History of Accounting

INTRODUCTION TO ACCOUNTING:

● Accounting - is the systematic process of measuring and reporting relevant

financial information about the activities of an economic organization or
unit.
1. THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
(AICPA) defines accounting as the art of recording, classifying, and
summarizing.
2. THE PHILIPPINE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
(PICPA) defines accounting as a service activity.
Nature of Accounting:
1. PROCESS - is a series of actions that produce something or that lead to a
particular result.
2. ART - is a skill acquired by experience, study, or observation.
3. SERVICE - is the occupation or function of serving.
Four Aspects of Accounting:
1. RECORDING - writing down business transactions chronologically in the
books of accounts as they transpire.
2. CLASSIFYING- sorting similar and related business transactions into the
three categories of assets, liabilities, and owner’s equity.
3. SUMMARIZING - preparing financial statements from the transactions
recorded in the books of account.
4. INTERPRETING - representing the financial information about the business
transactions in a language comprehensible to the users of financial
statements.
A BRIEF HISTORY OF ACCOUNTING:

● According to Wiley, Carol, it is believed that the very origin of writing itself
may have developed out of early marks used to keep account of goods at
ancient warehouses more than 5,300 years ago.
● The notion that pre-numerical counting systems, pre-dated even writing
language, didn’t come as a surprise to many historians and archaeologists.
ANCIENT ACCOUNTING IN EGYPT:
● ABACUS - which functioned as a calculator in ancient times, was
developed by Sumerians in 5,000 BCE.
● PAPYRUS - not only allowed recording of commercial transactions
but also the transaction of religious text, music, literature, and more.
● CLAY TABLETS - unearthed by an archaeologist named Dr. Gunter
Dreyer of the German Institute of Archaeology. It is considered to be
among the oldest written tax accounting record.
● In the tombs of King Scorpion I in Egypt, he discovered OLD STONE
LABELS believed to date back to 3,000 BCE or around 5,300 years
ago. These Old Stone Labels were complete with marks representing
accounts of oil and linens which were believed to be paid to the king
as taxes.
MESOPOTAMIA:
● CLAY TOKENS AND CLAY TABLETS - used to record their loans, herds,
crops, and system of trades.
● SCRIBES - who performed extensive duties in writing down and
recording in Mesopotamian civilization are equivalent to present-day
accountants.
● Aside from writing down commercial transactions, the SCRIBES
assured that the agreements were in compliance with the detailed
code requirements for commercial transactions.
GREEKS:
● The GREEKS also made significant contributions to the development
of accounting.
● MONEY - introduced by the greeks in 600 BCE in the form of coins.
● Greeks adopted the Phoenician writing system and inverted a Greek
Alphabet, which they used to facilitate record-keeping.
● As early as those times, BANKERS in Greece offered credit and helped
people transfer funds to banks in other cities as evidenced by the
Banker’s book of accounts.
ROME:
● ACCOUNTING helped establish their finance and legal system.
● ANNUAL BUDGET - Introduced by Romans which coordinated
estimated revenues and taxes paid by the citizens in relation to the
nation’s expenditures.
● CASH BOOK - was maintained by households for their expenses.
ENGLAND:
● William the Conqueror took possession of all properties in the name
of the king upon his invasion.
● DOMESDAY BOOK - contained all the real estate surveyed by William
the Conqueror and the taxes due to them.
● PIPE ROLL or THE GREAT ROLL OF THE EXCHEQUER - is the most
ancient surviving accounting record in the English Language. This
contains the yearly accounting of rents, fines, and taxes due to the
King of England, from 1130 to 1830.
14th Century - The Birth of Double-Entry Bookkeeping:

● LUCA PACIOLI - otherwise known as Friar Luca dal Borgo, a
mathematician, friend, and complementary of Leonardo da Vinci, and
considered to be “THE FATHER OF ACCOUNTING”.
● Luca Pacioli wrote Summa de Arithmetica, Geometria, Proportioni,
et Proportionalita (Everything About Arithmetic, Geometry, and
Proportions) which is composed of 36 short chapters that described
BOOKKEEPING, ACCOUNTING CYCLE similar to the modern
accounting cycle, extensively use of BALANCE SHEET of today, the
METHODS OF MEMORANDUMS, JOURNAL AND LEDGER, the use of
accounts such as ASSETS, LIABILITIES, AND OWNER’S EQUITY,
REVENUE AND EXPENSES, YEAR-END CLOSING ENTRIES, and the use
of TRIAL BALANCE to prove a balanced ledger.
● BENEDETTO COTRUGLI - proposed the original idea of Double-Entry
Bookkeeping.
● Cotrugli’s manuscript of Della Mercatura et del Mercante Perfetto(of
Trading and The Perfect Trader), contains a brief description of
double-entry bookkeeping.
● Not only Luca Pacioli but the Italians are broadly recognized to be the
father of accounting for their marked contribution to the
improvement of trade and commerce.
● VENETIAN MERCHANTS - used a double-entry system of recording in
the late 15th century to calculate their earnings and profits.
19th Century - The Dawn of Modern Accounting in Europe and

America:
● Domination of the Theories of accounts marked not only the
beginning but also the latter part of the 19th Century.
● In England, the Industrial Revolution replaced hand tools with
machine or power tools otherwise known as the Factory System,
which transformed accounting into an Actual Profession.
● Businesses requiring the expertise of Accountants to gain corporate
control of their flourishing businesses.
● In Scotland, QUEEN VICTORIA granted a royal charter to the Institute
of Accountants in Glasgow on July 6, 1854, thereby creating the
profession of Chartered Accountants(CA).
● Accounting became a formal profession.
● The year 1887 saw the first national US accounting society, the
AICPA.
20th Century - The Evolution of Modern Accounting Standards:

● Because of economic depression, SECURITIES AND EXCHANGE
COMMISSION(SEC) was formed.
● PERIODIC REPORTS - vouched by CPAs were filed by all the publicly
traded companies before selling their securities to the public.
● The establishment of the Financial Accounting Standards
Board(FASB), the result of the demand for more reliable and
comparable financial reporting by the Congress and SEC.
● The FASB and Government Accounting Standards Board(GASB) are
currently two of the significant authorities establishing the Generally
Accepted Accounting Principle(GAAP) in the US.
INFORMATION AGE:
● The Information Age, otherwise known as the Computer Age, Digital
Age, or New Media Age has brought a significant change in the
workload of Accountants.
● Transactions can be consummated online with the help of the
Internet.
● Various Softwares Applications in accounting have been developed
21st Century - Accounting in the Modern Times:

● The 21st Century opened with the replacement of the International
Accounting Standards Committee(IASC) by the International
Accounting Standards Board(IASB) established in January 2001.
● In the same year, the Enron Scandal, the greatest corporate fraud
case in American History, was caused by Arthur Andersen.
● In order to protect investors from corporate misinformation, the
Sarbanes Oxley Act was passed by the US Congress in 2002. This
imposed tougher restrictions on accountants conducting consultancy
services.

History of Accounting

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History of Accounting

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INTRODUCTION TO ACCOUNTING:

● Accounting - is the systematic process of measuring and reporting relevant

A BRIEF HISTORY OF ACCOUNTING:

14th Century - The Birth of Double-Entry Bookkeeping:

19th Century - The Dawn of Modern Accounting in Europe and

20th Century - The Evolution of Modern Accounting Standards:

21st Century - Accounting in the Modern Times:

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