It is supposed that the very origins of writing itself may have established out of early marks used to keep account of goods at earliest warehouses more than 5,300 years ago. The view that pre-numerical counting systems pre-dated even written language, didn’t originate as a surprise to many archeologists and historians who have long since recognized that the past of human civilization is mainly indistinguishable from the history of commerce.
The story of the backgrounds of monetary systems and commerce helps to provide a historical account of the backgrounds and development of accountancy, as commerce and accounting have run parallel to each other since their respective initial stages. For this purpose and reason, the history of accounting is frequently seen as indistinguishable from the olden times of finance and business.
Earliest Accountants of Egypt, Mesopotamia, Greece and Rome
Earliest Egyptian bookkeepers kept careful records of the inventory of goods kept in royal warehouses. The accuracy of these records was assured by the swift and plain penalty that came if mistakes were ever discovered.
Archeologist Dr. Gunter Dreyer of the German Institute of Archaeology discovered 5,300-year-old bone labels inscribed with marks and attached to bags of oil and linen in the Abydos, Egyptian tomb of King Scorpion I.
Describing inventory owners, possessors, amounts, and suppliers, these labels of antiquity are recognized to be the ancient origin of the counting systems that would ultimately develop into the sophisticated accounting approaches we’re familiar with today.
Other earliest societies also used accounting methods, including scribes in Mesopotamia who kept records of commerce on stone tablets. In early Greece, the account books of bankers show that they altered and loaned money and helped people make cash transfers through associate banks in other cities. In early Rome, government and banking accounts grew out of records kept by the heads of families.
14th Century - Double-Entry Bookkeeping
The most significant event in accounting history is generally considered to be the dissemination of double-entry bookkeeping by Luca Pacioli in 14th century Italy. Pacioli was much respected in his day, and was a friend and contemporary of Leonardo da Vinci.
In actual fact, the Italians of the 14th to 16th centuries are broadly acknowledged as the fathers of modern accounting and were the 1st to commonly use Arabic, instead of Roman, numerals for tracking business accounts.
Pacioli described double-entry bookkeeping, and other commerce-related concepts, in his book De Computis et Scripturis – translated in English to Of Reckonings and Writings.
The book was decoded into five languages within a century of initial publication. The essentials of bookkeeping methods used today have actually changed little since the days of Pacioli.
19th Century – The Beginnings of Modern Accounting in Europe and America
The modern, official accounting profession arisen in Scotland in 1854 when Queen Victoria granted a royal charter to the Institute of Accountants in Glasgow, creating the profession of chartered accountant (CA). Nowadays, the longest standing societies of public accountants are found in Scotland.
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 numerous 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).
20th Century – The Development of Modern Accounting Standards
The accounting profession in the 20th century advanced around, at first, state requirements for financial statement audits, and then around Federal requirements created by securities acts passed in 1933 and 1934 (which formed the Securities and Exchange Commission), according to a July 1999 article in The CPA Journal.
In the 1970s, Congress and SEC demands for more reliable and comparable financial reporting led to the founding of the Financial Accounting Standards Board (FASB) in 1973. The FASB and the Governmental Accounting Standards Board (GASB) are now two of the main organizations accountable for establishing generally accepted accounting principles (GAAP) in the U.S.
21st Century – Accounting Regulation in Modern Commerce
Beyond the industry's self-regulation, the state also sets accounting standards, through agencies such as the Securities and Exchange Commission and laws such as the Sarbanes-Oxley Act of 2002, approved after the Enron and WorldComm accounting scandals.
The 21st century also saw the passage of the Dodd-Frank Act after the recession of 2008. The act contains 16 major areas of reform, including creation of the Financial Stability Oversight Council and the Volcker Rule that restricts banks from owning, investing, or sponsoring hedge funds, private equity funds, or any other type of proprietary trading operations that outcome in their own profit.
Looking to the Future
Accountants looking to the future have recognized that present accounting principles in place in the United States known as the Generally Accepted Accounting Principles (GAAP), are expected to go the way of the dinosaurs at some point in the not too distant future.
The global standard outside of the US is the International Financial Reporting Standards (IFRS). As global commerce remains to grow, efforts are underway to create consistent accounting standards across borders through the widespread adoption of IFRS by American businesses and accounting firms who wish to continue to participate in the global economy.
March 09, 2018