All About Accountancy

Accounting's early years:

The history of accounting is closely linked to the development of human society and commerce. Actually represents a significant contribution to both over the past five and a half thousand years.

The origin of the accounts can be traced back to at least 3600BC when trade between tribes in the region of Mesopotamia required records must be kept in stone and clay tablets. In these times 'scribes' who possessed knowledge of writing also served as auditors.

It is believed that many of the first examples of what we call 'write' was actually records of transactions made more than 5,000 years ago. Some researchers believe that even then there were accounting systems in use, there were colleagues to our modern ledgers and receipts.

Accountants and auditors in ancient Egypt:

The ancient Egyptians had a far more sophisticated system, thanks to their advanced distribution systems have required large quantities of various commodities to be stored in warehouses and paid during periods when necessary.

Keep track of where the goods were and what had been consumed, there were a number of the scribes, the amounts coming into the store and another set of scribes, who recorded outward flows.

A third set of scribes acted as auditors, which compares the two sets of records and check them against the remaining quantities in the warehouses. It was a simple way to ensure that the Pharaoh had not been cheated in the operations were carried out.

Rulers during this period also, the documentary being prepared for tax purposes. The Roman Empire was run for profit and necessary to identify the location and ownership of wealth, so a portion may be extracted and sent back to finance expenditure and extravagance of its emperors.

Currencies made calculations easier:

The development of currency, gave impetus to the growth of accounts when it has made it much easier to produce records of transactions. Instead of assessing the value of livestock or agricultural products, it was much easier to record information of precious metal or embossed coins.

At first clay tokens etched with symbols to represent commodities were used as marketing pieces, later around 600BC coins of precious metal came to have their own representative value and can be exchanged for commodities.

Accounting system as we know it today developed in the 14th century in the Italian city of Florence, Genoa and Venice. These cities were centers of maritime commerce, banking, and their wealthy merchants are required to keep accurate records of financial transactions.

The first double entry:

We know that the double-entry bookkeeping was in use in 1300 AD. Accounts from the time established by Amatino Manucci, partner in the firm Giovanni Farolfi & Co. in Florence, have been recovered, and shows a complete double-entry bookkeeping system in place.

Thanks in no small part of its advanced system of accounts, and Italy soon became Europe's banking capital and the richest country on the continent. The concentration of wealth and power in Italy led to an improvement and standardization of accounting practices based on the "Italian method", which quickly spread across Europe.

Perhaps most surprising is how little bookkeeping methods have changed since the Middle Ages. Writings by Luca Pacioli, a monk who in 1494 produced a book on mathematics that described the accounting systems in use at the time, describes the procedures that would be recognized by modern accountants.

The biggest differences between modern accounting practices and what was called "method of Venice" is necessary improvements to accommodate the larger size of modern firms than is found in Pacioli time.

The relatively small sole proprietorship of the 15th century Italy has no need for specialized journals, subsidiary ledgers, controlling accounting, auditing, formal systems, costing or very detailed budgeting. These evolutionary development, but was built on land that is more than 500 years ago.