history of accounting

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HISTORICAL DEVELOPMENT OF ACCOUNTING ANCIENT CIVILIZATION Accounting started late back the very earliest days of human civilization that exist in Mesopotamia ( modern Iraq). In this area between the Tigris and Euphrates Rivers, periodic floodings made the valley an especially rich area for agriculture and also trading area of their product. 1

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They made small clay tokens, in various shapes and various markings, to represent such commodities as sheep, jugs of oil, bread or clothing and were used in the Middle East to keep records. The tokens were often sealed in clay balls, called bullae , which were broken on delivery so the shipment could be checked against the invoice, bullaes in effect were the first bills of lading. 2

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Bollae and tokens circa 3300 BC 3

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Later, symbols impressed on wet clay tablets replaced the tokens. Some experts consider this stage of record keeping the beginning of the art of writing, which spread rapidly along the trade routes and took hold throughout the known civilized world. In Ancient Egypt, they used papyrus rather than clay tablets allowed more detailed records to be made more easily. While the Egyptians tracked movements of commodities, they heated gold and silver not as mere articles of exchange. 4

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Pre-Christian China used accounting chiefly as a means of evaluating the efficiency of governmental programs and the civil servants who administer them. In the 5 th century B.C, Greece used “public accountants” to allow its citizenry to maintain real authority and control over their government’s finances. Perhaps the most important Greek contribution to accountancy was its introduction of coined money about 600BC. Widespread use of coinage took time, as did it’s impact on the evolution of accounting. 5

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Government and banking accounts in Ancient Rome evolve from records traditionally kept by the heads of families, where in daily entry of household receipts and payments were kept in adversaria or daybook, and monthly postings were made to a cashbook know as a coolex acceptiet expensi . It used as a basis for taxation and determination of civil rights. 6

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Later, during the reign of Roman Empire, accounting continued to evolve much further. “the deeds of divine Augustus” is an account of Emperor Augustus’ financial dealing. It listed such quantities as distributions to the people, grants of land, building of temples, money to military veterans, religious offerings and money spent on theatrical shows and gladiator events 7

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Accounting basis are also mentioned in the New Testament of the bible in the book of Mathew as well as in the other religious texts such as the Quaran . MIDDLE AGES Development of more formal account-keeping methods is attributed to the merchants and bankers of Florence, Venice and Genoa during 13 th to 15 th centuries. The earliest of these methods consisted of accounts kept by Floretine banker in 1211 A.D 8


Fra Luca did not invent double-entry accounting, instead, he superbly described a method used by merchants in Venice during the Italian Renaissance. His system included most of today's accounting routines such as the use of memorandums, journals and ledgers. His ledger included assets--receivables and inventories--liabilities, capital, income, and expense accounts. FRA LUCA PACIOLI 9

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INDUSTRIAL REVOLUTION AND CORPORATE ORGANIZATION This revolution which occurred in England from the mid-18 th to the mid-19 th century changed the method of producing commercial goods from the handicraft method to the factory system. With this change came the problem of costing for a large volume of products. The specialized field of cost accounting emerged to meet this need for the analysis of various costs . 10

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The expanded business operations initiated by the Industrial Revolution required increasingly large amount of funds to build factories and purchase machinery. This need resulted to the development of the corporate form of organization. The growth of corporations spurred the development of accounting. 11

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INFORMATION AGE Pacioli's accounting system has not changed practically for the last 500 years, and as long as our wealth was physical and our costs included mostly material and labour , this system was adequate. The double-entry accounting system relied on historical information and has traditionally provided financial reports and statements two weeks after the month-end closing period (10) . Businesses today, require information not two weeks after month-end but immediately; accounting information, activities and indices of performance must be available by the used of computer. 12

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