Elementary aspects of bookkeeping

Vande Matram! In this article, I am discussing, elementary aspects of bookkeeping in the legal profession.

Introduction:

Though the legal practice is not a money-oriented profession, there are a lot of transactions incurred by an advocate on daily basis regarding various cases he is looking after. Such transactions must be recorded efficiently and this recording is nothing but book-keeping. Book-keeping is a process of recording business transactions in the books of accounts in a very systematic manner. All the transactions are recorded date-wise. In India, this system of book-keeping was in Operation from the 23rd century ago at the time of Chandragupta Maurya. Chanakya was recording the accounting transactions. He wrote a famous book known as “Arthashastra”. Bookkeeping practices must be defined and tracked, so it does not distract Lawyers' billable time.

Meaning of bookkeeping:

Bookkeeping is the term used to record all business transactions in a law firm including financial transactions, sources of business revenue, profits, purchases, receipts, payments, reimbursements, and expenditures.

Many scholars have defined the term ‘book-keeping’ in their own way as follows:

1) J. R. Batliboi:  Book-keeping is an art of recording business dealing in a set of books".

2) R.N. Carter: "book-keeping is the science and art of correctly recording in the books of accounts, all those businesses transactions that result in a transfer of money's worth."

3) Spicer & Pegler: Book-keeping is the systematic recording of the transactions in a manner enabling the financial relationship of a business with other persons to be clearly disclosed and the cumulative effect of the transactions on the financial position of the business itself can be correctly ascertained.

4) Richard E. Strahelm: “The art of analyzing and recording business transactions, reporting the result of business operations through periodic statements and integrating such result for purposes of effective control of future operations."

5) Notch Cott - “Book-keeping is an art of recording in the books of accounts the monetary aspects of commercial or financial transaction."

Need of book-keeping by an advocate:

A businessman or a professional cannot remember each and every transaction without keeping account books regularly. He cannot also claim or recover any amount even though due from the other customer, client, or businessman. An advocate has to accurately manage the flow of money in and out and maintain a complete and precise record of all transactions.

This book can be used as a record for the settlement of fees with clients.

Having accurate monthly financial records helps advocate being aware of the balance of fees with a client, income, and expenses.

Also, in the matter of any professional misconduct, such a book can save the advocate as that book can show all the records of transactions.

Every advocate needs to keep a regular account which has certain evidentiary value also under the Indian Evidence Act, 1972.

The same book can be helpful in the income tax return as well as a professional tax return.

Principles of Book-Keeping

Tracking Every Activity: This includes tracking the hours devoted to clients, billing them for those hours, and keeping track of their payments when being received. The main point is to be accurate in tracking and simply not to let anything slip through.

Tracking Every Expense: Many transactions are incurred when an advocate is working for his client. Tracking all the expenses on such transactions is a must. These must be reported correctly.

Recording in Ledgers: Bookkeeping ledgers hold financial accounts and transactions. For every client, a separate page must be assigned in the ledger and all the transactions regarding expenses and fees received must be recorded in it. Ledger provides a summary of income and expenses, regularly and serves as the authoritative source of data for financial accounting reports.

Thus bookkeeping is necessary to fulfill duties towards the clients by an advocate. Also, bookkeeping helps in the easy assessment of accounts with clients at the time of settlement of fees and it is having an evidentiary value also.

To know the references and to read more articles related to Professional ethics and professional accounting system please visit this page Legal Profession: Professional Ethics and Professional accounting system.

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