History of accounting

Source: Wikipedia, the free encyclopedia.

The history of accounting or accountancy can be traced to

civilizations.[1][2][3]

The early development of

Babylonians.[2] By the time of the Roman Empire, the government had access to detailed financial information.[6]

In India,

Mauryan Empire. His book Arthashastra contains few detailed aspects of maintaining books of accounts for a sovereign state
.

The Italian Luca Pacioli, recognized as The Father of accounting and bookkeeping was the first person to publish a work on double-entry bookkeeping, and introduced the field in Italy.[7][8]

The modern profession of the chartered accountant originated in Scotland in the nineteenth century. Accountants often belonged to the same associations as solicitors, who often offered accounting services to their clients. Early modern accounting had similarities to today's

professional bodies in England merging to form the Institute of Chartered Accountants in England and Wales in 1880.[10]

Ancient history

Louvre Museum

Early development of accounting

See also: History of mathematics, History of writing, and History of money

Accounting records dating back more than 7,000 years have been found in

goods received and traded.[1] The development of accounting, along with that of money and numbers, may be related to the taxation and trading activities of temples:

"another part of the explanation as to why accounting employs the numerical metaphor is [...] that money, numbers and accounting are interrelated and, perhaps, inseparable in their origins: all emerged in the context of controlling goods, stocks and transactions in the temple economy of Mesopotamia."[1]

The early development of accounting was closely related to developments in writing, counting, and money. In particular, there is evidence that a key step in the development of counting—the transition from concrete to abstract counting—was related to the early development of accounting and money and took place in Mesopotamia[1]

Other early accounting records were also found in the ruins of ancient Babylon, Assyria and Sumer, which date back more than 7,000 years. The people of that time relied on primitive accounting methods to record the growth of crops and herds. Because there was a natural season to farming and herding, it was easy to count and determine if a surplus had been gained after the crops had been harvested or the young animals weaned.[11]

Expansion of the role of the accountant

Between the

cognitive leap for mankind.[5]

During the 2nd millennium BC,

Egyptian hieratic script, and there is evidence that an individual in ancient Egypt held the title "comptroller of the scribes". There is also evidence for an early form of accounting in the Old Testament; for example the Book of Exodus describes Moses engaging Ithamar to account for the materials that had been contributed towards the building of the tabernacle.[2]

By about the 4th century BC, the ancient Egyptians and Babylonians had auditing systems for checking movement in and out of storehouses, including oral "audit reports", resulting in the term "auditor" (from

Latin: audire, to hear). The importance of taxation had created a need for the recording of payments, and the Rosetta Stone also includes a description of a tax revolt.[2]

Roman Empire

Ancyra
, built between 25 BCE - 20 BCE.

By the reign of Emperor

gladiatorial games, covering a period of about forty years. The scope of the accounting information at the emperor's disposal suggests that its purpose encompassed planning and decision-making.[6]

The Roman historians

publicani (public contractors); and that it included the names of the freedmen and slaves from whom a detailed account could be obtained. The closeness of this information to the executive authority of the emperor is attested by Tacitus' statement that it was written out by Augustus himself.[13]

Records of

purchase and requisition; in one letter, a request for money to buy 5,000 modii (measures) of braces (a cereal used in brewing) shows that the fort bought provisions for a considerable number of people.[14]

The

economic decisions because the information was purposefully selected and arranged.[17]

Medieval and Renaissance periods

Double-entry bookkeeping

Main articles:
Double-entry bookkeeping system

In eighth century Persia, scholars were confronted with the Qur’an's requirement that Muslims keep records of their indebtedness as a part of their obligation to account to God on all matters of their life. This became particularly difficult when it came to inheritance, which demanded detailed accounting for the estate after death of an individual. The assets remaining after the payment of funeral expenses and debts were allocated to every member of the family in fixed shares, and included wives, children, fathers and mothers. This required extensive use of ratios, multiplication and division that depended on the mathematics of Hindu-Arabic numerals.

The inheritance mathematics were solved by a system developed by the medieval Islamic mathematician

Muhammad ibn Musa al-Khwarizmi (known in Europe as Algorithmi from which we derive "algorithm"). Al-Khwarizmi's opus “The Compendious Book on Calculation by Completion and Balancing” established the mathematics of algebra, with the last chapter devoted to the double-entry bookkeeping required for solution to the Islamic inheritance allocations.[18] Al Khwarizmi's work was widely circulated, at a time that there was substantial active discourse and trade between Arabic, Jewish and European scholars. It was taught in the learning centers of Al-Andalus in Iberia, and from the tenth century forward, slowly found its way into European banking, which began slipping Hindo-Arabic numerals into accounting books, despite their prohibition as sinful by the medieval church. Bankers in Cairo, for example, used a double-entry bookkeeping system which predated the known usage of such a form in Italy, and whose records remain from the 11th century AD, found amongst the Cairo Geniza.[19] Fibonacci included double-entry and Hindo-Arabic numerals in his Liber Abaci
which was widely read in Italy and Europe.

Al-Khwarizmı's
book introduced al-jabr meaning "restoration” (which European translated as "algebra") to its inheritance accounting, leading to three fundamental accounting - algebreic concepts:

  1. Debits = Credits: algebraic manipulations on the left-hand and right-hand sides of an equal sign had to "balance" or they were in error. This is the algebraic equivalent of double-entries "bookkeeping equation" for error control.
  2. Real accounts: These included assets for tracking wealth, weighed against liabilities from the claims of others against that wealth, and the difference which is the owner's net wealth, or owner's equity.This was al-Khwarizmi's "basic accounting equation".
  3. Nominal accounts: These tracked activity that affected wealth, and the "restoration" into the real accounts reflected accounting's closing process and the calculation of the owner's increment in wealth—net income.

Algebra balances and restores formulas on the left and right of an equal sign. Double-entry bookkeeping similarly balances and restores debit and credit totals around an equal sign. Accounting is the balancing and restoration of algebra applied to wealth accounting.[20]

In 756, the Abbasid caliph

An Shi Rebellion. The Abbasids and Tangs established an alliance, where the Abbasids were known as the Black-robed Arabs. The Tang dynasty's extensive conquests and polyglot court required new mathematics to manage a complex bureaucratic system of tithes, corvee labor and taxes. Abbasid scholars implemented their algebraic double-entry bookkeeping into operations of many of the Tang ministries. The Tang dynasty expanded their maritime presence across the Indian Ocean, Persian Gulf, and Red Sea, and up the Euphrates River.[21]
 On land they conquered much of what is today's China.

The Tangs invented paper currency, with roots in merchant receipts of deposit as merchants and wholesalers. The Tang's money certificates, colloquially called “flying cash” because of its tendency to blow away, demanded much more extensive accounting for transactions. A fiat currency only drives value from its history of transactions, starting with government issue, unlike gold and specie. Paper money was much more portable than heavy metallic specie, and the Tang assured its universal usage under threat of penalties and possibly execution for using anything else.

The Tangs were great innovators in the widespread use of paper for accounting books, and transaction documents. They developed the 8th-century Chinese printing techniques involving chiseling an entire page of text into a wood block backwards, applying ink, and printing pages by inventing early movable type, including characters chiseled in wood and the creation of ceramic print blocks. Tang science, culture, manners and clothing were widely imitated across Asia. Japan's traditional dress, as well as customs like sitting on the floor for meals, were borrowed from the Tangs. Imperial ministries adopted the Tang's double-entry bookkeeping for administration of taxes and expenditures. The Goryeo kingdom (the modern name "Korea" derives from Goryeo) donned the imperial yellow clothing of the Tangs, used the Three Departments and Six Ministries imperial system of the Tang dynasty and had its own "microtributary system" that included the Jurchen tribes of north China. The Tang's double-entry bookkeeping was essential to managing the complex bureaucracies surrounding Goryeo tribute and taxation.[22]

Later dispersion of knowledge of double-entry can be attributed to the rise of Genghis Khan and later his grandson Kublai Khan who were deeply influenced by the bureaucracy of the Tang dynasty. The accountants were the first to enter a city conquered by Mongols, tallying up the total wealth of the city, from which the Mongols took 10%, to be allocated between the troops. Cities were conquered, then encouraged to remain going-concerns. Double entry bookkeeping played an important role in assuring the Mongols were fully informed about taxes and expenditure.[22]

Ratios, division and multiplication were difficult with Roman numerals, and were achieved through a method called "doubling."

Archbishop of Arles, their most important customer.[23] The oldest discovered record of a complete double-entry system is the Messari (Italian: Treasurer's) accounts of the city of Genoa in 1340. The Messari accounts contain debits and credits journalised in a bilateral form and carry forward balances from the preceding year, and therefore enjoy general recognition as a double-entry system.[24]

The Renaissance

The Vatican, and the Italian banking centers of Genoa, Florence and Venice grew wealthy in the 14th century. Their operations recorded transactions, made loans, issued receipts and other modern banking activities. 

Fibbonaci ’s Liber Abaci was widely read in Italy, and the Italian Giovanni di Bicci de’ Medici introduced double-entry bookkeeping for the Medici bank in the 14th century. By the end of the 15th century, merchant ventures in Venice used this system widely. The Vatican was an early customer for German printing technology, which they used to churn out indulgences. Printing reached a wider audience with widely available reading glasses from Venetian glassmakers (medieval Europeans tended to be far-sighted, which made reading difficult before spectacles). Italy became a center for European printing, particularly with the rise of Aldine Press editions of classics in Greek and Latin.[22]

It was in this environment that a close friend of Leonardo da Vinci, the itinerant tutor, Luca Pacioli published a book not in Greek or Latin, but in a language that merchants understood well -- Italian vernacular. Pacioli received an abbaco education, i.e., education in the vernacular rather than Latin and focused on the knowledge required of merchants. His pragmatic orientation, widespread promotion by his friend da Vinci, and use of vernacular Italian assured that his 1494 publication, Summa de Arithmetica, Geometria, Proportioni et Proportionalita (Everything About Arithmetic, Geometry and Proportion) would become wildly popular. Pacioli's book explained the Hindu-Arabic numerals, new developments in mathematics, and the system of double-entry was popular with the increasingly influential merchant class. In contrast to scholarly abstracts in Latin, Pacioli's vernacular text was accessible to the common man, and addressed the needs of businessmen and merchants.[22] His book remained in print for nearly 400 years.

Luca's book popularized the words “credre” means “to entrust” and “debere” means “to owe”—the origin of the use of the words "debit" and "credit" in accounting, but goes back to the days of single-entry bookkeeping, which had as its chief objective keeping track of amounts owed by customers (debtors) and amounts owed to creditors. Debit in Latin means "he owes" and credit in Latin means "he trusts".[25]

Ragusan economist Benedetto Cotrugli's 1458[citation needed] treatise Della mercatura e del mercante perfetto contained the earliest known[citation needed] manuscript of a double-entry bookkeeping system. His manuscript was first published in 1573.[26]

plus and minus for the first time in a printed book, symbols which became standard notation in Italian Renaissance mathematics. Summa de arithmetica was also the first known book printed in Italy to contain algebra.[27]

Ragusan economist Benedetto Cotrugli's 1458[citation needed] treatise Della mercatura e del mercante perfetto contained the earliest known[citation needed] manuscript of a double-entry bookkeeping system, however Cotrugli's manuscript was not officially published until 1573. In fact even at the time of writing his work in 1494 Pacioli was aware of Cotrugli's efforts and credited Cortrugli with the origination of the double entry book keeping system.[28][29]

Although Luca Pacioli did not invent double-entry bookkeeping,[30] his 27-page treatise on bookkeeping is an important work because of its wide circulation and the fact that it was printed in the vernacular Italian language.[31]

Pacioli saw accounting as an ad-hoc ordering system devised by the merchant. Its regular use provides the merchant with continued information about his business, and allows him to evaluate how things are going and to act accordingly. Pacioli recommends the Venetian method of double-entry bookkeeping above all others. Three major books of account are at the direct basis of this system:

  1. the memoriale (Italian: memorandum)
  2. the giornale (
    Journal
    )
  3. the quaderno (ledger)

The ledger classes as the central document and is accompanied by an alphabetical index.[32]

Pacioli's treatise gave instructions on recording barter transactions and transactions in a variety of currencies – both of which were far more common than today. It also enabled merchants to audit their own books and to ensure that the entries in the accounting records made by their bookkeepers complied with the method he described. Without such a system, all merchants who did not maintain their own records were at greater risk of theft by their employees and agents: it is not by accident that the first and last items described in his treatise concern maintenance of an accurate inventory.[33]

The Renaissance cultural context

Accounting as it developed in Renaissance Europe also had moral and religious connotations, recalling the judgment of souls and the audit of sin.[34]

Financial and management accounting

Main articles: Financial accounting and Management accounting

The development of

auditors.[8]

Modern professional accounting

Modern Accounting is a product of centuries of thought, custom, habit, action, and convention. Two concepts have formed the current state of the accountancy profession. Firstly, the development of the double-entry book-keeping system in the fourteenth and fifteenth century and secondly, accountancy professionalization which was created in the nineteenth and twentieth centuries.[36] The modern profession of the chartered accountant originated in Scotland in the nineteenth century. During this time, accountants often belonged to the same associations as solicitors, and the latter solicitors sometimes offered accounting services to their clients. Early modern accounting had similarities to today's forensic accounting:[37]

"Like forensic accountants today, accountants then incorporated the duties of expert financial witnesses into their general services rendered. An 1824 circular announcing the accounting practice of one James McClelland of Glasgow promises he will make “statements for laying before arbiters, courts or council.”[37]

In July 1854 the Institute of Accountants in Glasgow petitioned

legal system as they were frequently employed by the courts to give evidence on financial matters. The Edinburgh Society of accountants adopted the name "Chartered Accountant" for members.[38]

By the middle of the 19th century, Britain's Industrial Revolution was in full swing, and London was the financial centre of the world. With the growth of the limited liability company and large scale manufacturing and logistics, demand surged for more technically proficient accountants capable of handling the increasingly complex world of high speed global transactions, able to calculate figures like asset depreciation and inventory valuation and cognizant of the latest changes in legislation such as the new Company law, then being introduced. As companies proliferated, the demand for reliable accountancy shot up, and the profession rapidly became an integral part of the business and financial system.

Designations by nationality

To improve their status and combat criticism of low standards, local

examinations
for admission and members were authorised to use the professional designations "FCA" (Fellow Chartered Accountant), for a firm partner and "ACA" (Associate Chartered Accountant) for a qualified member of an accountant's staff.

In the United States the American Institute of Certified Public Accountants was established in 1887.

In

Chartered Professional Accountants of Canada
(CPA) in 2013.

See also

  • Kushim (individual)

References

  1. ^ a b c d e Keith, Robson. 1992. “Accounting Numbers as ‘inscription’: Action at a Distance and the Development of Accounting.” Accounting, Organizations and Society 17 (7): 685–708.
  2. ^ a b c d A History of ACCOUNTANCY, New York State Society of CPAs, November 2003, retrieved December 28, 2013
  3. ^ The History of Accounting, University of South Australia, April 30, 2013, archived from the original on December 28, 2013, retrieved December 28, 2013
  4. ^ a b کشاورزی, کیخسرو (1980). تاریخ ایران از زمان باستان تا امروز (Translated from Russian by Grantovsky, E.A.) (in Persian). pp. 39–40.
  5. ^
    ISBN 978-0-415-41094-6
    , Chapter 5, p. 96
  6. ^ a b Oldroyd, David: The role of accounting in public expenditure and monetary policy in the first century AD Roman Empire, Accounting Historians Journal, Volume 22, Number 2, Birmingham, Alabama, December 1995, p.124, [1]
  7. ^ a b Heeffer, Albrecht (November 2009). "On the curious historical coincidence of algebra and double-entry bookkeeping" (PDF). Foundations of the Formal Sciences. Ghent University. p. 11.
  8. ^ a b Lauwers, Luc & Willekens, Marleen: "Five Hundred Years of Bookkeeping: A Portrait of Luca Pacioli" (Tijdschrift voor Economie en Management,
    Katholieke Universiteit Leuven, 1994, vol:XXXIX issue 3, p.302), KUleuven.be
  9. ^ Timeline of the History of the Accountancy Profession, Institute of Chartered Accountants in England and Wales, 2013, retrieved December 28, 2013
  10. ^
    ISBN 0-412-47330-5
    .
  11. ^
    ISBN 0-471-13075-3
    , p.1
  12. ^ "Discovery of Egyptian Inscriptions Indicates an Earlier Date for Origin of the Alphabet". The New York Times. Retrieved 13 June 2018.
  13. ^ Oldroyd, David: The role of accounting in public expenditure and monetary policy in the first century AD Roman Empire, Accounting Historians Journal, Volume 22, Number 2, Birmingham, Alabama, December 1995, p.123, [2]
  14. ISBN 978-0-415-92024-7
    , p. 40-41,45
  15. University of Illinois, 2009, p.7 Aucegypt.edu Archived 2010-05-28 at the Wayback Machine
  16. ISBN 0-521-03763-8
    , 1991, p.4
  17. ISBN 978-0-415-16495-5
    , July 2001, p.231
  18. OCLC 1224141523
    .
  19. ^ MEDIEVAL TRADERS AS INTERNATIONAL CHANGE AGENTS: A COMMENT, Michael Scorgie, The Accounting Historians Journal, Vol. 21, No. 1 (June 1994), pp. 137-143
  20. OCLC 1224141523
    .
  21. OCLC 1224141523
    .
  22. ^
    OCLC 1224141523
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  23. ^ Lee, Geoffrey A., The Coming of Age of Double Entry: The Giovanni Farolfi Ledger of 1299-1300, Accounting Historians Journal, Vol. 4, No. 2, 1977 p.80 University of Mississippi Archived 2017-06-27 at the Wayback Machine
  24. ^ Lauwers, Luc & Willekens, Marleen: "Five Hundred Years of Bookkeeping: A Portrait of Luca Pacioli" (Tijdschrift voor Economie en Management, Katholieke Universiteit Leuven, 1994, vol:XXXIX issue 3, p.300), KUleuven.be
  25. ^ Thiéry, Michel: Did you say Debit?, Assumption University (Thailand), AU-GSB e-Journal, Vol. 2 No. 1, June 2009, p.35, AU.edu Archived 2013-05-14 at the Wayback Machine
  26. ISBN 9781134675456
    .
  27. ^ Alan Sangster, Greg Stoner & Patricia McCarthy: "The market for Luca Pacioli's Summa Arithmetica" (Accounting, Business & Financial History Conference, Cardiff, September 2007) p.1–2, Cardiff.ac.uk
  28. ^ "SIESC Croatia 2". www.croatianhistory.net. Retrieved 2016-05-20.
  29. ^ DesignfishStudio. "History of double entry book keeping, origins of book keeping records". www.accountsman.com. Retrieved 2016-05-20.
  30. ^ Carruthers, Bruce G., & Espeland, Wendy Nelson, Accounting for Rationality: Double-Entry Bookkeeping and the Rhetoric of Economic Rationality, American Journal of Sociology, Vol. 97, No. 1, July 1991, pp. 37
  31. ^ Lauwers, Luc & Willekens, Marleen: "Five Hundred Years of Bookkeeping: A Portrait of Luca Pacioli" (Tijdschrift voor Economie en Management, Katholieke Universiteit Leuven, 1994, vol:XXXIX issue 3, p.292), KUleuven.be
  32. ^ Lauwers, Luc & Willekens, Marleen: "Five Hundred Years of Bookkeeping: A Portrait of Luca Pacioli" (Tijdschrift voor Economie en Management, Katholieke Universiteit Leuven, 1994, vol:XXXIX issue 3, p.296), KUleuven.be
  33. ^ Alan Sangster, Using accounting history and Luca Pacioli to teach double entry, Middlesex University Business School, September 2009, p.9, Cardiff.ac.uk
  34. ^
    ISSN 0743-1791
    . Retrieved 2014-09-30. Double-entry accounting made it possible to calculate profit and capital and for managers, investors, and authorities to verify books. But at the time, it also had a moral implication. Keeping one's books balanced wasn't simply a matter of law, but an imitation of God, who kept moral accounts of humanity and tallied them in the Books of Life and Death. [...] Accounting was closely tied to the notion of human audits and spiritual reckonings.
  35. ^ Carruthers, Bruce G., & Espeland, Wendy Nelson, Accounting for Rationality: Double-Entry Bookkeeping and the Rhetoric of Economic Rationality, American Journal of Sociology, Vol. 97, No. 1, July 1991, pp. 40-41,44 46,
  36. S2CID 155403205
    .
  37. ^ a b Donna Bailey Nurse (18 September 2023). "Silent sleuths". AICPA.
  38. ^ Alexander, John R., "History of Accounting" (ClubExpress, 2002) Ch.12; From "A History of Accounting and Accountants" by Richard Brown, 1905,
  39. ^ Stephen Bernhut (May 2002). "Setting the standard". CA Magazine. Retrieved 6 November 2011.
  40. ^ SC 1902, c. 58, as amended by SC 1951, c. 89 and SC 1990, c. 52

Further reading

Great Britain

  • Glynn, John J. "The development of British railway accounting: 1800–1911." Accounting Historians Journal 11.1 (1984): 103–118. online
  • Lee, Tom. "The changing form of the corporate annual report." Accounting Historians Journal 21.1 (1994): 215–232. online
  • Loft, Anne. "Towards a critical understanding of accounting: the case of cost accounting in the UK, 1914–1925." Accounting, Organizations and Society (1986) 11#2 pp: 137–169.

United States

  • Allen, David Grayson, and Kathleen McDermott. Accounting for Success: A History of Price Waterhouse in America 1890-1990 (Harvard Business School Press, 1993), 373 pp.
  • Carey, John L. The rise of the accounting profession: From technician to professional, 1896-1936 (Vol. 1. American Institute of Certified Public Accountants, 1969)
  • Carey, John L. The rise of the accounting profession: To responsibility and authority, 1937-1969 (Vol. 2. American Institute of Certified Public Accountants, 1969)
  • Hammond, Theresa A. A White-Collar Profession: African American Certified Public Accountants since 1921 (2002) online
  • Miranti, Paul J. Accountancy Comes of Age: The Development of an American Profession, 1886-1940 (1990)
  • Pandit, Ganesh M., and C. Richard Baker. "Historical Development of the Standard Audit Report in the US: Form, Scope, and Renewed Attention to Fraud Detection." Accounting Historians Journal 48.1 (2021): 31–45.
  • Westland, J Christopher. (2020). Audit Analytics: Data Science for the Accounting Profession. Cham: Springer International Publishing.
    OCLC
     1224141523.
  • Zeff, Stephen A. "The evolution of the conceptual framework for business enterprises in the United States." Accounting Historians Journal 26.2 (1999): 89-131 online.
  • Zeff, Stephen A. "How the US accounting profession got where it is today: Part II." Accounting Horizons 17#4 (2003): 267–286. online

Historiography

  • Carnegie, Garry D., and Christopher J. Napier. "Popular accounting history: Evidence from post-Enron stories." Accounting Historians Journal 40.2 (2013): 1–19. online
  • Fleischman, Richard K., and Vaughan S. Radcliffe. "The roaring nineties: accounting history comes of age." Accounting Historians Journal (2005): 61–109. in JSTOR

External links

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