The history of accounting in the United States

Jorge Yeshayahu Gonzales-Lara

 The history of accounting in the United States

Content
• Abstract 2
• Ancient Mesopotania 2
• Doble-entry accounting boom 3
• Luca Pacioli: father of modern accounting 3
• Father of Accounting and Bookkeeping 3
• Accounting during the industrial revolution 4
• Modern Accounting 4
• Cost accounting in the 21 Century 5
• Public accounting Regulation 5
• Private Regulation of Accounting Standards 6
• Advances of accounting technology 6
• Building a bright future over a historical past 6
• References & Bibliography 7

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Abstracts

The objective of this article is to explain the historical development of accounting in the United
States. Explain the changes during the twentieth century, and the twenty-first century with special
emphasis on the last three decades. I hope this article illuminates the origins and consequences of
these changes that collectively brought the profession to its current condition. This article reviews,
examines and interprets events and developments in the evolution of the accounting profession of
the USA UU. during the twentieth century so that one can judge "how we got where we are today.
"While other historical works study the evolution of American accounting

The history of accounting in the United States of

America
Jorge Yeshayahu Gonzales-Lara

Keeping books is a practice that humans have been refining since before we had real books. From
the confusing confines of prehistory to the computerized accounting methods of the modern era,
controlling the flow of resources is a universal human concern. (By Lyle DelVecchio | April 16,
2019 | Finance and AP)

Ancient Mesopotamia

Ancient Mesopotamia, that historical region that gave rise to human civilization between the Tigris
and Euphrates rivers, which always flows, caused, and then fueled, the fires of philosophy,
medicine, literature and mathematics 5,000 years before the It was current (ECB).

One of the most important gifts transported from the land between the two rivers was basic
accounting, first developed in approximately 2,500 BC. C. The rulers of civilizations as varied as
ancient Egypt, Assyria, Sumerian and Greece relied on a simple accounting to track gold, food and
other resources that seeped into their coffers, as well as resources spent on public works and social
programs.

The abacus, made of wire and perforated beads, was used by the ancient Egyptians as the world's
first shortage / surplus calculator in 500 BC. C.

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Around 1000 B.C., in the seafaring nation of Phoenicia, linguistics mixed with commerce to create
an alphabet and language firmly focused on trade and commerce and designed to negotiate with
Phoenicia’s business partners. With everyone speaking the same language, it was much easier to
avoid being fooled by opportunistic or unscrupulous foreign merchants. The Phoenician alphabet
and language were so successful that they became the basis of many alphabets throughout the
ancient Mediterranean, including the Roman alphabet which, in turn, gave rise to both the
Romanesque alphabets and the modern English alphabet.

Double entry accounting boom

Barter was the name of the exchange game for ordinary people during the long centuries after the
fall of the Roman Empire in the West and the rise of the mercantile class. But in the thirteenth
century AD, Europe began its revolutionary shift towards an economic paradigm based on
currencies and currency. As a result, merchants began tracking both debits (from the Latin
debitum, "something owed") and credits (from the Latin creditum, a loan or something entrusted
to another) to have a real-time view of their businesses and an expansion and investment plan.

The creation of two entries for each transaction laid the framework for double-entry accounting
and the basis of our modern accounting systems.

Luca Pacioli: father of modern accounting

In 1494, after spending years observing the commercial and accounting practices of merchants
throughout Italy, an Italian mathematician and a Franciscan friar named Fra Luca Pacioli wrote a
historical treatise on the double-entry accounting system.

The Father of Accounting and Bookkeeping, and included:

• The first instances of the plus (+) and minus (-) signs in a published work
• The first appearance of algebra in an Italian book
• Integration of classical Greek philosophical concepts based in Geometry with Algebraic
computation (effectively shifting the emphasis in contemporary mathematics to execution
informed by logic and theory)

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 • Double-entry bookkeeping, balance sheets, financial statements, trial balances, and even
an early forerunner of logarithms used to calculate the likelihood of an investment
growing or shrinking

Pacioli, a friend of and collaborator with Leonardo da Vinci, worked as a math’s professor and
wrote Summa over the course of many years. He was also responsible for Divine
proportioned (“Divine proportions”), a work on geometric concepts (illustrated by his friend da
Vinci) that helped revolutionize art and design as much as Summa had accounting.

Accounting during the industrial revolution.

Pacioli's work was the guiding light for accounting principles until well into the 18th century. But
when the Industrial Revolution began, and business became a focus not only of commercial but
social enterprise, accounting principles, and practices expanded. Double-entry accounting was
perfected with a focus on maximizing efficiency and accountability while minimizing spending in
support of newly created corporate bodies.

Accountants, increasingly important as more and more companies seek to dominate the market
and the world, joined to form the first professional accounting organization in the United Kingdom:
The Institute of Public Accountants in England and Wales. Not to be left behind in the burgeoning
era of corporate expansion, New York accountants in the United States founded the American
Association of Public Accountants (AAPA) in 1887. In 1896, the State of New York issued
professional titles and licenses for Certificates of Recent Creation of Public Accountants (CPA).
Accounting During the Industrial Revolution

(Note: By 1957, the association had grown much larger, taken in its smaller brethren, and evolved
into the American Institute of Certified Public Accountants (AICPA) we know today.)

Modern Accounting

Despite the relatively short distance from 1900 to our own time, accounting history records several
significant changes in the century or so that’s elapsed since the turn of the 20th century.

The Wall Street Crash of 1929 made all too clear the need for real and practical accounting reform
to reign in fraud, theft, and other criminal embarrassments. Both the United States Generally
Accepted Accounting Principles (GAAP) and the Financial Accounting Standards Board (FASB)

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were created in the 30s to bring corruption under control and create effective, efficient, and reliable
accounting standards and best practices.

Today, FASB and the AICPA continue to expand, enhance, and refine accounting, guided by
GAAP. At a more granular level, companies of all sizes are increasingly implementing artificial
intelligence and automation via ERP and purchasing software packages to ensure their own
practices and policies are both fully compliant with the law and optimized for performance and
profitability. In time, as machines take much of the drudgery out of accounting and accountants
become more concerned with verifying transactions and accounting records than posting them, we
may see the role of the accountant shift once again to something resembling Roman auditors.

Cost accounting in the 21st century

Alfred Sloan and General Motors were able to compete with Henry Ford in the 1920s in part with
advanced cost accounting techniques. Sloan and GM's financial assistant, Donaldson Brown,
introduced new accounting measures to address the company's diverse line of vehicles. To
determine whether car labels like Chevrolet and Cadillac were successful, GM measured the return
on investment and return on equity as part of its standard accounting practices. The introduction
of the return on investment and equity allowed GM to determine if they were making a profit from
investments in high-end brands. GM accounting metrics created a more flexible budget and a faster
response to market changes in the competitive 1920s.

Public Accounting Regulation

The United States Congress has been responsible for two important pieces of financial accounting
regulation in the 20th century, beginning with the Securities Act of 1934. This New Deal
legislation created the Securities and Exchange Commission (SEC) as an agency of supervision
for the stock trade and captivity. An important mission of the SEC is to maintain transparency in
financial reports and stock information, which requires accurate accounting of companies on US
stock exchanges. More recently, Congress passed the Sarbanes-Oxley Act of 2002 in response to
accounting scandals at Enron and WorldCom. This legislation required internal accounting
controls instituted by corporate executives, accounting firms and consultancies based in the United
States. Sarbanes-Oxley is designed to eliminate accounting tricks and discourage disconnections
between executives and accountants that caused the disputes.

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Private Regulation of Accounting Standards

The American accounting profession has created several organizations since the Great Depression
to set standards for its members. The Accounting Procedure Committee was created in 1939 by
the American Institute of Certified Public Accountants (AICPA) to resolve philosophical disputes
between American accountants. This committee lasted until 1951 and published 51 accounting
research bulletins that address accounting issues in an ad hoc manner. AICPA created the
Accounting Principles Board in 1959, an agency responsible for popularizing generally accepted
accounting practices (GAAP). The Financial Accounting Standards Board (FASB) was founded
in 1973 to solve the problems of the first two generations of accounting boards. Instead of issuing
proclamations and periodic notices, the FASB has been responsible for creating standardized rules
and regulations for US accounting firms and departments.

Advances in accounting technology

The accounting profession has been revolutionized several times in the last 150 years by
technological advances. The advent of the tabulation machine in 1890 allowed faster processing
of receipts and the reconciliation of books. The IBM 700 computer line was first used by
accountants and companies in the early 1950s, second only to the federal government in the next
computer revolution. The creation of the accounting firm Arthur Andersen of a computerized
payroll system for General Electric in 1953 showed accounting firms the almost endless
possibilities for accounting and money management. In recent years, accounting software such as
Peachtree and QuickBooks have taken the financial accounting book to the electronic world with
features unthinkable for accountants only a generation ago.

Building a bright future over a historical past

The history of accounting is a story about the organization, economics, and optimization. And no
matter what challenges, opportunities, and technological advances greet the accountants of
tomorrow, we can be sure that in the core of practice and politics there will be a version of the
same basic double-entry accounting that inspired Pacioli to create a working teacher. Centuries
ago.

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References and Bibliography

• Katers, Nicholas, September 26, 2017.

https://bizfluent.com/about-4740535-history-accounting-america.html
• A history of accountancy. New York State Society of CPAs, November 2003,
retrieved December 28, 2013
• The history of accounting in the United States of America Assignment,
https://primetimeessay.com/history-accounting-united-states-america/
• Bellis, Mary. History of Accounting from Ancient Times to Today: The Medieval and
Renaissance Revolution of Bookkeeping. June 29, 2019.