Accounting, often referred to as the “language of business,” has a rich history that spans thousands of years and is said to have developed alongside writing, counting, and money.
It has evolved from simple record-keeping methods to sophisticated financial systems of today’s world.
Let’s journey through the history of accounting, tracing its development and innovations up to the present day.
The Dawn of Accounting
Accounting has been an essential part of human history for centuries. Its roots can be traced back to ancient civilisations such as Mesopotamia, Egypt, and Rome, where simple tally sticks and clay tablets were used for record-keeping.
For instance, the earliest known records of financial transactions were discovered on clay tablets in Mesopotamia, dating back to 3000 B.C. These records primarily involved agricultural production, barter, and taxation.
The ancient Egyptians used papyrus scrolls to document their financial dealings, including trade, tax collection, and resource management. They may have even had someone in the role of comptroller.
The early Egyptians and Babylonians created auditing systems, while the Romans collated detailed financial information.
As early as 300 B.C., Iran employed some of the first accountants who used tokens and bookkeeping scripts. Around the first millennium, the Phoenicians developed an alphabetic system specifically for bookkeeping.
The Father of Accounting and the Birth of Double-Entry Accounting
Benedetto Cotrugli, a Ragusan economist and scientist, is said to have been the inventor of the double-entry accounting system in 1458, an invention that revolutionised accounting.
Benedetto’s 1458 manuscript Della mercatura e del mercante perfetto is followed by an appendix containing an inventory and many journal entries.
But the father of modern accounting is the Italian mathematician and Franciscan monk, Luca Bartolomes Pacioli.
While he was not the inventor of accounting, Pacioli wrote about the system of double-entry bookkeeping used by Venetian merchants in his book Summa de Arithmetica, Geometria, Proportioni et Proportionalita (“The Collected Knowledge of Arithmetic, Geometry, Proportion, and Proportionality”) in 1494, which included a 27-page treatise on bookkeeping (which was the first known published work on the topic of double-entry bookkeeping).
In addition to this, Pacioli wrote many books on accounting and invented a system of record keeping that used a memorandum, journal, and ledger.
One chapter of his book, “Particularis de Computis et Scripturis” (“Details of Calculation and Recording”), on the topic of record keeping and double-entry accounting, became the reference text and teaching tool on those subjects for hundreds of years.
The chapter provided knowledge on the usage of journals and ledgers, as well as accounting for various elements such as assets, receivables, inventories, liabilities, capital, income, and expenses. It also emphasised the importance of maintaining a balance sheet and an income statement.
Following the publication of his book, Luca Pacioli received an invitation to teach mathematics at the Court of Duke Lodovico Maria Sforza in Milan.
Among Pacioli’s students was the renowned artist and inventor Leonardo da Vinci, with whom he developed a close friendship.
Da Vinci illustrated Pacioli’s manuscript titled “De Divina Proportione” (“Of Divine Proportion”).
In return, Pacioli taught da Vinci the mathematics of perspective and proportionality.
How Britain Modernised Accounting
The origins of the modern accounting profession can be traced back to the mid-1800s in Britain.
The first professional bodies for accountants were established in Scotland in 1854, beginning with the Edinburgh Society of Accountants and the Glasgow Institute of Accountants and Actuaries.
The Institute of Accountants in Glasgow sought a Royal Charter from Queen Victoria to differentiate accountants from solicitors. Previously, accountants had been part of solicitors’ associations, providing accounting services alongside legal services.
The petition, signed by 49 accountants from Glasgow, emphasised that accounting had long been a separate and respected profession in Scotland, with the number of practitioners rapidly increasing.
The petition also highlighted the diverse skills required to be a professional accountant. In addition to mathematical proficiency, accountants needed a good understanding of general legal principles, as they often provided financial evidence in court.
As a result, the organisations were granted a royal charter. From 1854, members of these organisations adopted the title of “chartered accountants,” a term that still holds legal significance globally.
Similar organisations for chartered accountants have been established worldwide. In the United States, the American Institute of Certified Public Accountants was founded in 1887.
The Industrial Revolution and Technological Advancements
By the mid-1800s, Britain was well into the industrial revolution, and London stood as the global financial hub.
The rise of limited liability companies and large-scale manufacturing and logistics created a surge in demand for technically skilled accountants who could navigate the increasingly complex world of global transactions.
As companies multiplied, the need for trustworthy accountancy skyrocketed, solidifying the profession as an integral part of the business and financial system. This growing importance of accountants led to the professionalisation of accounting, first in the UK and later in the US.
In 1904, eight individuals established the London Association of Accountants, aiming to broaden access to the profession beyond the older associations in the UK.
After several name changes, the association eventually became known as the Association of Chartered Certified Accountants (ACCA) in 1996.
The Rise of Accounting Systems
The 1970s and 1980s marked the emergence of accounting software packages which brought efficiency to various accounting processes.
These software solutions simplified bookkeeping, helped generate financial statements, and allowed businesses to maintain better control over their finances.
However, these early systems still required manual data entry and were limited in their capabilities.
The Next-Gen Accounting Automation Software
Today, we find ourselves at the forefront of a new era in accounting, with the advent of next-gen accounting automation software like FinanSys Apps.
This cutting-edge software leverages the power of artificial intelligence (AI) and machine learning to streamline and automate a wide range of accounting processes.
Unlikely Accountants: Celebrities in the World of Finance
While we’ve explored the evolution of accounting from its inception to the present day, it’s fascinating to note that accounting has played a role in the lives of some well-known celebrities.
Here are a few individuals who, at one point in their lives, pursued a path in accounting:
- Mick Jagger: The iconic rockstar studied Accounting and Finance at the London School of Economics on a scholarship, but the allure of the stage led him away after just a year.
- Janet Jackson: Before joining her family’s musical dynasty, Janet Jackson studied accountancy. She has humorously remarked that, “if I wasn’t singing, I’d probably be an accountant.”
- Eddie Izzard: The successful British comedian initially pursued an accounting degree at Sheffield University but chose to take a different path after facing challenges with his exams, ultimately finding his calling in stand-up comedy.
- Robert Plant: The rock legend, known for fronting Led Zeppelin, had a brief stint attending private accountancy tutoring as insisted by his father before embracing his role as a music icon.
- John Grisham: The best-selling author of legal thrillers, including “The Firm” and “The Pelican Brief,” initially studied Accounting with plans to become a Tax Lawyer. Instead, he utilised his knowledge to write gripping novels that have sold over 275 million copies worldwide.
- Kenny G: The renowned smooth jazz musician holds a degree in Accounting from Washington University, showcasing the diverse paths that accounting graduates can take.
- J.D. Rockefeller: One of the richest individuals in modern history started his career as an assistant bookkeeper for a shipping company, proving that even the most influential figures can have humble beginnings in accounting.
- Venus Williams: The tennis professional and former world number 1 completed her degree in Business Administration at Indiana University, although accounting wasn’t her ultimate calling.
- Chuck Liddell: In the world of martial arts and as a former UFC Light Heavyweight Champion, Chuck Liddell has a surprising background in accounting, demonstrating the unexpected intersections of different fields in one’s journey.
These celebrities not only add an intriguing dimension to the world of accounting but also exemplify how one’s career can take unexpected turns, ultimately leading to success in various fields.