BUS103: Introduction to Financial Accounting

What is litigation support? It does not mean working in an attorney's office. It involves assisting legal counsel in attempting to gain favorable verdicts in a court of law. Persons involved in litigation support generally work for a public accounting firm, a consulting firm, or as a sole proprietor or in partnership with others. An experienced litigation support person can expect to earn an income well into six figures.

Litigation support in a broad sense encompasses fraud auditing, valuation analysis, investigative accounting, and forensic accounting. The practice of litigation support involves assisting legal counsel in such things as product liability disputes, shareholder disputes, contract breaches, and major losses reported by entities. These investigations require the accountant to gather and evaluate evidence to assess the integrity and dollar amounts surrounding the aforementioned situations.

The accountant can be, and often is, requested to serve as an expert witness in a court of law. This experience requires knowledge of accounting and auditing in addition to possessing good communication skills, appropriate credentials, relevant experience, and critical information that could result in successful resolution of the issue.

What kind of person pursues litigation support as a career? It takes a very special individual. The person must be part accountant, part auditor, part lawyer, and part skilled businessperson. An undergraduate accounting degree, an MBA, and a law degree would be the perfect educational background needed for such a career. Many universities offer a combined MBA/JD program. Such a program fulfills the graduate needs of the litigation support person.

In addition to the degree, work experience in the business sector is essential. A career in public accounting, industry, or with a government agency would serve as valuable experience in pursuing a career in litigation support.

Much of the growth of business in recent years is due to the immense expansion of credit. Managers of companies have learned that by granting customers the privilege of charging their purchases, sales and profits increase. Using credit is not only a convenient way to make purchases but also the only way many people can own highpriced items such as automobiles.

This chapter discusses receivables and payables. For a company, a receivable is any sum of money due to be paid to that company from any party for any reason. Similarly, a payable describes any sum of money to be paid by that company to any party for any reason.

Primarily, receivables arise from the sale of goods and services. The two types of receivables are accounts receivable, which companies offer for short-term credit with no interest charge; and notes receivable, which companies sometimes extend for both short-and long-term credit with an interest charge. We pay particular attention to accounting for uncollectible accounts receivable.

Like their customers, companies use credit, which they show as accounts payable or notes payable. Accounts payable normally result from the purchase of goods or services and do not carry an interest charge. Short-term notes payable carry an interest charge and may arise from the same transactions as accounts payable, but they can also result from borrowing money from a bank or other institution. Chapter 4 identified accounts payable and short-term notes payable as current liabilities. A company also incurs other current liabilities, including payables such as sales tax payable, estimated product warranty payable, and certain liabilities that are contingent on the occurrence of future events. Long-term notes payable usually result from borrowing money from a bank or other institution to finance the acquisition of plant assets. As you study this chapter and learn how important credit is to our economy, you will realize that credit in some form will probably always be with us.