Cash

Accounts Payable and Expenses

Prepaid Items and Deferred Revenue

Another Deferred Item—Taxes

Conclusion

 

Chapter 5. Fixed Assets and Depreciation

Introduction

Accounting for Fixed Assets

The Concept of Depreciation

The Mechanics of Depreciation Accounting

Methods of Depreciation

GAAP Versus IRS Depreciation

Gains and Losses on the Sale of Fixed Assets

Natural Resources and Depletion

Intangible Assets and Amortization

Conclusion

 

Chapter 6. Inventory Accounting and Cost of Goods Sold

Introduction

The Business Cycle as It Relates to Inventory

Inventory—The Basics

Two Types of Inventory Accounting

Methods of Costing Ending Inventory Under the Periodic Method

Comparison of the Differences in Methodologies

Errors in Inventory Accounting

Inventory in Manufacturing Companies

Conclusion

 

Chapter 7. Financial Statement Analysis

Introduction

Concepts for This Chapter

Methods of Financial Statement Analysis

Analysis of Financial Statements

Profitability Ratios

Solvency, Liquidity, and Leverage Ratios

Management and Activity Ratios

Conclusion

 

Chapter 8. Determining Personal Income (With Emphasis on California Family Law)

Introduction

Statutory Definitions of Income

Financial Definition of Income

Why Income Determination Is Confusing

Accrual Versus Cash Basis Accounting

Categories of Income

What Is Not Income

Income to the Individual

Income From the Ownership of a Business

The Difficult Problem of Income for Support

California Case Law of Income

The Lawyer’s Job: Arguing For or Against an Item of Income

Conclusion

 

Chapter 9. Introduction to Finance: The Time Value of Money

Introduction

Wealth, Capital, and Money

The Time Value of Money: Interest

Definition of Terms for This Chapter

Simple Interest

Compound Interest and the Time Value of Money

The Concept of Present Value

Regular Mortgage Loan Calculations

Advanced Mortgage Calculations

The Amortization Worksheet (BA II Plus Guidebook, Pages 21, 23, 25, and 26)

Ordinary Annuities (BA II Plus Guidebook, Pages 21-43)

Conclusion

 

Chapter 10. General Principles of Appraisal and Valuation of Businesses

Introduction

General Principles of Appraisal

Approaches to Determining Value

Standards of Value

Premise of Value

Valuing Small Businesses

Overview of the Business Appraisal Process

Possible Methods of Valuing a Business

Capitalization of Excess Earnings Method

Balance Sheet Review (Determination of Net Tangible Assets)

Adjustments Generally Required in the Analysis

Tax Consequences of Adjusting

Income Statement Review

Example: ACME Industries Inc.

Excess Earnings Analysis

Conclusion

 

Chapter 10, Appendix A. Sample Appraisal Report

Chapter 10, Appendix B. IRS Revenue Rulings

IRS Revenue Ruling 59-60

Revenue Ruling 68-609

 

Chapter 11. Damages

Introduction

Definition of Damages

Legal Concepts Underlying Damages

General Classifications of Damages

Specific Subcategories of Damages

Classifications and Categories of Damages

Spectrum of Damages Calculations

Damages in Contracts

Financial Concepts Underlying Damages Analyses

Conclusion

 

Chapter 12. Personal Economic Losses

Introduction

Different Types of Losses

Other Important Issues in Personal Economic Loss Calculations

Lost Earnings/Lost Earnings Capacity Analysis

Lost Earnings and Lost Earnings Capacity Distinguished

Conceptual Framework of a Lost Earnings Capacity (LOE) Analysis

Graphic Presentation of a Lost Earnings Capacity Analysis

Calculating a Plaintiff’s Lost Earnings Capacity

Mitigating Earnings

Loss of Household Services

Medical, Life Care, and Other Expenses

Conclusion of Example

Personal Consumption

Conclusion

Chapter 12 Appendix. Discount Rate Calculations

Net Discount Rate Method (NDR)

 

Chapter 13. Commercial Damages

Introduction

Damages From Breach of Contract

Commercial Damages From Torts

Lost Profits as Damages

Calculating Lost Profits Damages

Discounting Future Lost Profits

Another Issue: Date of Valuation

Conclusion

 

Chapter 14. Opinion Evidence and Expert Testimony

Introduction

Opinion Evidence

The Attorney’s Role Versus the Expert’s Role Generally, and the Financial Expert Specifically

Legal Privileges Relating to Expert Witnesses

Using and Opposing Experts in Litigation

Taking Effective Expert Depositions

The Effective Expert Deposition

Eliciting Opinion Evidence at Trial

Cross-Examination

Conclusion

 

Look Inside the Guide

Finance & Accounting for Lawyers