History of Accounting

Historical accounting records have been found on ancient civilization.

2500 BC Back then, rulers are the keeping accounting records for taxing and
spending on public works.

1000 BC The Phoenicians creates an alphabet with accounting for them not to be
cheated in trading with Egyptians.

500 BC Egyptians carried on with accounting records and invented the first bead
and wire abacus.

Auditing profession is born to double check storehouses as to what come

423 BC in and out the door. The reports that were taken by these accountants
were given orally hence the name “auditor”

The first requirement for business to keep accounting records spread

1200 - across many of the Italian Republics in the 13th century. These records
1493 were mainly taken to keep track of day to day transaction and credit
accounts with other business.

LUCA PACIOLI, “father of accounting” writes the famous paper,

1493
Everything about Arithmetic, Geometry and Proportion. Reveled that
several merchants kept books of DEBITS which means he owes and
CREDIT means he trusts.

1500 - Double-entry records has progressed, change in financial accounting and

1700 managerial accounting.

Really became important for the title and professional license of the
1700 -
Certified Public Accountants followed shortly in the year 1896.
1900

Became important to reduce the amount of FRAUDS and SCANDALS.

1920 –
Just like what happened on the Lehman Brothers in 1939.
1940

1940 –
 Have been centrally located into what is known as codification. The
CODIFICATION reveals all of the current practices and standards.

The Cradle of Civilization (Around 3600 BC)

Record-keeping was already common from Mesopotamia, China and India to Central and South
America. The oldest evidence of this practice was the “clay tablet” of Mesopotamia, 90% of which
dealt with commercial transactions at the time such as listing of accounts receivable and accounts
payable.

Simple accounting is mentioned in the New Testament.

MATTHEW 25:19 states, “After a long time, the lord of those servants came to settle accounts with
them.”

14th Century – Double-entry Bookkeeping

The most important event in accounting history is generally considered to be the dissemination of
double entry bookkeeping by Luca Pacioli (‘The Father of Accounting’) in 14th century Italy.

Pacioli was much revered in his day, and was a friend and contemporary of Leonardo da Vinci. The
Italians of the 14th to 16th centuries are widely acknowledged as the fathers of modern accounting
and were the first to commonly use Arabic numerals, rather than Roman, for tracking business
accounts. Luca Pacioli wrote Summa de Arithmetica, the first book published that contained a
detailed chapter on double-entry bookkeeping.

French Revolution (1700s)

The thorough study of accounting and development of accounting theory began during this period.
Social upheavals affecting government, finances, laws, customs and business had greatly influenced
the development of accounting.

The Industrial Revolution (1760 – 1830)

Mass production and the great importance of fixed assets were given attention during this period.

19th Century – The beginning of Modern Accounting in Europe and America

The modern, formal accounting profession emerged in Scotland in 1854 when Queen Victoria
granted a Royal Charter to the Institute of Accountants in Glasgow, creating the profession of the
Chartered Accountant (CA).

In the late 1800s, chartered accountants from Scotland and Britain came to the U.S. to audit British
investments. Some of these accountants stayed in the U.S., setting up accounting practices and
becoming the origins of several U.S. accounting firms. The first national U.S. accounting society was
set up in 1887. The American Association of Public Accountants was the forerunner to the current
American Institute of Certified Public Accountants (AICPA).

In this period rapid changes in accounting practice and reports were made. Accounting standards to
be observed by accounting professionals were promulgated. Notable practices such as mergers,
acquisitions and growth of multinational corporations were developed. A merger is when one
company takes over all the operations of another business entity resulting in the dissolution of
another business. Businesses expanded by acquiring other companies. These types of transactions
have challenged accounting professionals to develop new standards that will address accounting
issues related to these business combinations.

The Present – The Development of Modern Accounting Standards and Commerce

 The accounting profession in the 20th century developed around state requirements for financial
statement audits. Beyond the industry's self-regulation, the government also sets accounting
standards, through laws and agencies such as the Securities and Exchange Commission (SEC). As
economies worldwide continued to globalize, accounting regulatory bodies required accounting
practitioners to observe International Accounting Standards. This is to assure transparency and
reliability, and to obtain greater confidence on accounting information used by global investors.

Nowadays, investors seek investment opportunities all over the world. To remain competitive,
businesses everywhere feel the need to operate globally. The trend now for accounting professionals
is to observe one single set of global accounting standards in order to have greater transparency and
comparability of financial data across borders.

Evolvement of Double-entry System

The earliest known examples of this technique are
the mercantile books of Freris Bonis of
Montauban, dates 1339.
However, the evolution of double-entry
accounting system has an Italian influence in the
13th to 15th century.
In Genoa
There were double-entry records wherein debits
were written overncredits. It is also in Florence
that manuscripts of “Partnership and Association
Contracts” reflecting how partners’ capital,
division of profit and losses, and dissolution of
partnership were computed.
In the present system, the Florentine Methods is
observed in the Journal entries with double-entry
bookkeeping.

The oldest double-entry books entitled “Massari
Ledgers of Commune of Genoa” were written in
1340. This books were known as a perfect double-
entry form because separate pages were used for
debit and credit. This is simplified into the T-
account and expanded into the Ledger.
In Florence
Double-entry Bookkeeping – based on the dual
aspect concept which says that in every business
transaction, two effects of recording are to be
made – the value received (debit) and the value
parted with (credit)
The basic principle of bookkeeping is the
principle of balance. It is the principle that
distinguishes double-entry bookkeeping from
mere record keeping.
Double entry means that at least two entries are
made in recording each transaction or operation.
In Venice of Northern Italy
Had key influence in the use of the double-entry
system in 1400s.
In 1494, Luca Pacioli (1447 -1517), an Italian
monk and mathematician, wrote Summa de
Arithmetica, the first book that was published
containing a detailed chapter of double-entry
bookkeeping which enabled others to study and
use it.
Subsequent Developments
French Revolution (1700s)
Industrial Revolution (1760 – 1830)
Global Industrial Economy (1900s)
International Business Transactions and
International Relationships of Government
(2000s)
With the globalization of business and diverse accounting practice, efforts have been made to harmonize
international accounting and reporting standards across countries.
In this book, Pacioli introduced three important
books of records, namely:
a. Memorandum Book – for all information
on a transaction
b. Journal Book – for the original entry
c. Ledger Book – for the final entry (posting,
the center of accounting system)
Through Venetian Method, the double-entry
accounting became known to the world and
became the standard not only for the Italians but
also for Dutch, German, and English authors of
accounting books. The present Ledger posting is
the modern adaption of the Venetian Method.
The thorough study of accounting and development
of accounting theory began during this period.
Social upheavals affecting government, finances,
laws, customs and business had greatly influenced
the development of accounting.
Mass production and the great importance of fixed
assets were given attention during this period.
This resulted in rapid changes to accounting
practice and reporting, and participative
promulgation of accounting standards. Notable
accounting practices were developed such as
mergers, acquisitions and growth of multinational
corporations, and internal and external reporting
and control systems.
To facilitate accounting work, the development of
computer-assisted accounting practice and reporting
developed rapidly and dominant to date.