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the historical development of accounting
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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.
During the 1960s, Briloff became a critic in the accounting field by raising alarm on the standards and habits that in his own opinion did not agree with t...
Wolk, H., Dodd, J., & Tearney, M. (2003). Accounting Theory: Conceptual Issues in a Political and Economic Environment (6th edition ed.). South-Western College Pub.
Accounting is considered to be a Social and institutional practice, one which is constitutive and intrinsic to social relations (Hopwood, 1994, pg1). In case of (MA), internal users like managers are provided with (MA) information (Seal, 2009, pg4). This information focuses on both human performance and product services costs. It also gives the responsibility to managers to take measures according to the planning, directing and motivating and controlling of the business (Young, 2003, chapter5). Modern managerially-run enterprises was first established by Chandler in the United States between ‘1830 to 1860’(Chandler, 1977, pg3).It makes possible the world of oligopolies, which brings imperfect competition and misallocation of resources. It is...
Until late 2002, financial reporting standards (FRS) in New Zealand were developed based on a sector neutral approach. This meant a single set of accounting standards were applied to all entities regardless of which sector they were operating in. This was achievable because when FRS was created, the financial reporting standards board (FRSB) took into account that entities in the public sector, not-for-profit sector and private sector would be applying these standards. This included having to think about a broad range of transactions, different reasons for carrying out transactions, the readers of financial statements for all sectors, and the information that those readers needed (Brady, 2009). Not only did FRS account for the range of entities that would be applying the standards but it was also written in a language that was appropriate and made sense for all entities in each sector (Brady, 2009). However, since the decision to
creating situations where ethical issues such as independence and integrity are questioned making it imperative that the AICPA create guidelines from which the evolving profession must base itself. In the age of deregulation accounting jumped on the boa t, now it is becoming increasingly fashionable to re-regulate, accounting, as a profession must not miss that boat, lest they drown in the result-- government intervention.
The USA exercises great influence on the existing accounting standards all over the world. The USA espouses the Financial Accounting Standards Board (FASB), which has set forth many standards that are applied by the international accounting standards boards. On the other hand, the rest of the countries of the world follow the International Accounting Standards Board (IASB), which is designed to realize convergence in accounting standards globally (IASB international, 2010) to develop International Financial Reporting Standards.
Hines, R. D. (1991). The FASB’s conceptual framework, financial accounting and the maintenance of the social world. Accounting organizations and society, 16(4), 313-331.
To understand the basics of accounting a person needs to understand the steps involved. Each step is necessary in order to provide complete and accurate financial stat...
Accounting systems in Saudi Arabia was shown to be imported from developed countries. Although in Saudi Arabia, the accounting principle and structures were primarily constructed from Western countries, the new accounting system has been reformed to adapt the unique Saudi Arabian environment. The various factors might explain how the new accounting system emerges. This paper will analyze how the three main factors-economy environment, taxation policies and foreign accounting standards and principles affect accounting systems in Saudi Arabia.
Throughout the past several years major corporate scandals have rocked the economy and hurt investor confidence. The largest bankruptcies in history have resulted from greedy executives that “cook the books” to gain the numbers they want. These scandals typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of assets or underreporting of liabilities, sometimes with the cooperation of officials in other corporations (Medura 1-3). In response to the increasing number of scandals the US government amended the Sarbanes Oxley act of 2002 to mitigate these problems. Sarbanes Oxley has extensive regulations that hold the CEO and top executives responsible for the numbers they report but problems still occur. To ensure proper accounting standards have been used Sarbanes Oxley also requires that public companies be audited by accounting firms (Livingstone). The problem is that the accounting firms are also public companies that also have to look after their bottom line while still remaining objective with the corporations they audit. When an accounting firm is hired the company that hired them has the power in the relationship. When the company has the power they can bully the firm into doing what they tell them to do. The accounting firm then loses its objectivity and independence making their job ineffective and not accomplishing their goal of honest accounting (Gerard). Their have been 379 convictions of fraud to date, and 3 to 6 new cases opening per month. The problem has clearly not been solved (Ulinski).
Lucas Pacioli was the first to describe a system of debts and credits in accord with journals and ledgers in 1494. These basics came together to be the concoction for what is known as accounting. Since the formal establishment of accounting in 1494, the field has expanded as the demands of the ever-changing economy became greater. The industrial revolution created the first jump in the field forcing the creation of sectors within. Since this first creation of sectors, accounting as a field has been creating more specific sects to accommodate a large variety of areas. The most common and large sects created this far include public and private accounting. Although both sects carry the same basis for their work, the variation between the two lies in their demographic, demands, and decoration.
Over the years materiality has changed and evolved in various ways to reach the point where it is today. We will now take a look at some of the major changes in materiality over the past century. With respect to events prior to 1950, it is important to know that Generally Accepted Auditing Standards (GAAS) were publicized in October 1947; however, they were not yet elabo¬rated upon (Selley 2010). This means that while the standards were created they were not well researched or very specific at this point. Next we will talk about one of the largest changes in the history of auditing with respect to materiality. Starting in the U.K. in 1900 the use of the phrase “true and correct” was changed to “true and fair” (Selley 2010). This was a big turning point for auditing because not on...
The third organization that helps to regulate the accounting standards is the IASB. “Our mission is to develop, in the public interest, a single set of high quality, understandable and international financial reporting standards (IFRSs) for general purpose financial statements”(IASB 2008,¶ 1). The IASB consists of a board that is made up from nine different countries with the sole purpose of expanding accounting standards. Their main hope and goal is to one day that there will be only one set of accounting standards that will be used throughout the world.
In attempting to explain why double entry bookkeeping developed in fourteenth century Italy instead of ancient Greece or Rome, accounting scholar A.C. Littleton describes seven "key ingredients" which led to its creation. Those key ingredients consisting of private property, capital, commerce, credit, writing, money and arithmetic. Most of these did not exist in ancient times. This alone would not lead someone to create a complete and involved accounting system. Writing, for example, is as old as civilization itself, but arithmetic - the systematic manipulation of number symbols - was really not a tool possessed by the ancients. Fairly, the persistent use of roman numerals for financial transactions long after the introduction of Arabic numeration appears to have delayed the earlier creation of double-entry systems. However, the problems encountered by the ancients with record keeping, control and verification of financial transactions was not entirely different than our own today. Governments had strong incentives to keep careful records of receipts and disbursements -for the most part as concerns taxes. In any society where individuals accumulated wealth, there was a desire by the rich to perform audits on the honesty and skill of slaves and employees entrusted with asset management. But the lack of the above-listed antecedent to double entry bookkeeping made the job of an ancient accountant extraordinarily difficult. In societies where nearly all were illiterate, writing materials costly, numeration difficult and money systems inconsistent, a transaction had to be extremely important to justify keeping an accounting record.
The purpose of this document is to describe the nature, purpose and scope of accounting and it deliberately explains the details of each category in accounting. Accounting involves in preparing financial documents of an entity by analyzing, verifying, and reporting this records. It emphasizes its major characteristic role in field of banking and finance, with a mixture of supportive sub topics.