History of Accounting – Summary, origin and evolution

We explain the history of accounting, its relationship with mathematics and politics. Also, modern accounting.

History of accounting
Capitalism increased the need for professional accounting.

What is the history of accounting?

Accounting is a discipline in charge of measuring and analyzing the financial and equity situation of a specific individual, nation or organization, whether in the public or private sphere, in order to provide pertinent information for management and decision-making tasks.

It is a technical discipline, to which accountants or accounting professionals are currently engaged, professions that only exist from the 19th century to the present day, despite the fact that accounting has a thousand-year-old history. This is because the need to account for assets, that is, to keep a record of them for a better economic organization, it’s as old as mankind.

In fact, it is thought that was one of the reasons for the invention of writing, which just took its first steps in Mesopotamia, Egypt and other geographies as a method of representing goods, livestock or people, through signs or drawings of the same. Lists of expenses, goods received and sold, and other similar documents of around 7,000 years old are still preserved.

What’s more, the rise of the great ancient empires supposed an accumulation of economic information, productive, tax and commercial that undoubtedly represented a challenge for administrators, given their volume of transactions. Because demanded the work of accountants of some kind, that they will keep a record of what is there, what is owed, what is negotiated, what is won, what is collected in taxes, and so on.

The Roman Empire, for example, was notorious for its handling of financial information, but it was by no means the first to do so. The ancient Persians, Phoenicians, Assyrians and Sumerians already had a relative practice of accounting.

Secondly, the first texts on the art of accounting arose in the cultures in which mathematics was invented. During the Mauryan Empire (320 to 185 BC) of India, for example, the Brahmin and writer Chanakya (c. 350-283 BC) wrote his work Arthashasthra, in which he explains in detail how to keep the accounting books of a sovereign State.

Something similar was developed in the time of the Roman Emperor Augustus (63 BC-14 AD), who listed and quantified the public spending of the empire, as evidenced in the Res Gestae Divi Augusti (“The exploits of the divine Augustus”). There, a record was kept of grants, costs to war veterans, offerings, temple constructions, and so on. That is just one example of the many accounting documents that survive from Ancient Rome.

Later, accounting gained importance in medieval Europe when in the thirteenth century a monetary economy began. In fact, at that time the double entry method was introduced, which records a debit entry for each transaction (from the Latin I will debit, “Debt”) and another in credit (from Latin credere, “Believe” or “trust”).

The pioneers in the use of this methodology were the Jewish bankers of the Middle East, although they soon moved to Renaissance Italy, seat of the commercial bourgeoisie, and the first book that collects this accounting method is the Ledger of Farolfi (1299-1300 ), from Giovanno Farolfy & Company, a Florentine company based in Nimes, France.

Two other important books for the standardization of accounting at that time were:

  • The treaty Della mercatura e del mercante perfetto (“On the merchandise and the perfect merchant”) by Benedetto Cotrugli (1416-1469), Italian merchant and economist, published in 1573 for the first time in Venice.
  • Summa de Arithmetica, Geometria, Proportioni et Proportionalità (“Revision of Arithmetic, Geometry, Proportions and Proportionality”) by the Franciscan friar Luca Pacioli (c. 1445-1517), which appeared in 1494 and soon became a reference book for merchants of the time.

The advent of modernity and capitalist thinking created an even greater need for professional accounting. For instance, from 1600 the rise of joint-stock companies required new accounting information systems, which led to their division into two aspects: accounting for internal purposes (for administration), and accounting for external purposes (for financial purposes).

But modern accounting, as it is understood today, is the product of professionalization of the trade in the 19th century, especially in Scotland, where he managed to separate himself from the legal profession. Thus, in 1854, the Glasgow Institute of Accountants petitioned Queen Victoria for a Royal Charter, requesting the formalization of the accounting profession as one of tradition and respect, whose professionals came to be considered “public accountants”.

Shortly after, the first colleges for chartered accountants emerged in Wales and England in the late 19th century. With London being the financial center of the world during the Industrial Revolution, British accounting considerations soon became international norm and echoed in other nations. In the United States, for example, the first American Institute of Certified Public Accountants was established in 1887.