Historical Development of Accounting

Introduction 

Accounting History is a specialist, international peer-reviewed journal that encourages critical and interpretative historical research on the nature, roles, uses and impacts of accounting and provides a forum for the publication of high quality manuscripts on the historical development of accounting across all organizational forms. The journal is acknowledged as a premier journal in its field and is a prized resource for academic, practitioners and students who seek to augment understanding of accounting's past and use that understanding to elucidate accounting's present and its p   ossible future development. Accounting History is the official journal of the Accounting History Special Interest Group of the Accounting and Finance Association of Australia and New Zealand. It is believed that the very origins of writing itself may have developed out of early marks used to keep account of goods at ancient warehouses more than 5,300 years ago. The notion that pre-numerical counting systems pre-dated even written language, didn’t come as a surprise to many historians and archeologists who have long since recognized that the history of human civilization is largely indistinguishable from the history of commerce.

Early Accounting

Accountancy has its roots in the earliest history of civilization. With the rise of agriculture and trade, people needed a way to keep track of their goods and of transactions. Around 7500 B.C., Mesopotamians began using clay tokens to represent goods, such as animals, tools, food items or units of grain. This helped owners keep track of their property. Instead of counting heads of cattle or bushels of grain every time one was consumed or traded, people could simply add or subtract tokens. Different shapes were used for different goods. Around 4000 B.C., the Sumerians began placing these tokens in sealed clay envelopes. Each token would be stamped into the clay of the outside of the envelope, so the owner would know how many tokens were inside, but the tokens themselves would be kept safe from tampering or loss. This practice of pressing the tokens into the clay may have been the earliest genesis of writing. A few hundred years later, more complex tokens began to be used. These tokens had special markings to denote different units or types of goods. Starting around 3000 B.C., the Chinese developed the abacus, a tool for counting and calculating.

The history of accounting is closely linked to the development of human society and commerce. In fact, accounting has made significant contributions to both over the past five and a half thousand years.The origins of accounting can be traced back to at least 3600BC when trade between tribes in the region of Mesopotamia required records to be kept on stone and clay tablets. In those times the ‘scribes’ who possessed a knowledge of writing also served as bookkeepers.It is believed that many of the first examples of what we call ‘writing’ were actually records of transactions carried out more than 5,000 years ago. Some scholars believe that even then there were accounting systems in use that had counterparts for our modern ledgers and receipts.

Accountants And Auditors in Ancient Egypt

The ancient Egyptians had a far more sophisticated system, thanks largely to their having advanced systems of distribution that required quantities of various commodities to be stored in warehouses and disbursed over periods of time as required. To keep track of where goods were and what had been consumed, there was one set of scribes that recorded amounts brought into the warehouse and another set of scribes that recorded outwardmovements.

A third set of scribes functioned as auditors, comparing both sets of records and checking them against the quantities remaining in the warehouses. It was a simple way to ensure that the Pharaoh wasn’t being cheated in the transactions that were carried on. Rulers of that period also required accounting records to be compiled for the purpose of taxation. The Roman Empire was run for profit and needed to identify the location and ownership of wealth so a share could be extracted and returned to finance the expenses and extravagances of its emperors.

I n 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:

Private property: The power to change ownership, because bookkeeping is concerned with recording the facts about property and property rights;

Capital: Wealth productively employed, because otherwise commerce would be trivial and credit would not exist;

Commerce: The interchange of goods on a widespread level, because purely local trading in small volume would not create the sort of press of business needed to spur the creation of an organized system to replace the existing hodgepodge of record-keeping;

Credit: The present use of future goods, because there would have been little impetus to record transactions completed on the spot;

Writing: A mechanism for making a permanent record in a common language, given the limits of human memory;

Money: The "common denominator" for exchanges, since there is no need for bookkeeping except as it reduces transactions to a set of monetary values; and

Arithmetic: A means of computing the monetary details of the deal.

Many of these factors did exist in ancient times, but until the middle ages they were not found together in a form and strength necessary to push man to the innovation of double entry. 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. Rather, the persistent use of roman numerals for financial transactions long after the introduction of Arabic numeration appears to have hindered the earlier creation of double-entry systems.

Nevertheless, the problems encountered by the ancients with record keeping, control and verification of financial transactions were not entirely different than our own today. Governments, in particular, had strong incentives to keep careful records of receipts and disbursements - particularly as concerns taxes. And 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 antecedents 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.

Accounting In Mesopotamia, Circa 3500 B.C.   

German archaeologists say carbon dating places the age of the tablets at 3300 BC to 3200 BC More than two-thirds of the translated hieroglyphic writings, on small pieces of clay tablets and the sides of jars, are tax accounting records. The discovery was met with interest by historians, who have generally regarded the Sumerians of the Mesopotamian Valley (present-day Iraq) as the first people to employ writing - also for accounting purposes (see main text). The oldest existing Sumerian writings are believed to have been made sometime before 3000 BC.

Although Oxford University Professor of Egyptology John Baines views the Germans' discovery as "very important," he was quoted by the Associated press as saying, "I would say it is likely that writing was invented in both places (Egypt and Mesopotamia)." Most of the writings were accounts of linen and oil delivered to King Scorpion I in taxes, short notes, numbers, lists of kings' names and institutions. While hieroglyphic symbols are employed, it is considered true writing because each symbol represents a consonant for the spoken word.

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