History of Accounting

EARLY TIMES

Records made by markings on convenient surfaces: stones, clay tablets,

papyrus. The romans kept elaborate records, standardized military payrolls and
provincial governors’ accountability.

14TH – 15TH CENTURY

Italian trade and commerce. Development of extensive record keeping

systems. Learned numerals and basic arithmetic from the Arabs which paved the
way to the creation of the double entry bookkeeping system. Established as the
Fathers of Modern Accounting.

The Genoese System, (Genoa, Northwest Italy). Unlike items compared with
common monetary unit. Distinctions between capital and income, include both
expenses and equity accounts. Massari Ledgers (1340) were the oldest double
entry books.

The Florentine System, (Florence, Italy). Listed debits above credits rather than
separate pages. Used separate columns for recording monetary value. Partnerships
took place.

The Venetian System, (Venice, Italy). Key influencer of the double entry
bookkeeping.

Fra Luca Pacioli, Italian Monk. Created “Summa de Arithmetica Geometria

Proportionis et Proportionalista” in 1494. The Father of Double-Entry Bookkeeping
system. Formalized the practice but was not the inventor.

16TH – 18TH CENTURY

The center of commerce shifted to Spain, Portugal and Northern Europe. In

1673, France adopted the first official accounting code. The Balance sheet should
be drawn every two years. The standardization of the debits on the left and credits
on the right. In 1700, the French revolution led to the development of the Savory
and Napoleon Communist Code.
 INDUSTRIAL REVOLUTION

Great Britain was the financial center of the civilized world. Industrial
breakthroughs and shifts in business forms from proprietorship to partnership and
stock companies. Accounting for depreciation has started as well as allocation of
overhead and inventory accounting. Increased government regulation of business
made new demands on firms, which also generated new accounting systems.
Increased taxation of business and individuals which brought new tax accounting
systems and procedures.

SCHMALENBACH AND THE CHART OF ACCOUNTS

Eugene Schmalenbach (German), “Standardized Accounting Chart Model”,

1927, Der Kontenrahmen. The model placed cost accounting at the center of a
coding system which attempted to mirror the “circuit” of resources to, from and
within an enterprise. Aims to act as the accounting skeleton for an organization, to
design an information system, similar to data bank, allowing rapid decision-making.

RISE OF GROUP COMPANIES AND THE NEED FOR CONSOLIDATED ACCOUNTS

The rapidity of change and the increasing complexity of the world’

acquisitions, and the growth of multinational corporations paved the way t the
development of:

 Internal and external reporting systems

 Improved control systems
 New audit and reporting procedures.

INTERNATIONALIZATION OF MARKETS AND REPORTING

A dramatic increase in foreign investments, world trade and formation of

regional economic groups such as the European Union occurred in the 20 th century.
Investors seek investment opportunities all over the world.