A Brief History of Accounting
- The history of accounting dates back to the earliest days of human agriculture and civilization when the need to maintain accurate records of the quantities and relative values of agricultural products first arose.
- Kautilya’s famous Arthashastra not only relates to Economics and Politics, but also explains the art of account keeping.
- The development in trade and commerce has been responsible for the growing importance of a methodical accounting work.
- Luca Pacioli also known as Friar Luca dal Borgo wrote a book, primarily on mathematics, “Summa de Arithmetica , Geometrica, Proportioniet Proportionalita” (Review of Arithmetics, Geometry and Proportions) in 1494. Therefore, Luca Pacioli is regarded as Father of Modern Accounting. His book is the first printed book on Double entry system.
- Pacioli used the term ‘Debito’ (owed to) and ‘Credito’ (owed by), these came from the Latin words ‘debitur’ and ‘creder’.
- The system he published included most of the accounting cycle as we know it today.
- He described the use of journals and ledgers, and warned that a person should not go to sleep at night until the debits equalled to credits.
- He stressed on measurement of profit or loss at regular interval.
- He also suggested the preparation of an ‘inventory’ i.e. financial position of a business which is called ‘Balance Sheet’.
- Pacioli’s book initiated an important step in keeping of records under double entry system.
- In the succeeding years, many improvements took place in the accounting books and methods for the convenience of different organizations.
- Industrial revolution of 18th century and globalised trade necessitated further improvements in accounting, such as mechanized accounts, computerized accounting statement etc.
