History Of Accounting

Once upon a time, Luca Pacioli wrote a math book. It was just a little survey and should have been treated like ordinary books of the time and read and then disappeared into historical archives and forgotten. A few brief chapters on practical mathematics made this one special.

The time was 1494. Columbus had discovered America just two years before. The author was a Franciscan monk.

The chapter on practical mathematics addressed mathematics in business. He said that the successful merchant needs three things: sufficient cash or credit, an accounting system that can tell him how he¡¯s doing, and good bookkeeper to operate it. His accounting system consisted of journals and ledgers. It rested on the invention of double-entry bookkeeping. Debits were on the left side because that¡¯s what ¡°debit¡± meant, ¡°the left¡±. The numbers on the right were named ¡°credits¡±.

If everything was done right, then the bookkeeper could do a trial balance (¡°summa summarium¡±). Add up all the debits and then add up all the credits, he said. If everything had been done right, the totals should match. If not, ¡°that would indicate a mistake in your Ledger, which mistake you will have to look for diligently with the industry and intelligence God gave you.¡± He wrote.

Experience

Before computers came along Jack had never got a trial balance right the first time. Many hours were spent looking for the mistakes, though not necessarily with the reverent attitude that Father Pacioli advised!

Double-entry bookkeeping was so simple and met the needs of business so well that it caught on immediately.

In 1850 14 accountants offered services to the public in New York City, 4 in Philadelphia, and 1 in Chicago. The British Isles was the su...

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...ervices: 1) Compilation, 2) Reviews and 3) Audits. Auditing: The Expectation Gap covers these. Responding to public pressure, they okayed plain paper ¡°management only¡± statements in 1998.

Other countries had their own rule-making activities. As the gray areas in accounting came to be covered by rules the flexibility of accountants to accommodate the differing practices of different countries disappeared. What to do?

More rules, of course! The International Accounting Standards Commission promulgated the rules for international accounting. This was set up in Britain just before the turn of the century.

With the corporate scandals directly involving misleading accounting in the early years of the 2000¡¯s, accounting has come back to the days of 1930¡¯s. This time it did not escape direct government oversight.

And they are not living happily ever after.