HISTORICAL DEVELOPMENT
OF ACCOUNTING
ANCIENT CIVILIZATION
• ORIGIN OF KEEPING ACCOUNTS CAN BE TRACED AS FAR BACK AS
8500 B.C.
• ARCHAEOLOGISTS FOUND KEEPING OF RECORDS THROUGH
CLAY TOKENS (I.E. CONES, DISKS, SPHERES, AND PELLETS) IN
MESOPOTAMIA.
• THE TOKENS WERE SEALED IN CLAY BALLS CALLED BULLAE.
THIS BULLAE WERE BROKEN ON DELIVERY SO THE SHIPMENT
COULD BE CHECKED AGAINST THE INVOICE
• BULLAE, IN EFFECT, WERE THE FIRST BILL OF LADING (DELIVERY
RECEIPT)
ANCIENT CIVILIZATION
• THE TOKENS WERE REPLACED BY THE CLAY
TABLETS.
• EXPERTS BELIEVE THAT THIS STAGE OF
RECORD KEEPING IS THE BEGINNING OF THE
ART OF WRITING.
• CODE OF HAMMURABI (2286 – 2242 B.C.) –
DURING THE 1ST DYNASTY OF BABYLONIA,
REQUIRES ALL MERCHANTS TO GIVE BUYERS A
SEALED MEMO CONTAINING THE AGREED
PRICE BEFORE IT CAN BE CONSIDERED
ENFORCEABLE.
• THE AGREEMENT WAS RECORDED BY THE
SCRIBE, THE ACCOUNTANT DURING THIS TIME.
MEDIEVAL TIME
• AS A RESULT OF THE CRUSADERS IN 11TH TO 13TH CENTURIES,
NORTHERN ITALY’S LITERACY BECOME WIDESPREAD.
• ARABIC NUMERALS ARE ALSO USED AS A RESULT OF TRADE WITH
THE NEAR EAST.
• THE USE OF CREDIT WAS PREVALENT AND A SEMBLANCE OF AN
INTERNATIONAL BANKING SYSTEM WAS ALSO FUNCTIONING THUS
REQUIRE A SYSTEM OF RECORDING.
• DEVELOPMENT OF FORMAL RECORD-KEEPING CAN BE ATTRIBUTED
TO THE MERCHANTS AND BANKERS OF FLORENCE, VENICE AND
GENOA DURING THE 13TH TO 15TH CENTURIES.
• THE SYSTEMATIC BOOKKEEPING EVOLVED FROM THE METHODS
USED BY FLORENTINE BANKERS IN 1340 A.D.
• THE SYSTEM IS PRIMITIVE. ACCOUNTS ARE NOT RELATED IN ANY
SPECIAL WAY, AND BALANCING OF ACCOUNTS ARE LACKING.
• DOUBLE-ENTRY RECORDS FIRST APPEARED IN GENOA IN 1340 A.D.
MEDIEVAL TIME
• SUMMA DE ARITHMETICA, GEOMETRIA, PROPORTIONI ET
PROPORTIONALITA (EVERYTHING ABOUT ARITHMETIC, GEOMETRY,
PROPORTIONS AND PROPORTIONALITY) BY THE FRANCISCAN
MONK, FRA LUCA PACIOLI IN 1494 IN VENICE WAS REGARDED AS
THE FIRST FORMAL DISCOURSE THAT EXPLAINED IN DETAIL THE
DOUBLE-ENTRY SYSTEM OF BOOKKEEPING.
• ACCORDING TO THE BOOK, MERCHANTS SHOULD HAVE 3
ESSENTIALS THINGS TO BE SUCCESSFUL – SUFFICIENT CASH OR
CREDIT, A GOOD BOOKKEEPER, AND AN ACCOUNTING SYSTEM.
• ALTHOUGH FR. PACIOLI MADE NO CLAIM TO DEVELOPING THE
ART OF BOOKKEEPING BUT HE HAS BEEN REGARDED AS THE
FATHER OF DOUBLE-ENTRY ACCOUNTING.
• NICOLAS PETRI, IN THE 17TH CENTURY, WAS THE FIRST PERSON
TO GROUP SIMILAR TRANSACTIONS IN A SEPARATE RECORD AND
ENTER THE MONTHLY TOTALS IN JOURNAL, RATHER THAN
RECORDING ALL TRANSACTIONS IN SERIATIM (SERIES).
INDUSTRIAL REVOLUTION
• ALTHOUGH ACCOUNTING CAN BE TRACED BACK
FROM ANTIQUITY BUT THE FORMATION OF
ACCOUNTING AS A PROFESSION WAS CLOSELY
LINKED TO THE RISE OF MODERN INDUSTRIAL
SOCIETY IN BRITAIN DURING THE LATE 18TH
CENTURY.
• THE INDUSTRIAL REVOLUTION (MID-18TH TO THE
MID-19TH CENTURY) CHANGED THE METHOD OF
PRODUCING COMMERCIAL GOODS FROM THE
HANDICRAFT METHOD TO THE FACTORY SYSTEM.
• THE CHANGE CREATE A PROBLEM OF COSTING
FOR A LARGE VOLUME OF PRODUCTS THUS AT
THIS TIME, COST ACCOUNTING EMERGED TO
ANALYSE VARIOUS COSTING PROBLEMS.
INDUSTRIAL REVOLUTION
• THE EXPANSION OF BUSINESS DUE TO THE INDUSTRIAL
REVOLUTION REQUIRES AN INCREASINGLY LARGE AMOUNT OF
CAPITAL TO BUILD FACTORIES AND PURCHASE MACHINERY.
• THIS NEED RESULTED TO THE DEVELOPMENT OF THE CORPORATE
FORM OF ORGANIZATION – THE CORPORATION.
• THE GROWTH OF CORPORATIONS PROMPTED THE DEVELOPMENT
OF ACCOUNTING.
• CORPORATE OWNERS, THE SHAREHOLDERS, WERE NO LONGER
THE MANAGER OF THEIR BUSINESS.
• MANAGERS HAD TO CREATE ACCOUNTING SYSTEMS TO REPORT
TO THE OWNERS THE RESULTS OF THEIR STEWARDSHIP OF THE
BUSINESS.
• THIS SITUATION CREATE EXTERNAL AUDITING. AN INDEPENDENT
REPORT THAT PROVIDE ASSURANCE THAT THE FINANCIAL
STATEMENTS PREPARED BY THE MANAGEMENT ARE RELIABLE.
INFORMATION AGE
• INFORMATION TECHNOLOGY REVOLUTIONIZED ACCOUNTING IN RECENT YEARS.
• TASKS THAT ARE TIME-CONSUMING WHEN DONE MANUALLY CAN NOW BE DONE
WITH SPEED, CONSISTENCY, PRECISION, AND RELIABILITY USING COMPUTING
MACHINE AND COMPUTER APPLICATIONS (SOFTWARE).
• EXAMPLES: ENROLMENT PROCESS, POINT-OF-SALES (POS) IN SUPERMARKETS
AND CINEMAS
