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A Brief History of Accounting

The history of accounting dates back thousands of years to ancient civilizations like Mesopotamia and Egypt. Early accounting records found in Mesopotamia dating back over 7,000 years showed lists of expenditures and goods traded. Luca Pacioli published the first work on double-entry bookkeeping in 1494, considered the beginning of modern accounting practices. In the 19th century, accounting began transitioning into a formal profession with the establishment of organizations like the Institute of Chartered Accountants in England and Wales in 1880.

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Ric John Naquila Cabilan
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514 views8 pages

A Brief History of Accounting

The history of accounting dates back thousands of years to ancient civilizations like Mesopotamia and Egypt. Early accounting records found in Mesopotamia dating back over 7,000 years showed lists of expenditures and goods traded. Luca Pacioli published the first work on double-entry bookkeeping in 1494, considered the beginning of modern accounting practices. In the 19th century, accounting began transitioning into a formal profession with the establishment of organizations like the Institute of Chartered Accountants in England and Wales in 1880.

Uploaded by

Ric John Naquila Cabilan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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A Brief History of Accounting

The history of accounting or accountancy is thousands of years old and

can be traced to ancient civilizations.

The early development of accounting dates back to ancient

Mesopotamia, and is closely related to developments in writing,

counting and money and early auditing systems by the ancient

Egyptians and Babylonians. By the time of the Emperor Augustus, the

Roman government had access to detailed financial information.

In India Chanakya wrote a manuscript similar to a financial

management book, during the period of the Mauryan Empire. His book

"Arthashasthra" 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.

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

forensic accounting. Accounting began to transition into an organized

profession in the nineteenth century, with local professional bodies in

England merging to form the Institute of Chartered Accountants in

England and Wales in 1880.

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

in Mesopotamia, and documents from ancient Mesopotamia show lists

of expenditures, and goods received and traded. The development of

accounting, along with that of money and numbers, may be related to

the taxation and trading activities of temples:


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

Other early accounting records were also found in the ruins of ancient

Babylon, Assyria and Sumeria, 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.

Between the 4th millennium BC and the 3rd millennium BC, the ruling

leaders and priests in ancient Iran had people oversee financial matters.

In Godin Tepe (‫ )گدین تپه‬and Tepe Yahya (‫)تپه یحيی‬, cylindrical tokens that

were used for bookkeeping on clay scripts were found in buildings that
had large rooms for storage of crops. In Godin Tepe's findings, the

scripts only contained tables with figures, while in Tepe Yahya's findings,

the scripts also contained graphical representations. The invention of a

form of bookkeeping using clay tokens represented a huge cognitive

leap for mankind.

During the 1st millennium BC, the expansion of commerce and business

expanded the role of the accountant. The Phoenicians invented a

phonetic alphabet "probably for bookkeeping purposes", 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.

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


audire, to hear in Latin). By the 2nd century BC, 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

Financial statements

Financial statements are a collection of summary-level reports about an

organization's financial results, financial position, and cash flows. They

are useful for the following reasons:

To determine the ability of a business to generate cash, and the sources

and uses of that cash.

To determine whether a business has the capability to pay back its

debts.

To track financial results on a trend line to spot any looming

koprofitability issues.
To derive financial ratios from the statements that can indicate the

condition of the business.

To investigate the details of certain business transactions, as outlined in

the disclosures that accompany the statements.

The standard contents of a set of financial statements are:

Balance sheet. Shows the entity's assets, liabilities, and stockholders'

equity as of the report date. It does not show information that covers a

span of time.

Income statement. Shows the results of the entity's operations and

financial activities for the reporting period. It includes revenues,

expenses, gains, and losses.

Statement of cash flows. Shows changes in the entity's cash flows

during the reporting period.


Supplementary notes. Includes explanations of various activities,

additional detail on some accounts, and other items as mandated by

the applicable accounting framework, such as GAAP or IFRS.

If a business plans to issue financial statements to outside users (such

as investors or lenders), the financial statements should be formatted in

accordance with one of the major accounting frameworks. These

frameworks allow for some leeway in how financial statements can be

structured, so statements issued by different firms even in the same

industry are likely to have somewhat different appearances. Financial

statements that are being issued to outside parties may be audited to

verify their accuracy and fairness of presentation.

If financial statements are issued strictly for internal use, there are no

guidelines, other than common usage, for how the statements are to be

presented.
At the most minimal level, a business is expected to issue an income

statement and balance sheet to document its monthly results and

ending financial condition. The full set of financial statements is

expected when a business is reporting the results for a full fiscal year, or

when a publicly-held business is reporting the results of its fiscal

quarters.

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