Tina,

Great to see you blogging--I know you've got a bunch of interesting things to say.

I couldn't agree with you more that law schools don't teach accounting well, that the course ought to be 3 credits (at least), and that cases should be minimized (or, I would say, eliminated). When I advise students to take accounting (which I always do), I tell them that, if they have the option, they should take the course given in the business school.

I disagree however, when you say that students don't need to learn debits and credits. Understanding how double entry bookkeeping works is essential to a true understanding of the way financial statements work.

Its not just theoretical, and its not just for people who plan on being bookkeepers. I can't tell you how often in practice I have analyzed an add-back to a financial covenant, reviewed a pro forma, given comments on a comfort letter, negotiated an earn-out, or dealt with some other accounting matter, when I've needed to understand how the journal entries worked.

Somehow, business schools manage to teach these concepts, even in courses designed "for readers of financial and managerial reports rather than the accountants who prepare them." See, e.g. http://ocw.mit.edu/OcwWeb/Sloan-School-of-Management/15-501Spring-2004/CourseHome/index.htm .

I think law schools can and should too.

Maybe I'm alone, but what you propose is not a good curriculum for a general purpose "transactional lawyers." I am a transactional lawyer; I do mostly patent and technology transactions. The things you describe as a three credit course has almost no applicability to my practice. Indeed, I bet that few transactional lawyers (like a real estate attorney) who would not classify those skills as very high on their list of things they needed to know before they started.

What's critical to quality transactional lawyers to me are as follows, in ascending order of significance:
1) understanding the deal;
2) contract drafting;
3) understanding the legal implications and the risk associated with deal; and
4) negotiation.

Your course seems to focus on probably the smallest, most variable, least teachable portion of the skills.

More to the point, a client is not going to hire an attorney that doesn't get the business deal. No one would hire me for, for example, the sale of a mortgage backed security--nor should I take that matter without someone else with that expertise.

Finally, in the real world, most day-to-day transactions involve the business team negotiating the "business terms" ahead of the legal terms. Stupid, yes, but reality. As such, the ability of a lawyer to niggle through line items is limited by both time constraints and client expectations.

Tina offers some excellent ideas--not perfect, perhaps, as prior comments suggest, but what course would be? Not incidentally, I'm not sure that the existing courses or materials leave out as much as suggested or overemphasize things like debits and credits or cases. As examples, both my textbooks for instruction in accounting for law schools offer much of what Tina suggests and avoid or limit what is said to be less useful. Nevertheless, I'll keep the post in mind as I prepare revised editions of my books.

As a CPA who suffered through an "accounting for lawyers" course in law school, I find Tina's ideas sound.

Why don't law schools just send students over to the adjacent B-schools at the same universities for an introduction to accounting? Or bring over a practical-minded accounting prof to co-teach the "accounting for lawyers" course?

Bringing business studies into closer focus for law students is a laudable aim, one wonders however whether there is some cross-over with Management Accounting.

Great to see such an intelligent discussion of a topic essential to teaching transactional lawyering.

Nice to hear from everyone. A couple of more thoughts. You can teach the equivalent of double entry bookkeeping by taking students through the evolution of a balance sheet and an income statement. Start the balance sheet with a $1000 in equity and $1000 in cash. Spend $200 on inventory; cash goes down; inventory goes up; and equity stays the same. By going through multiple more sophisticated transactions, students come close to learning double entry bookkeeping. Besides, working through these provisions with the accountants is also the right thing to do.

For anyone who questions the importance of a sophisticated understanding of accounting, I commend to you Prof. Cunningham,s article: Sharing Accounting's Burden: Business Lawyers in Enron's Dark Shadows, 57 The Business Lawyer 1421 (August 2002).

I am not suggesting that accounting is the only business education a student should have, but rather that it is a core course that we might think about revising.

I agree that understanding the business deal and contract drafting are crucial. My post was not to disparage either of those, but rather to talk about a course that provides a foundation for both the skills.

Tina,

Of course we're in almost complete agreement. Just a quibble-in essence what you are saying is: we should teach debits and credits, just not call it that.

My response to you would be,

(i) in real life, entries often include several line items, not just two--looking at the journal entry is a much easier way to think about things, and

(ii)as in so many things, learning the language people use is important. If I ask a CFO: "what happens when x goes up" and she says "we credit y" it is better if I don't have to intuit what she means from the context.

MAW

Vagts, Dodge & Koh's "Transnational Business Problems" is an exceptional business law casebook, even though it purports to deal only with cross-border issues. It covers, very broadly, legal issues involved in sales agreements, licensing, IP, antitrust, M&A, tax, and a host of other business issues.

I do not understand why someone has not come up with a class similar to "International Business Transactions" (offered at many law schools), but instead simply "Business Transactions" offering an overview of the various areas of transactional practice. It would be an incredibly helpful 2L course.

Let me take this opportunity to promote Ribstein & Lipshaw, Unincorporated Business Associations, 4th ed., which will be available for 2009-10. It will have a short section on accounting basics (for purposes of understanding partnership capital accounts). As Tina suggests, it downplays the credit and debit nomenclature, but nevertheless discusses and gives examples of double-entry bookkeeping.

Larry Cunningham's short book on accounting was an inspiration and a source.