History of Accountancy

Interactive Session by:

Prashant D. Joshi
The Galaxy Education System
Accountacy faculty.
Rajkot
 Preface
• Accountancy is a very interesting field.
• It is almost necessary in every profession.
• Even a Doctor or an Engineer will have to
prepare books of accounts
• It is said that during the toughest times when the
company is retiring its employees, it is the
accountant that will retire at the end.
• Thus Accountancy is an interesting field.

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FACULTY
Why Study History of Accounts?
• The history of accounting is as old as
civilization, a key to important phases
of history, among the most important
professions in economics and
business, and it is fascinating. 
• Accountants participated in the
development of cities, trade, and the
concepts of wealth and numbers.

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ACCOUNT FACULTY
Why Study History of Accounts?
• Accountants invented
– writing,
– participated in the development of money and
banking,
– invented double entry bookkeeping that fueled the
Economy,
– saved many Industrial Revolution inventors and
entrepreneurs from bankruptcy,
– helped develop the confidence in capital markets
necessary for western capitalism, and
– are central to the information revolution that is
transforming the global economy.

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ACCOUNT FACULTY
 Milestones in History of
Accountancy
• 3000 B.C. to 2500 B.C.
– Ancient Sumerians invent the world’s first written
language.
– Cuneiform eases record-keeping requirements for
Sumerian cities expanding trade.
– Across the ancient world, rulers tax their people to
finance public works, making records necessary to
account for transactions.
• 1000 B.C.
– The commercially oriented Phoenicians invent a 22-
character phonetic alphabet, probably for
bookkeeping purposes and to prevent themselves
from being cheated by the more advanced Egyptians.
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ACCOUNT FACULTY
 Milestones in History of
Accountancy
• 500 B.C.
– Egyptians invent the bead-and-wire abacus.
• 423 B.C.
– Aristophanes refers to the incorrect accounts of
Pericles in his play “The Clouds” in 423 B.C.
– Ancient Egyptians and Babylonians have instituted
auditing systems where everything that went into and
came out of storehouses was double-checked.
– Such “audit reports” were given orally, thus the later
term “auditor,” derived from the Latin audire, to hear.

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ACCOUNT FACULTY
 Milestones in History of
Accountancy
• 200 B.C.
– Egyptians inscribe the Rosetta Stone, a key to their
language and civilization, which includes the account
of a tax revolt and the reaction to it by the Egyptian
ruler Ptolemy V.
– Taxation has become a fuel of Mediterranean
civilization, creating the need for scribes to record
payments.
• 800 A.D.
– The term “rationator” (accountant) is used in a deed.

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ACCOUNT FACULTY
 Milestones in History of
Accountancy
• 1494
– Italian monk Luca de Pacioli officially introduces “double entry”
bookkeeping in his Summa de Arithmetica, a compendium of
mathematical knowledge.
– Pacioli bases his work on procedures that have generally been
used in Genoa, Florence, Milan and Venice since about 1350.
– Double–entry bookkeeping made it easier for them to detect
errors and provided a fuller picture of business activity—a
balance sheet along with an income statement.
• 1553
– James Peele writes what is probably the first original English text
on bookkeeping.

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ACCOUNT FACULTY
 Milestones in History of
Accountancy
• 1581
– The Collegio dei Raxonati becomes the world’s first
society of accountants.
– By 1669, no one will be permitted to practice in
Venice without being a member of the college.
• 1600
– The East India Company is founded.
– The trading company introduces invested capital and
dividend distributions, creating a great need for
accountability to investors.

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ACCOUNT FACULTY
 Milestones in History of
Accountancy
• 1789
– The U.S. government creates the Treasury Department,
including a comptroller and auditor.
– Benjamin Franklin urges businesspeople to have training and
facility in “accompts.”
– Franklin earned money as a young man keeping books of
account, and used those skills later to create the postal service.
– Thomas Jefferson’s two bookkeeping texts are among the first
books in the Library of Congress.
• 1841 to 1850
– Expanding railroad empires employ accountants as auditors
independent of management.

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ACCOUNT FACULTY
 Milestones in History of
Accountancy
• 1850
– There are 264 “accounting terms” listed in
London’s directory of professionals.
– In 1799, there were only 11; in 1840, there
were 107.
• 1854
– Scotland formally recognizes the profession
under the designation of “chartered
accountants.”

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ACCOUNT FACULTY
 Milestones in History of
Accountancy
• 1880
– England formally recognizes the chartered
accountant.
• 1887
– The first accounting organization in the United States
is established.
• 1896
– New York state officially recognizes the profession
under the license of certified public accountant.

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ACCOUNT FACULTY
 Milestones in History of
Accountancy
• 1895 to 1905
– The New York, Ontario and Western Railway Company
becomes the first railroad in the United States to issue audited
financial statements.
– United States Steel is the first major industrial corporation to
issue an audited report.
– Equitable Life Assurance Society becomes the first insurance
company to have an independent audit.
– Meanwhile, major universities like the University of Chicago and
Dartmouth establish accounting courses, though business
colleges have been organized to teach bookkeeping and
accounting skills since the mid-19th century.

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ACCOUNT FACULTY
 Milestones in History of
Accountancy
• 1913
– The enactment of the income tax laws establishes accountants
as the premier profession in this arena.
– At the same time, CPA management expertise catapults the
profession as top consultants in boardrooms and on factory
floors.
• 1931
– The Ultramares case establishes the principle that auditors have
liability to third parties relying on the auditor’s report.
– The American Institute of CPAs eliminates the word “certify”
from the report and replaces it with “examined” to emphasize the
report was an opinion, not a guarantee.

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ACCOUNT FACULTY
 Milestones in History of
Accountancy
• 1933
– The Academy of Motion Picture Arts and Sciences chooses
Price Waterhouse to oversee the voting for the Oscar awards in
1933, in response to the widely held belief that the awards were
rigged.
– The Academy publicizes the engagement to create public
confidence in the Oscar.
• 1938
– A firm records fictitious receivables and nonexistent inventory in
warehouses, leading to an auditing standard requiring the
observance of physical inventory and the direct confirmation of
accounts receivable.
– It also leads to the reporting consistency requirement and tests
of the internal control.

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ACCOUNT FACULTY
 Milestones in History of
Accountancy
• 1941
– The Securities and Exchange Commission requires
the auditor’s report to state that the examination was
made in accordance with generally accepted
accounting standards.
• 1968
– The Continental Vending Case establishes that the
auditor must disclose improper activities of the client
or the client’s officers when such activities are known
to the auditor and may reasonably affect the audited
financial statements; and
– that compliance with GAAP is not a conclusive
defense against criminal liability.
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ACCOUNT FACULTY
 The First Accountant
• 8000 BCE Jerry
– of Jericho First used "tokens" to accurately count
the temple's wealth
– The tokens may represent an inventory count, the
envelopes a summary "document" and a form of
internal control. Thus, this can be interpreted as a
potential accounting system

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ACCOUNT FACULTY
 The First Accountant
• 3100 BCE Marion
– the Sumerian Invented
Cuneiform writing to
determine the king's wealth
& tribute payments

Accounting records on pre-

cuneiform tablet (Louvre)

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ACCOUNT FACULTY
 The First Accountant
• Jerome
– of Rome Rich
Romans kept financial
records in memo form
and on ledgers.
– Scribes kept detailed
financial records of
the Empire
Scribe - Sakkara about
2500 BC (Louvre)
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ACCOUNT FACULTY
 The First Accountant
• 1299 Amatino
Manucci,
– A merchant,
developed the first
known financial
records that included
all major components
of double entry
bookkeeping

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ACCOUNT FACULTY
 The First Accountant
• 1494 Luca Pacioli, -
The Father of
Accounting
– Publication of Summa,
which included the first
full description of the
Italian method of
double entry
bookkeeping
Luca Pacioli

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ACCOUNT FACULTY
 The First Accountant
• 1772 Josiah Wedgwood,
– is well known as a potter
and as grandfather of
Charles Darwin
– Industrial Revolution
entrepreneur that
developed innovative cost
accounting records
following a severe
recession

Josiah Wedgwood
by Joshua
Reynolds
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ACCOUNT FACULTY
 The First Accountant
• 1854 William Cooper
The Birth of a
Profession
– Early founder of a Big
Six firm, important to
the development of the
British accounting
profession

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ACCOUNT FACULTY
 The First Accountant
• 1920 Donaldson
Brown - Big
Business
– GM CFO developed
the "modern" cost
accounting system
used by industrial
giants to control vast
operations

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ACCOUNT FACULTY
 The First Accountant
• That leaves...the winner: Amatino
Manucci, the writer of the earliest surviving
complete double entry bookkeeping
system.
• Modern accounting is not fundamentally
different from that of Manucci.
• He's not likely to become a household
name, but should be recognized as the
First Accountant.
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ACCOUNT FACULTY
 Eye Opener
Answer the following questions:
1. Who is termed the first accountant?
Ans. Amatino Manucci, the writer of the earliest surviving
complete double entry bookkeeping system.
2. Who developed the modern cost accounting system?
Ans. Donaldson Brown
3. What is Luca Pacioli Known For?
Ans. He is known as the father of Accountancy as he first
invented the Double Entry Accounting System.
4. Who kept financial records in memo form and on
ledgers for the Romans?
Ans. Jerome

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ACCOUNT FACULTY
 Summary
• The concept of accounting was invented
long back in 8000 BC
• That the modern Concept of accounting
came into existence in the early 1494 by
Luca Pacioli
• That accountancy also included concepts
of Cost Accountancy. Developed in 1772
by Josiah Wedgwood.

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ACCOUNT FACULTY