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History of Accounting Practices

1014 words (4 pages) Business Assignment

12th Oct 2020 Business Assignment Reference this

Tags: Business AssignmentsAccounting

This essay tries to say “accounting is considered as one of the world’s oldest professions.” This may reveal the origin of accounting and how the accounting practices have changed over the time. Accounting has the long history that runs over large number of past centuries. By now, the accounting profession has developed over those centuries and has a good status within the modern economy. Therefore, nowadays accounting profession is also called as “Language of Business.” There are so many considerable parties use accounting services in their day to day economic activities.

Accounting is a system that records and summarizes the business data, and generate valuable information on their users such as creditors, investors, customers and governments, etc. Accounting has evolved just after people started to trade between each other. Early evidences on accounting can be found among Egyptians and Mesopotamians who has used clay tablets as early as 2000 to 3300 B.C. In 15th century Luca pacioli who is widely known as father of accounting, created a basic simple system for accounting.  And it was recorded in his book “The Collected Knowledge of Arithmetic, Geometry, Proportion and Proportionality” in 1494. He created journals, ledgers, receivables, inventories, closing entries and trial balances in his system and these methods are still used today. Double entry book keeping is one of a major discovery in the ancient accounting profession which involves debit and credit entries for business transactions. Before computerized accounting, there was a manual record keeping system. That leads to time consumption, more mistakes and frauds etc. However, those problems are eliminated through computerized accounting systems. It leads to lower level of mistakes and errors, speed the accounting procedures, simplify the accountants’ workload. 

According to Dabor, (2008)   there are four stages of the accounting development. The first stage is “Pre capitalist period”. This era is starts with mesapothemian civilization and ends with geek and roman era. The era is non-economic. Accounts are recorded for public work by the government, lists of cattle and goods on landed estates, army pay sheets… etc. the second stage is “Commercial capitalism”. Money was in the trade and people sold thing on cash in this era. The investments were too short. Development of the trade and accounting practices it has led to bookkeeping. The third stage is “Industrial capitalism” which occurred industrial revaluations in most countries. This period used double entry bookkeeping instead of single transaction recordings. “Financial capitalism” is the fourth stage. In this stage they try to separate expenditures between capital and revenue, fixed assets valuation, calculating the profit etc.

The modern accounting practices and processes are not a sudden event over a one night. It took much time to develop and enhance up to now. But the fantastic is, Pacioli’s accounting system has not much changed over past 500 years. “The modern trial balance sheet came about in 1868, and statements of financial position in the 1980s.” (The Origin of Accounting). The accounting basics were not changed over the time. They remain stable as many long ago. However, the accounting regulations, methods and accountants have changed over the time.

Nowadays businesses do not wait longer days to prepare their financial statements. With the advancements of information and communication technology businesses can prepare their financial statements within few seconds. They provide reliable and valuable information within the framework of accounting processes and information and communication technology. The cloud computing has made a huge impact on accounting that creating mobility and connectivity among accountants. As a result, accountant can work on his client beyond global reachable restrictions.

The person who bear the responsibility on financial performances is called as “accountant”. They are very essential to attract investors and other parties. “Chartered accountants were the first accountants to form a professional accounting body, initially established in Scotland in 1854.” (Chartered accountant, 2019). Organizations for chartered accountants now have been formed all over the world. Along the evolution of the accounting history, we can see there is specialization has occurred among accounting activities. Although small businesses use same accountant for handle all financial and management accounting practices large scale businesses use number of accounting professionals to handle the accounts such as account receivable/payable handler, payroll handler, bookkeeper, taxation officer, auditor, Chief financial officer, etc. They take part of responsibility of whole accounting process. Because of wide range of institutions in the world, countries try to create their own standards and rules complying with world accounting standards. Also, nowadays, the whole globe has linked together, therefore the accounting profession also has linked together. Now it is very stronger than earlier.

The discovery of all changes and enhancements in the past cannot be clearly identified. Anyhow, there are significant changes and improvements has occurred in accountancy profession as stated above and significant changes will be expected in the future. “The accounting profession has a long history with its origins in the earliest transactions conducted by humans. It remains a robust, respected and essential profession today.” (The Origin of Accounting).

References

  • Chartered accountant. (2019, 8 10). Retrieved from Wikipedia: https://en.wikipedia.org/wiki/Chartered_accountant
  • Dabor, E. L. (2008). Basic Business Accounting. Benin City: Dan Diamond Publisher.
  • The Origin of Accounting. (n.d.). Retrieved from New England College: https://www.newenglandcollegeonline.com/resources/accounting/the-origin-of-accounting/

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