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Shvoong Home>Business & Finance>Accounting>History of Accounting Review

History of Accounting

Article Review   by:ElkabberAwi     Original Author: JeffreyArizona@aol.com
  • Summary rating: 3 stars (10 Ratings)
  • Visits : 1758
  • words:600 
  • Comments : 2
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Long before document-shredding became headline news, accountants found themselves under pressure to change.

Over the past two decades, innovations in computer technology rendered many of the old-fashioned auditor's functions obsolete, prodding accountants to find other ways to bring in revenue.

Companies' desire to produce ever-rosier results for an ever-larger and savvier shareholding public compelled accountants to find ways to put the best possible spin on clients' financial reports.

And then there was simple greed. The industry had already shown it was susceptible. In the early 1970s, a prominent accountant was linked to the Watergate scandal. The next decade, the savings-and-loan crisis raised questions about how accountants could have let things get so bad.

In recent years, partners' pay, largely determined by hourly billing rates, fell way behind that of accountants' investment-banking brethren, enriched by the rise of the stock-market culture of the '80s and '90s. Hiring consultants and having people sell their services to audit clients was a way to narrow the gap.

And ultimately the ancient profession sacrificed the public confidence that underpinned its reputation.

The industry was formed as a vessel of trust, originating more than 10,000 years ago with stone counters in Jericho. In ancient Sumerian cities of the land that is now Iraq, bookkeepers documented wealth by pressing the ends of sticks into damp clay tablets that hardened into permanent records.

Formal accounting was invented by a Franciscan friar named Luca Pacioli in 1494 in his paper "Summa de Arithmetica, Geometria, Proportioni et Proportionalita" ("Everything About Arithmetic, Geometry and Proportion").

The treatise described double-entry bookkeeping -- that for every credit entered into a ledger there must be a debit, a concept created by Florentine merchants and hailed by Goethe as "one of the most beautiful discoveries of the human spirit."

Three traits shared by successful merchants, Mr. Pacioli wrote, were access to cash, a constantly updated accounting system and a good bookkeeper. His contemporary Christopher Columbus apparently knew that: On his voyage to the New World, he took a royal accountant to track his "swindle sheet when he started to figure the cost of gold and spices he would accumulate," according to Alistair Cooke's 1973 book "America."

The craft changed little until the industrial revolution, when accounting advanced from pure recordkeeping to a means of survival. Josiah Wedgwood, Charles Darwin's grandfather, kept his British pottery factory alive during the depression of 1772 through the innovation of cost accounting -- calculating the costs of materials and labor for each step of the manufacturing process, and then setting prices to ensure enough margin to remain viable.

By the mid-19th century, "accompants," as accountants were known, were flourishing in Britain. The Cooper brothers, whose name lives on in PriceWaterhouse Coopers, ran a Dickensian operation of screeching supervisors lording over clerks toiling long hours for scant pay. The industry followed European investments to the New World, and in 1887, 31 accountants formed the predecessor to the American Institute of Certified Public Accountants. A decade later, they created a standardized test, bestowing on a man named Frank Broaker the honor of becoming the first CPA.

Published: September 22, 2008   
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  1. 2. Ahlawy87

    thank you

    thanks alot sir really i'm glad to read this speech you are welcome in my shvoong page in any time

    0 Rating Wednesday, January 14, 2009
  2. 1. kennethtaylorfcca

    History of Accounting

    Well I've been qualified for 38 years and never enjoyed such an interesting article on the subject! congratulations

    0 Rating Sunday, January 11, 2009
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