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Accounting Basics – The History of Accounting

December 17, 2014
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Accounting is one of the oldest professions. Accounting is at least a thousand years old and can be traced to ancient civilizations. The initial developments in the field of accounting can be traced back to ancient Mesopotamia, and is closely related to developments in writing, counting and money; ancient Iran has shown signs of an early form of bookkeeping and auditing systems of one form or the other were seen by ancient Egyptians and Babylonians. There is also evidence for early forms of bookkeeping in ancient Iran, and early auditing systems by the ancient Egyptians and Babylonians. By the time of the Emperor Augustus, the Roman government had access to detailed financial information.

But the name that emerges when we talk about accounting history is Luca Pacioli, who first described the system of double entry bookkeeping in his Summa de Arithmetica, Geometria, Proportioni et Proportionalita in 1494 which was used by Venetian merchants. The reason for this association despite accounting being in practice far into the history is because it was Pacioli who was the first to describe the system of debits and credits in journals and ledgers that is still the basis of today's accounting systems.

The History of Accounting: Industrial Revolution and the Great Depression

When you talk about history of something related to economics, finance or even accounting, industrial revolution is unavoidable. . The industrial revolution spurred the need for more advanced cost accounting systems, and the development of corporations created much larger classes of external capital providers - shareowners and bondholders - who were not part of the firm's management but had a vital interest in its results. The rising public status of accountants helped to transform accounting into a profession, first in the United Kingdom and then in the United States. In 1887, thirty-one accountants joined together to create the American Association of Public Accountants. The first standardized test for accountants was given a decade later, and the first CPAs were licensed in 1896.

Securities and Exchange Commission (SEC) was created in response to “The Great Depression” in 1934. Thereafter, all publicly-traded companies had to file periodic reports with the Commission to be certified by members of the accounting profession. The American Institute of Certified Public Accountants (AICPA) and its predecessors had responsibility for setting accounting standards until the Financial Accounting Standards Board (FASB) was established in 1973. The industry thrived in the late 20th century, as the large accounting firms expanded their services beyond the traditional auditing function to many forms of consulting.

that was the beginning of the accountancy profession that we know today!


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