The History of Accounting

By its’ very definition, accounting is a method of recording and summarising financial transactions. For as long as civilization has been engaging in business and trade, systems of record keeping, accounting, and also accounting tools have been invented.

Accounting has been key to important phases of history, it has been a major influence with professions in economics and business, and has fascinated traders and business minds throughout the ages.  Accountants participated in the development of cities, trade, and the concepts of wealth and numbers. Accountants invented writing, participated in the development of money and banking, invented double entry bookkeeping that fuelled the Italian Renaissance, 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. So, accountants are a pretty important bunch!

But strangely there have been virtually no household names among the accountancy heroes, apart from possibly the inventor of the “double-entry” bookkeeping system, an Italian Friar called Luca Pacioli. In 1494, he published the first book on double-entry accounting. His impact on accounting was so great that five centuries later, accountants from around the world gathered in the Italian village of San Sepulcro to celebrate the anniversary of the book’s publication!

In the middle of the eighteenth century, the industrial revolution provoked the need for more advanced cost accounting systems, and the development of corporations created much larger classes of external capital providers – shareowners and bondholders – who were not part of the firm’s management but had a vital interest in its results. The rising public status of accountants helped to transform accounting into a profession, first in the United Kingdom and then in the United States.

In the modern world, billions of dollars exchange hands every day, in millions of separate business transactions. These are recorded and reported on using a comprehensive set of guidelines, referred to as Generally Accepted Accounting Principles (GAAP).

So, the often used adage, “Accountancy is Boring”, is really rather unfair, it is the life-line of commerce and without it, or us, trade, business and the worlds’ economy would be a very complicated and confusing place!

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