Welcome to a short overview of the history of accounting in Western Civilization, in
a “big picture” kind of way.
This video takes you through five major eras of development in the history of accounting,
and highlights the major breakthroughs, many of which are relevant up to this present day!
What’s the essence of the accounting profession?
It hasn’t changed that much over time.
Accountants are here to record your transactions.
The core part of the word “accounting” is: “count”.
We help you count, record, classify, summarize, reconcile and analyze.
That role started a long time ago, and has evolved along with developments in society
and technology.
Early accounting records have been found in Mesopotamia,
Assyria, Phoenicia, Sumeria and Egypt.
The main purpose was to record the growth of crops and herds.
Human beings transitioned from the hunter-gatherer stage to agriculture about 10.000 years ago,
which is not that long ago given that our current species of human has been in existence
for about 200.000 years and our planet earth is estimated to be 4.5 billion years old.
When we moved to an agricultural society, hierarchy and structure were introduced, and
the need for an accounting and control cycle (including auditing systems) was born.
Fast forward to the early Renaissance.
La bella Italia!
The birth of the monetary economy, where merchants depended on bookkeeping to oversee multiple
simultaneous transactions financed by bank loans.
Luca Pacioli was the author of a book on mathematics, which was printed and published in Venice,
in 1494, and included a 27-page section on bookkeeping.
This is seen as the first known published work on the topic of accounting, and includes
a description of double entry bookkeeping and ledger classes, concepts that are in use
until this very day.
Pacioli did not necessarily invent modern accounting, but summarized, formalized and
helped spread the accounting practices in use in Italy and around the Mediterranean.
Forward to the Republic of the Netherlands around the year 1600.
Enjoying the recent self-proclaimed independence from Spain, the Dutch were very actively trading
goods all over the world.
The Dutch East India Company became the first company in history to issue bonds and shares
of stock to the general public.
In other words, it was officially the first publicly traded company, because it was the
first company to be ever actually listed on an official stock exchange.
This new ownership structure drove further developments in accounting methods.
The industrial revolution started in the late 1700s in Britain.
The steam engine is an important symbol for the technical developments around the time.
As machines took the central role in manufacturing, and labor was largely seen as expandable,
machines became the assets on the balance sheet
and people a mere expense in the income statement.
On to the second half of the 20th century.
The advent of the computer, shaking up and revolutionizing society to this very day.
Large parts of transaction processing can now be fully automated, and new ways of building
organizations emerge.
Accounting frameworks like US GAAP and IFRS continue to evolve, adapting to the changing
world around us.
And people working in the accounting profession are still here for you to help you count,
record, classify, summarize, reconcile and analyze.
I hope you enjoyed this short overview of the history of accounting in Western Civilization!
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