History of Bookkeeping and

Accounting
Scribe - Sakkara about 2500 BC (Louvre)

The Ancient World

Medieval Developments
Industrial Revolution
The “Near East” – Cradle of Civilization

Ancient Names
 Sumeria
 Assyria
 Mesopotamia
 Babylon
 Persia
Dawn of Civilization
 Transition from
hunter/gather to
farmer
 Jordan River Valley
 Jericho – Oldest
fortified city
discovered so far
 Artifacts date back
some 10,000 years!
“Jerry of Jericho”
The First Inventory
Scribe - Sakkara about 2500 BC (Louvre)

 Who was the first

accountant?
 Someone who
needed to keep
track of what was
stored in temple or
king’s granary?
 Must “writing” come
before record
keeping?
 Which came first – writing or numbers?

 Dr. Gunter Dreyer of the German Institute

of Archaeology is perhaps the most
prominent of a number of archeologists
who believe that writing actually
developed out of early marks that were
used to tally the kinds and amounts of
goods in stock at ancient warehouses
Earliest writing = inventory control!
 Dr. Dreyer recently discovered
numerous inscribed bone
labels attached to bags of oil
and linen in the tomb of King
Scorpion I at Abydos, Egypt.
 The labels date back 5300
years, are the world's earliest
known writing, and describe
inventory owners, amounts,
and suppliers.
 One of the Oldest Professions!

 Inancient Egypt, the accountant

was called the "eyes and ears" of
the king.
 Simple Token System
 Token system
Simple token system
expandeddid –not
used
require
as
abstract concepts
evidence of transactions
of numbers, writing or
money!
 Clay “envelopes” date from around 4000 BC in
Sumeria

Envelope & tokens - Susa, 3300 BC (Lourve)

 Accounting pre-dates writing!
 Complex tokens evolved about 3700
BC
 Use of lines, notches and other
markings used as abstract
representations of wealth and the
development of numbers
 Evolved into
cuneiform

Accounting records on pre-cuneiform tablet (Louvre)

 Cuneiform Collection – SMM 7

Translation: 
1.  3 acres barley, for harvest,
2.  Field of the Ash Trees
3.  Dada, the swineherd
4.  Seal(Ed by) Lugal-ema e
5.  Month of barley harvest,
6.  year Huhnuri was destroyed.
 Sealing Tablets

This tablet is a
receipt for beer,
sealed by a clerk
named Umani.

Source: - Science Museum of Minnesota

http://www.smm.org/research/Anthropology/cuneiform/sealing.php
Babylonia – Base 60 numerals
 Here are the 59 symbols built from
just two symbols
Ancient Egyptian Numbers

“Zero” had not yet

been “invented
Sticks & Strings

Other
accounting
systems for
illiterate ages
and societies
 The Inca Quipu
 The Inca (unlike the
Maya and Aztec) had
no true form of writing
 Tally Sticks

These sticks recorded expenses for illiterate servants and

masters.  As money or goods changed hands, the tally
sticks were carved with v-shaped grooves for "pounds,"
rounded grooves for "shillings," and slices for "pense." 
At the end of a transaction, the stick would be split
lengthwise and divided between the debtor and the
creditor until the debt was paid.
Invention of Money
Coins appear to be a simultaneous but
independent development at about the
same time in China, India, and Greece

                    

First coin of India (?)

Before 5th Century BC
Minted in Madhyadesha?, found near Mathura
Silver unit Seven punch marks
Weight: 7.14 gm
Numismatic Digest # 22
Rare

http://www.med.unc.edu/~nupam/ancient1.html
Invention of Coins – around 630BC

 Castulo AE30. Augustus' (?) portrait right / Helmeted Sphinx right, star
before, Iberian legend in ex. - photos from
http://www.wildwinds.com/coins/sg/sg0015.html
Ancient Greece
 The public economy
of the Athenians had a highly
developed system of accounting
& auditing
 Treasurer or manager of Public
Revenue
 Accounts kept by clerks and
controlled by “checking clerks”
 Accountability assured by public
exposure of accounts on stone
Ancient Rome
 Practices of private life led to public
accounting process
 Transactions were first entered in a “day
book” (memorandum or “adversaria” in
Latin)
 Monthly, the entries were transferred to
the ledger (“codex tabulae”)
 The codex could be used in court to

substantiate contracts and claims

 In government – separation of
responsibilities
China
 Accounting largely used to evaluate
efficiency of governmental
programs and civil servants
 To date, no evidence of double-
entry bookkeeping before
introduction from west in 1800s
The Rise of Double Entry

Crusades – demand for exotic goods

Genoa-Venice-Florence: A
Commercial Revolution
 Littleton’s Antecedents of Bookkeeping

1. Private property 5. Writing

(power to change 6. Money
ownership) 7. Arithmetic
2. Capital
(wealth productively
 The antecedents then
employed)
require:
3. Commerce  A methodology (a plan to
(exchange of goods) systematically rendering the
4. Credit material into the language)
(present use of future
goods)
The Father of Accounting:
Frater Luca Bartolomes Pacioli

 He was born in 1445

Traditional
in Sansepolcro, Italy.
 A dedicated
Franciscan, he
showed a passion for
mathematics
 Did not invent double
entry – but wrote the
most influential early
“textbook”
1494 – The Summa
 The treatise’s official
title: "Summma de
Arithmetica,
Geometria: Proportioni
et Proportionalita"
 One section of the book
was devoted to methods
of recording merchant
transactions, including
ideas about double-entry
bookkeeping.
Numbers in Medieval Bookkeeping
 Even though the Italian merchants
calculated with Arabic numerals as early as
the 13th century, Roman figures dominated
in their account books until the late 15th
century (but with decreasing frequency).
 Use of Roman numerals persisted in northern
Europe even longer as double entry moved north
gradually
 The prolonged use of the ’old’ writing style
is mostly explained by with the general
belief of the contemporaries that the
Roman were forgery-proof.
Sombart’s Theory (1924)
 Double entry bookkeeping was
such a powerful tool that it
made possible the new social
and economic system which we
call capitalism

 “chicken and egg” arguments!

Rise of Cost Accounting
 Josiah Wedgwood – Entrepreneur &
Cost Accountant
 1770-2 financially difficult times with
dropping demand and rising inventories
 Found head clerk had been embezzling
 Began looking at costs of materials and
labor & allocated overhead costs
 Discovered economies of scale –
importance of volume
 Started differential pricing – elite vs.
mass-market
 New manufacturing equipment introduced
 The Abacus
 The Abacus is an ingenious counting device based on
the relative positions of two sets of beads moving on
parallel strings. The first set contains five beads on each
string and allows counting from 1 to 5, while the second
set has only two beads per string representing the
numbers 5 and 10. The Abacus system seems to be
based on a radix of five. Using a radix of five makes
sense since humans started counting objects on their
fingers.

http://www.xnumber.com/xn
umber/mechanical1.htm00
The Exchequer
 in British history, the government
department that was responsible for
receiving and dispersing the public
revenue. The word derives from the
Latin scaccarium, “chessboard,” in
reference to the checkered cloth on
which the reckoning of revenues
took place.
Technology Changes What’s Possible
in Accounting

 William Seward
Burroughs
invented and
patented the first
workable adding
machine in 1885 in
St. Louis, Mo.
 Production
increased
dramatically after
1900
SOURCE:
 Accounting History for Students
 Link:
http://is.vsfs.cz/el/6410/zima2013/
NA_AS/Accounting_History_for_stu
dents.ppt?lang=en
by Nelson Education Ltd.

BOOKKEEPING AND
ACCOUNTING DEFINED
 PowerPoint® Slides
to accompany

Basic Bookkeeping,
Seventh Edition
Prepared by
JD Chazan CPA, CA
National Taiwan University

Copyright © 2015 by Nelson Education

Ltd.
 DEFINING BOOKKEEPING
 What is bookkeeping?
 Keeping track of money-related activities for an individual
or a business
 Systematic and chronological recording of business
transactions of events. This is the record-making phase of
accounting. Bookkeeper is the person recording the
transactions of the business. (Arellano and Caballero 2012)

 What kinds of money-related activities?

 Cash received
 Cash paid out
 Sales
 Purchases
 Others activities
 DEFINING BOOKKEEPING
 What kinds of money-related activities?
 Cash received
 Cash paid out
 Sales
 Purchases
 Others activities
 DEFINING BOOKKEEPING
• Personal  Bookkeeping for
Bookkeeping Business
• Cash received  Cash received
• Cash paid out  Cash paid out

• Things owned  Sales

• Debts owed  Purchases

 Things owned

 Debts owed
Chapter 17

Understanding
Accounting
and Financial
Information

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
DEFINING ACCOUNTING
 Accounting -- Recording,
classifying, summarizing and
interpreting of financial events and
transactions in an organization to
provide interested parties needed
financial information.
DIFFERENCE BETWEEN
ACCOUNTANY AND BOOKKEEPING.
 BOOK KEEKPING IS MERELY RECORDING
THE BUSINESS TRANSACTIONS IN BOOKS
AND LEDGERS .
 ACCOUNTANCY IS WIDER CONCEPT:
COMPLIATION OF ACOUNTS IN SUCH A
WAY THAT ONE IS IN A POSITION TO
UNDERSTAND STATE OF AFFAIRS OF
BUSINESS.
DIFFERENCE BETWEEN
ACCOUNTANY AND BOOKKEEPING.
 STATE OF AFFAIRS OF BUSINESS.
 USERS OF FINANCIAL STATEMENTS ARE
INCOME TAX DEPAREMENT, ST
DEPARMENT SHAREHOLDERS,
INVESTORS ,BANKS AND FIS AND SO ON.
 IT IS IN THE INTEREST OF ALL THAT
FINANCIAL STATEMENTS REFLECT TRUE
AND FAIR VIEW OF STATE OF AFFIAIRS OF
AN ENTITY.
Presentation Source:
http://www.cengage.com/resource
_uploads/downloads/0176530827_
416202.ppt
Copyright © 2015 by Nelson
Education Ltd.
PURPOSE OF ACCOUNTANCY
 TO KEEP A SYSTAMATIC RECORD
 TO ASCERTAIN THE RESULTS OF
OPERATIONS
 TO ASCERTAIN FINANCIAL
POSITION OF BUSINESS.
 TO FACILITATE RATIONAL
DECISION MAKING
 TO SATISFY REQUIREMENT OF LAW
AND USEFUL IN MANY RESPECTS.
 Users of
Accounting information
“Accounting is a service activity. Its
function is to provide qualitative
information, primarily financial in
nature, about economic entities that
is intended to be useful in making
economic decision.”
 Users of Accounting Information

External Internal Users

Users

• Lenders • Consumer Groups • Managers • Sales Staff

• Investors • External Auditors • Officers • Employees
• Government • Customers • Internal Auditors• Owners
s
 Users of Accounting Information

External Users Internal Users

Financial accounting Managerial accounting

provides external users with provides information needs
financial statements for internal decision makers
(shareholders, lenders, etc.). (officers, managers, etc.).
 Employees
“Employees are entitled to bonus at the end
of the year , which is linked to the profit
earned by an enterprise there fore , the
employees are interested in financial
statement. Thus , the financial statement
also reflect whether the enterprise has
deposited its dues into the provident funds
and employees state insurance etc…….”
 Employees will, therefore look for
information on:
 Revenue and profit growth

 Levels of investment in the business

 Overall employment data (numbers

employed, wage and salary costs)
 Status and valuation of company pension
schemes / levels of company pension
contributions
 OWNERS

“Owners contribute capital in the business

and are exposed to maximum risk. Thus, they
are interested in knowing the profit or loss by
the business besides the safety of their
capital. As a result the financial statement
give the information about the profit or loss
and financial position of the business.”
 Lenders/Creditors

“Banks and loan stockholders who

lend money to a business require
information that helps them
determined whether loans and
interest will be paid when due.”
 The key accounting information for
lenders is therefore:
 Cash flow

 Securityof assets against which

the lending may be secured

 Investment requirements in the

business
 Investors
“Investors are concerned about risk and
return in relation to their investments. They
require information to decide whether they
should continue to invest in a business. They
also need to be able to assess whether a
business will be able to pay dividends, and
to measure the performance of the business
management overall.”
 The key accounting information for an investor is therefore:

 Information about growth - sales, volumes

 Profitability (profit margins, overall level of

profit)

 Investment (amounts invested, assets owned)

 Business value (share price)

 Comparative information of competitors

 Creditors
“Suppliers and trade creditors requirement
information that helps them understand and
assess the short-term liquidity of a business. Is
the business able to pay short-term debt when
it falls due?”
 Creditors will, therefore, be looking
for information on:
- Cash flow

-Management of
working capital

- Payment policy
 Public at Large

“Public want to see the business running since it

makes substantial contribution to the economy in
many ways . Eg. Employment of people, patronage
to suppliers, etc. Thus, financial accounting
provides useful financial information to various
users group for decision making. ”