The History of Accounting

The history of accounting can be dated back to 7000 years, when first signs of accounting emerged were found in the ruins of the ancient world of Babylon, Assyria and Sumeria. Primitive accounting methods where used in ancient times by the inhabitants to keep a record of the crop yield and herd count. During middle ages, the barter system was predominant between the merchants. In 13^th century there was a shift in accounting from barter economy to monetary economy which led to the development of book-keeping system by the sedentary merchants of medieval Europe. Over centuries, the system evolved into a method of analyzing and documenting the transactions based on double entry bookkeeping processes.

A recurring question arises, why should one learn about the history of accounting? Pragmatically, the history provides a glimpse of the ancient and medieval methods of accounting to the modern day professionals. This enables them to envision the changes which can be made in the present system. The earliest form of accountancy began in the Sumerian region, a part of the Mesopotamian civilization, with simple use of clay tablets. Clay tablets were replaced by papyrus in ancient Egypt, China Greece and Rome. Advent of the 14^th century marked numerous developments in the accounting system in the Middle East. In northern Italy, a new approach of double entry bookkeeping came into existence with a mechanism of debit and credit. (Debit means ‘to owe’ whereas credit means ‘to trust’.) This emerged from the need of investors to invest capital in multiple ventures. This development is directly or indirectly attributed to Luca Pacioli’s “review of arithmetic, Geometry, ratio and proportion” which was published in Venice in 1494. The 27 page treatise on bookkeeping, the first written document on accounting, laid the foundation of double entry bookkeeping. Another three volume masterpiece by Pacioli, named ‘Summa arithematica’, introduced the symbols of plus and minus (which also became the standard notation for Italian revolution). The three major books namely memorandum, journal and ledger became the basis of accounting.

Nearly 400 years after introduction of double entry bookkeeping system, in 1894, the Institute of chartered accountants of Scotland (ICAS) received its royal charter and became world’s first professional body for chartered accountants. ICAS had evolved from a combination of 3 charters (wherefrom the word chartered accountant (CA) originated). This marked the beginning of the modern day accountancy. The profession began to spread world over with institutes in England and Wales, Ireland and Austria. The CA membership grew to 18000 with members working in public practice, commerce, public sector and education. With economic boom, Accountancy as a profession started catching up and turned into a lucrative field with high paying jobs.

To know more about the history of accounting, consult the following links:

• Forms of accountability in Ancient civilizations- This document provides a detailed view of the evolution of accounting in the ancient world.
• Accounting in Ancient Egypt, China, Greece and Rome- A chapter by chapter study is in the link provided to get an insight into the world history of accounting.
• Islam and accounting- The impact of religion is a less explored facet in influencing the business dealings. This document sheds some light on it.
• Principles of accounting- A manual which guides you towards the foundation on which accounting.
• Using accounting history and Luca Pacioli to teach double entry- A guide to Luca Pacioli’s theory, which shaped the modern day bookkeeping.
• Timeline of accounting- A brief timeline of the developments which took place in the modes of accounting the transactions.
• Emergence of ICAS- ICAS is the first official organization which successfully nurtured professional in accountancy. This link provides the history of the organization.
• New approaches to accounting- A compendium of new approaches for analyzing and recording transactions.
• Traditional approach v/s Modern approach- The report analyzes the difference between different approaches of accountancy.
• Future model for private company accounting- A description of various proposals towards new models of accounting is provided which will change the face of modern accounting.