Who came up with the idea of accounting and what was the reason they created it? Was it
the cavemen, the ancient Egyptians or even your great ancestors?
I’m Thomas Harwood and Welcome to The Accounting Student, where we create free and short videos
so that you can learn about accounting.
Today’s video is looking at the history of accounting.
Millions of years ago, when the human life started to appear on the face of the earth
things were a lot different compared to what they are today. There was no money, jobs,
technology and most significantly no accounting!
Around tens of thousands of years ago, the humans started to evolve and some started
to acquire new skills. They would use their skills for a service in exchange for something
that another human had.
This is Example Time! This is where we put the theory into so called real life examples.
This is to try and increase your understanding of the topic and theory.
About ten thousand years ago, Harry the hunter was very good at catching animals.
Harry would catch animals for other humans, like Woody, in exchange for what he needed.
Harry would exchange an animal or two for some of the wood of Woody’s. Harry would
then have some materials to build a home or even a weapon for protection. While on the
other hand; Woody would have animals so that he could feed his family.
As the humans continued to evolve, humans like Harry wanted to keep records of their
exchanges.
It is believed that records associated with accounting and business started to exist around
ten thousand years ago and that accounting had been practised in ancient times in places
such as Egypt, India and Rome.
After a few thousands years later, there was still little development and adoption of accounting
records and methods globally.
Until 1494, an Italian by the name of Luca Pacioli wrote and published a book. The book
includes a section called “Details of Calculation and Recording” and many refer to this as
the basis of double entry in modern accounting.
Additionally, terms in modern accounting like debit, credit, journal and ledger all originate
from this book.
Back to Example Time.
As the humans continued to evolve, so came civilisation and in the middle ages trade
and business grew and accounting became more important.
Mike a merchant and relative of Henry the hunter was starting to grow like many businesses
at that time. However, a big problem was that he did not know how much was owed to him and
how much he owed to others.
A business like this at this time could cause Mike to lose his business, home and other
assets. This is where accounting thrived because businesses decided to hire agents, later known
as “bookkeepers” to record details of transactions, receipts and payments.
Mike would then hire a bookkeeper of his own and this then allowed merchants like him to
become a respectable and successful business during the middle ages.
After a couple of hundreds of years, some businesses became big whereby managers where
separate from owners and owners often had no involvement in day-to-day trading.
This started to form the accounting and auditing profession. And in 1581 the first association
of accountants were established in Venice called the Collegio dei Rexonati.
Then in 1854, the first national body of accountants were formed called the Institute of Chartered
Accountants of Scotland. This was followed by the formation of the English Institute
of Chartered Accountants and US national accounting body in 1880 and 1887 respectively.
Today in 2016, accounting is very important in a highly competitive business world and,
auditing as well, is becoming more vital with high profile accounting and financial scandals
in recent years.
Ending
So that was the history of accounting. If you enjoyed it, press the like button.
If you have a question you want answered leave it in the comments below and we’ll try to
answer it.
And if you’re not already subscribed make sure you click on the big red subscribe button
above to keep updated with The Accounting Student.
Thanks for watching we’ll see you next time.