Introduction
Unlike most other modern professions, accounting has a history that is usually discussed in terms of one seminal event – the invention and dissemination of the double entry bookkeeping processes. But a view of accounting history that begins with Luca Pacioli’s contributions overlooks a long evolution of accounting systems in ancient and medieval times.
More fundamental is the question, why should we care about the history of accounting at all? Certainly a glimpse back into this period helps illuminate our past generally, and it is the sort of winding, twisted path that makes for an entertaining story. But perhaps the most compelling reason is to help explain the phenomenal growth that the profession of accountancy has enjoyed worldwide since the first royal charters were granted to the Society of Accountants in Edinburgh Institute of Chartered Accountants in England and Wales
How and why did this relatively new profession develop? Its history is that of human commerce, and even more fundamentally, of writing and the use of numbers and counting. Some argue that accounting developed purely in response to the needs of the time brought about by changes in the environment and societal demands. Others claim that the development of the science of accounting has itself driven the evolution of commerce since it was only through the use of more precise accounting methods that modern business was able to grow, flourish and respond to the needs of its owners and the public. Either way, the history of accounting throws a light on economic and business
history generally, and may help us better predict what is on the horizon as the pace of global business evolution escalates.
Obviously this presentation can only be an overview on a subject whose complete bibliography would itself be massive. We have included this on the ACAUS Web site because we were aware that there were so few online resources available on accounting history. It is intended only as a brief introduction, to whet the appetite for a more in-depth look that additional reading can provide. For a listing of some good books on this subject see the conclusion of this history or order directly from our history selection in our online ACAUS Bookstore.
Ancient Accounting: Dawn of Man through Luca Pacioli
In attempting to explain why double entry bookkeeping developed in 14th century Italy instead of ancient Greece or Rome, accounting scholar A. C. Littleton describes seven "key ingredients" which led to its creation:
• Private property: The power to change ownership, because bookkeeping is concerned with recording the facts about property and property rights.
• Capital: Wealth productively employed, because otherwise commerce would be trivial and credit would not exist.
• Commerce: The interchange of goods on a widespread level, because purely local trading in small volume would not create the sort of press of business needed to spur the creation of an organized system to replace the existing hodgepodge of record-keeping.
• Credit: The present use of future goods, because there would have been little impetus to record transactions completed on the spot.
• Writing: A mechanism for making a permanent record in a common language, given the limits of human memory.
• Money: The "common denominator" for exchanges, since there is no need for bookkeeping except as it reduces transactions to a set of monetary values.
• Arithmetic: A means of computing the monetary details of the deal.
Accounting In Mesopotamia , circa 3500 B.C.
Five thousand years before the appearance of double entry, the Assyrian, Chaldaean-Babylonian and Sumerian civilizations were flourishing in the Mesopotamian Valley Euphrates Rivers , now mostly within the borders of Iraq Mesopotamian Valley Babylon and Ninevah became the centers for regional commerce, and Babylonian became the language of business and politics throughout the Near East .
There was more than one banking firm in Mesopotamia , employing standard measures of gold and silver, and extending credit in some transactions.
During this era (which lasted until 500 B.C.), Sumeria was a theocracy whose rulers held most land and animals in trust for their gods, giving impetus to their record-keeping efforts. Moreover, the legal codes that evolved penalized the failure to memorialize transactions. The renowned Code of Hammurabi, handed down during the first dynasty of Babylonia (2285 - 2242 B.C.), for example, required that an agent selling goods for a merchant give the merchant a price quotation under seal or face invalidation of
a questioned agreement. Thus it is believed that most transactions were recorded and subscribed by the parties during this period.
The Mesopotamian equivalent of today's accountant was the scribe. His duties were similar, but even more extensive. In addition to writing up the transaction, he ensured that the agreements complied with the detailed code requirements for commercial transactions. Temples
In a typical transaction of the time, the parties might seek out the scribe at the gates to the city. They would describe their agreement to the scribe, who would take from his supply a small quantity of specially prepared clay on which to record the transaction. Clay was plentiful in this area, while papyrus was scarce and expensive.
The moist clay was molded into a size and shape adequate to contain the terms of the agreement. Using a wooden rod with a triangular end, the scribe recorded the names of the contracting parties, the goods and money exchanged and any other promises made. The parties then "signed" their names to the tablet by impressing their respective seals. In an age of mass illiteracy, men carried their signatures around their necks in the form of stone amulets engraved with the wearer's mark, and were buried with them at death. Often the seals included the owner's name and religious symbols, such as the picture and
name of the gods worshipped by the owner.
Accounting In Ancient Egypt , China , Greece and Rome
Governmental accounting in ancient Egypt
Egyptian bookkeepers associated with each storehouse kept meticulous records, which were checked by an elaborate internal verification system. These early accountants had good reason to be honest and accurate, because irregularities disclosed by royal audits were punishable by fine, mutilation or death.
Although such records were important, ancient Egyptian accounting never progressed beyond simple list-making in its thousands of years of existence. Perhaps more than any other factors, illiteracy and the lack of coined money appear to have stymied its development. While the Egyptians tracked movements of commodities, they treated gold and silver not as units of fungible value, but rather as mere articles of exchange. The inability to describe all goods in terms of a single valuation measure made cumulation and summation difficult and the development of a cohesive accounting system all but impossible.
Pre-Christian China China Greece
Perhaps the most important Greek contribution to accountancy was its introduction of coined money about 600 B.C. Widespread use of coinage took time, as did its impact on the evolution of accounting.
Banking in ancient Greece Rome
Medieval Accounting
The thousand years between the fall of the Roman Empire and the publication of Luca Pacioli's Summa are widely viewed as a period of accounting stagnation, and medieval practices outside Italy
While accounting under the Roman Empire was prescribed by the centralized legal codes of the time, medieval bookkeeping was localized and centered on the specialized institutions of the feudal manor. The systems of exchequer and manor necessitated numerous delegations of authority over property from the owners to actual possessors and users. The central task of accounting during this era was to allow the government or property owners to monitor those in the lower portions of the socio-economic
"pyramid." When William the Conqueror invaded England
Compiled from valuations in the Domesday Book and from statements of sheriffs and others collecting for the royal treasury, the Pipe Roll was the final record on parchment of a "proffer" system which extensively used a wooden stick as a basis of account-keeping. Twice a year, at Easter and Michaelmas (September 29), the various county sheriffs were called before the Exchequer at Westminster
In accepting a sheriff's payment on account (the proffer), the treasurer would have a wooden tally stick prepared and cut as a record of the transaction.
Used even before the introduction of the Pipe Roll, the tally stick was a nine-inch long, narrow, hazelwood stick, cut with notches of varying size to indicate the amount received. A cut the size of a human hand was 1,000 pounds; a thumb's width, 100 pounds; a cut the thickness of a "grain or ripe barley," one pound; and a shilling, just a notch. Chatfield describes the way in which the tally stick was used to make a receipt in an age when few could read or write:
After the amount of the sheriff's proffer had been carved, a diagonal cross cut was made an inch or two from the thicker end of the tally, and the whole stick was split down the middle into two identically notched parts of unequal length. The flat sides of both pieces were inscribed in Latin to show that they related to the same debt, and as additional protection, the cross cuts were made at various angles on different tallies, so that no "foil" or shorter piece could possibly be fitted to any "stock" but its own. The sheriff then departed with the stock as his receipt for payments rendered, and the foil was kept by the treasurer for the Exchequer archives.
At Michaelmas, each sheriff returns for the final accounting, at which he pays the whole year's revenues. The treasurer reads the amount due from the Pipe Roll, and the sheriff must justify any unusual expenses claimed. Final settlement occurs at a table covered by a checkered cloth, for which the Exchequer is named. "Counters" are placed on the squares to visually represent the amount due the king from that county. Another row of counters represents the Easter payment, which is verified by fitting together the sheriff's tally stock with the Exchequer's foil to demonstrate that the notches and cuttings correspond.
Italian Renaissance: Birth of Double Entry Bookkeeping
The innovative Italians of the Renaissance (14th -16th century) are widely acknowledged to be the fathers of modern accounting. They elevated trade and commerce to new levels, and actively sought better methods of determining their profits.
Although Arabic numerals were introduced long before, it was during this period that the Italians became the first to use them regularly in tracking business accounts – an improvement over Roman numerals the importance of which cannot be overstated. They kept extensive business records, as the use of capital and credit on a large scale developed: The evolutionary trend toward double entry bookkeeping was underway.
Luca Pacioli and The Summa
Luca Pacioli was a true Renaissance man, with knowledge of literature, art, mathematics, business and the sciences, at a time when few could even read. Born about 1445 at Borgo San Sepulcro in Tuscany
of those, such as mathematics and accounting, which exhibit harmony and balance.
His friend Leonardo da Vinci helped prepare the drawings for Pacioli's 1497 work, Divina Proportione; In turn, Pacioli is reputed to have calculated for da Vinci the quantity of bronze needed for the artist's huge statue of Duke Lidovico Sforza of Milan
Around 1482, after completing his third treatise on mathematics, Pacioli, who like many of his time sought preferment as a teacher, became a Franciscan friar. He traveled throughout Italy del
Pacioli's System: Memorandum, Journal and Ledger
"De Computis" begins with some basic instruction for commerce. The successful merchant, declares Pacioli, needs three things: sufficient cash or credit, good bookkepers and an accounting system which allows him to view his finances at a glance. Before commencing business, one should prepare an inventory listing all business and personal assets and debts. This inventory must be completed within one day, and property should be appraised at current market values and arranged according to mobility and value, with cash and other valuables listed first since they are most easily lost. The memorandum, or memorial, was Pacioli’s equivalent of a daybook, for the recording, in chronological order, of business transactions as they occurred. The transaction could be entered in any
of the various monetary units then in use in the Italian city-states of the time, with conversion to a common currency for double entry left for later.
The journal was the merchant's private account book. Entries consisted of a narrative debit, credit and explanation in one continuous paragraph. The journal had only one column, which was not totaled. There were no compound entries. Pacioli's ledger was, of his three books, the most like its modern equivalent. The money and date columns were almost identical to those in modern ledgers, with entries consisting of brief paragraphs,debits on the left side of a double page (deve dare) and credits on the right (deve avere).
The bookkeeper posts "cash in hand" as a debit on page one of the ledger, just as it was entered first in the journal. As ledger postings are made, two diagonal lines are drawn through each journal entry, one from left to right when the debit is posted and the other from right to left when the credit is posted. The first 16 chapters of "De Computis" describe this basic system of books and accounts, while the remaining 20 are devoted to specialized accounting issues of merchants. These include bank deposits and withdrawals, brokered purchases, drafts, barter transactions, joint venture trading, expense disbursements and closing and balancing books.
The trial balance (summa summarium) is the end of Pacioli's accounting cycle. Debit amounts from the old ledger are listed on the left side of the balance sheet and credits on the right. If the two totals are equal, the old ledger is considered balanced. If not, says Pacioli, "that would indicate a mistake in your Ledger, which mistake you will have to look for diligently with the industry and intelligence God gave you."
Significance of the Summa
In the first century after its publication, the Summa was translated into five languages, and numerous books on double entry bookkeeping appeared in Dutch, German, English and Italian whose descriptions were obviously lifted from "De Computis." Many consider these works inferior explanations of the system so clearly articulated by Pacioli. One historian has described the works issued during this period as, "at the best, revisions of Pacioli, at the worst servile transcriptions without even the courtesy of referring to the original author."
Nevertheless, they helped quickly spread the knowledge of the "Italian method" throughout Europe . Perhaps most surprising is how little bookkeeping methods have changed since Pacioli. Both the sequence of events in the accounting cycle and the special procedures he described in "De Computis" are familiar to modern accountants. In fact, the primary differences between current bookkeeping practices and the "Method of Venice" are additions and refinements brought about by the needs of a larger scale of business operation. The small proprietorships of 15th century Italy
It is not unfitting that when we come to deal with the modern profession of accountant, Scotland Scotland Italy
In tracing the growth of the profession in Scotland Edinburgh Scotland Edinburgh , but to a greater extent in the more commercial city of Glasgow
It may be of interest to quote here, as a very full compendium of the kind of work
which a Glasgow
1. Factor and trustee on sequestered estates.
2. Trustee or factor for trustees of creditors acting under trust deeds.
3. Factor for trustees acting for the heirs of persons deceased.
4. For gentlemen residing in the country for the management of heritable or other property.
5. Agent for houses in England and Scotland
6. The winding up of dissolved partnership concerns and the adjusting of
partners' accounts.
7. The keeping and balancing of all account-books belonging to merchants, manufacturers, shopkeepers, &c.
8. The examining and adjusting of all disputed accounts and account-books. The making up of statements, reports, and memorials on account-books or disputed accounts and claims for the purpose of laying before arbiters, courts, or counsel.
9. The looking after and recovering old debts and dividends from bankrupt
estates.
10. And all other departments of the accountant business.
On 6th July 1854 [The Institute of Accountants in Glasgow petitioned Queen Victoria
Professional Accountancy Travels Across the Globe
George Watson (1645-1723), one of the early Scottish accountants, trained in Holland England Institute of Chartered Accountants in England and Wales
In the late 1800s, large amounts of British capital were flowing to the rapidly growing industries in the United States U.S. to audit these investments, and a number of them stayed on and set up practice in America New York , four in Philadelphia and one in Chicago New York , 87 in Philadelphia and 31 in Chicago America
Into The Twentieth Century and Beyond
However prosperous, the United States U.S.
Labor unions developed in response to corporate exploitation of workers. Congress responded by passing the first Interstate Commerce Act and the Sherman Antitrust Act, marking the beginnings of federal regulation of business. When TheodoreRoosevelt became President after the 1901 assassination of William McKinley, he supported the use of governmental power to control the growing industrial monopolies and the price increases they caused. The Roosevelt administration helped persuade Congress to establish the Department of Commerce and Labor to gather the facts needed to enforce antitrust laws. The Interstate Commerce Commission's powers over transportation were broadened, and the ICC established a uniform system of accounting -
the first instance of accounting used as an instrument of federal regulation.
Unlike the British, who used the balance sheet in an effort to monitor management's use of stockholders' monies, American corporations of the early 20th century had no comparable history of losses from stock speculation. Rather, American balance sheets were drafted mainly with bankers in mind, and bankers of the era cared more about a company's liquidity than earning power. Beginning in 1920, business practices began changing drastically as the U.S.
their current cash flow. The offering of corporate stock issues became a leading method of financing expansion. As stockholders, rather than bankers, became the primary audience of financial statements, the income statement began to take center stage over the balance sheet.
Other factors, such as the rise of income taxation and cost accounting, also shifted the focus to revenues and expenses. At the turn of the century, there were at least four types of funds statements in use - those that summarized changes in cash, in current assets, in working capital and overall financial activities. Accountant H. A. Finney led the movement for use of a funds statement that focused on liquidity by tracking the sources of changes in working capital. He used a worksheet approach to highlight meaningful balance sheet changes by aggregating most of the fluctuations that affect working capital, and offered a standardized method for calculating them.
In the 1940s, the accounting profession increasingly used the funds statement to measure the actual flow of monies, rather than simply the sum of working capital changes between balance sheet dates. The funds statement increasingly became a staple for the financial statement and, in 1971, the American Institute of Certified Public Accountants began requiring its inclusion in stockholders' annual reports. Nowadays, with more than 330,000 members, the AICPA is the premier national professional association for CPAs in the United States
Sumber : http://documents.clubexpress.com/
Tidak ada komentar:
Posting Komentar