History of Accounting

Everyone needs an accountant, or so the saying goes. But why would that be? The history of accounting dates back thousands of years to the cradle of civilization in Mesopotamia and is said to have developed alongside writing, counting, and money. The early Egyptians and Babylonians created auditing systems, while the Romans compiled detailed financial information.

Accounting is the basic tool that records, reports, and evaluates the economic calculations and transactions that can reach a company. Every business needs to track the flow of money into and out of its accounts to have an accurate picture of its true financial well-being. Having obtained that knowledge, companies can decide financially and strategically about their future.

The need for accounting records dates back more than 5,300 years to the meticulous records of ancient Egyptian accountants who kept track of goods in royal warehouses. Historians believe that this ancient record was the basis for the invention of writing and numbers. However, the fathers of accounting are considered to be Venetians from the fourteenth to sixteenth centuries.

Some of the first accountants were employed around 300 BC. C. in Iran, where accounting records and scripts were discovered. Around the first millennium, the Phoenicians invented an alphabetical system for accounting, while the ancient Egyptians may even have assigned someone the role of controller.

Italian origin

In 1494, the mathematician Luca Pacioli published the world’s first printed bookkeeping treatise titled The Collected Knowledge of Arithmetic, Geometry, Proportion, and Proportionality in which he describes the use of double-entry bookkeeping used by Venetian merchants. Translated into many languages, it became the reference text and teaching tool for the next several hundred years.

With the onset of the industrial revolution in 1760, there was a proliferation of businesses and the need for more advanced accounting systems. The development of corporations also created larger groups of investors and more complex ownership structures, all of which required the adaptation of accounting systems.

Scotland modernizes accounting

The modern profession also has its roots in Scotland in the mid-19th century, when the Glasgow Institute of Accountants requested a Royal Charter from Queen Victoria so that accountants could be distinguished from lawyers, as accountants had long belonged to bar associations. which would offer accounting in addition to the legal services of a firm. In 1854, the institute adopted the term “certified public accountant” for its members, a term and demarcation that still carries legal weight worldwide today.

The petition was signed by 49 Glasgow accountants, arguing that the accounting profession had long existed in Scotland as a distinct profession of great respectability and that the small number of professionals had grown rapidly. The petition further highlighted the various skills required to be a professional accountant – in addition to mathematical skills, an accountant needed to be familiar with general legal principles, as they were often used by courts to provide evidence on financial matters – as they still are today.

In 1854, Queen Victoria created the profession of public accountants after awarding a royal charter to the Glasgow Institute of Accountants and paved the way for the modern and formal accountancy profession. America’s First National Accounting Society was established in 1887.

The accounting profession was recognized with a law in 1896 establishing that the title as a public accountant was given to people who passed the State exams after having 3 years of experience in the field. In 1902, an Act of the Parliament of Canada incorporated the Canadian Institute of Public Accountants, while the Association of Certified General Accountants was founded in 1908 in Montreal and incorporated at the federal level in 1913.

Industrial Revolution

The industrial revolution in Great Britain had been underway since the mid-19th century and the London capital was the center of finance for the entire world. As society grew with limited responsibility, manufacturing and logistics were on a large scale. The demand for accountants was beginning to increase and there was more competition. They were capable of being able to move the world with global transactions.

The growing importance of accountants helped transform accounting into a profession, first in the United Kingdom and then in the United States. In 1904, eight people formed the London Accountants Association to open up the profession to a wider audience than was available through the older UK associations. After several name changes, the London Association of Accountants adopted the name of the Association of Certified Chartered Accountants (ACCA) in 1996.

Importance of ethics

Not everything has been easy for the accounting profession. The 21st century has seen some dubious actions by accountants that have sparked large-scale scandals. The Enron scandals in 2001 rocked the accounting industry, for example. Arthur Andersen, one of the largest accounting firms in the world at the time, closed.

Subsequently, under the recently introduced Sarbanes-Oxley Act, accountants now face more severe restrictions on their consulting jobs. Yet ironically, since Enron and the financial crisis of 2008, accountants have been in high demand as corporate regulations have increased and more experience is required to meet reporting requirements.

In the 21st century, accounting has taken off with large companies and advanced accounting software, as accountants no longer need to resort to hand-held double-entry bookkeeping. The evolution of adding machines and computers over the past 150 years has changed the nature and efficiency of an accountant’s daily tasks. Accounting will continue to be a necessary institution in companies large and small, with new technologies in the coming years only to improve the efficiency and quality of the accounting work produced.