History of accounting

Because there was a natural season to farming and herding, it was easy to count and determine if a surplus had been gained after the crops had been harvested or the young animals weaned.

The Phoenicians invented a phonetic alphabet "probably for bookkeeping purposes", based on the Egyptian hieratic script, and there is evidence that an individual in ancient Egypt held the title "comptroller of the scribes".

The inscription was an account to the Roman people of Augustus' stewardship, and listed and quantified his public expenditure, including distributions to the people, grants of land or money to army veterans, subsidies to the aerarium (treasury), building of temples, religious offerings, and expenditures on theatrical shows and gladiatorial games, covering a period of about forty years.

[6] The Roman historians Suetonius and Cassius Dio record that in 23 BC, Augustus prepared a rationarium (account) which listed public revenues, and the amounts of cash in the aerarium (treasury), in the provincial fisci (tax officials), and in the hands of the publicani (public contractors); and that it included the names of the freedmen and slaves from whom a detailed account could be obtained.

An account of small cash sums received over a few days at the fort of Vindolanda circa AD 110 shows that the fort could compute revenues in cash on a daily basis, perhaps from sales of surplus supplies or goods manufactured in the camp, items dispensed to slaves such as cervesa (beer) and clavi caligares (nails for boots), as well as commodities bought by individual soldiers.

[15] The Heroninos Archive is the name given to a huge collection of papyrus documents, mostly letters, but also including a fair number of accounts, which come from Roman Egypt in the 3rd century AD.

[18] In eighth century Persia, scholars were confronted with the Qur’an's requirement that Muslims keep records of their indebtedness as a part of their obligation to account to God on all matters of their life.

The assets remaining after the payment of funeral expenses and debts were allocated to every member of the family in fixed shares, and included wives, children, fathers and mothers.

The inheritance mathematics were solved by a system developed by the medieval Islamic mathematician Muhammad Ibn Musa al-Khwarizmi (known in Europe as Algorithmi from which we derive "algorithm").

Al-Khwarizmi's opus “The Compendious Book on Calculation by Completion and Balancing” established the mathematics of algebra, with the last chapter devoted to the double-entry bookkeeping required for solution to the Islamic inheritance allocations.

[19] Al Khwarizmi's work was widely circulated, at a time that there was substantial active discourse and trade between Arabic, Jewish and European scholars.

It was taught in the learning centers of Al-Andalus in Iberia, and from the tenth century forward, slowly found its way into European banking, which began slipping Hindo-Arabic numerals into accounting books, despite their prohibition as sinful by the medieval church.

[21] In 756, the Abbasid caliph Al-Mansur sent scholars, merchants and mercenaries to support the Tang dynasty's Dukes of Li to thwart the An Shi Rebellion.

The Tang dynasty's extensive conquests and polyglot court required new mathematics to manage a complex bureaucratic system of tithes, corvee labor and taxes.

Paper money was much more portable than heavy metallic specie, and the Tang assured its universal usage under threat of penalties and possibly execution for using anything else.

[8] Giovanno Farolfi & Company, a firm of Florentine merchants headquartered in Nîmes, acted as moneylenders to the Archbishop of Arles, their most important customer.

The Messari accounts contain debits and credits journalised in a bilateral form and carry forward balances from the preceding year, and therefore enjoy general recognition as a double-entry system.

[23] It was in this environment that a close friend of Leonardo da Vinci, the itinerant tutor, Luca Pacioli published a book not in Greek or Latin, but in a language that merchants understood well -- Italian vernacular.

His pragmatic orientation, widespread promotion by his friend da Vinci, and use of vernacular Italian assured that his 1494 publication, Summa de Arithmetica, Geometria, Proportioni et Proportionalita (Everything About Arithmetic, Geometry and Proportion) would become wildly popular.

Pacioli's book explained the Hindu-Arabic numerals, new developments in mathematics, and the system of double-entry was popular with the increasingly influential merchant class.

[26] Ragusan economist Benedetto Cotrugli's 1458[27] treatise Della mercatura e del mercante perfetto contained the earliest known[28] manuscript of a double-entry bookkeeping system.

[29] Luca Pacioli's Summa de Arithmetica, Geometria, Proportioni et Proportionalità (early Italian: "Review of Arithmetic, Geometry, Ratio and Proportion") was first printed and published in Venice in 1494.

Pacioli wrote primarily for, and sold mainly to, merchants who used the book as a reference text, as a source of pleasure from the mathematical puzzles it contained, and to aid the education of their sons.

Indeed, at the time of writing his work in 1494, Pacioli was aware of Cotrugli's efforts and credited Cortrugli with the origination of the double entry book keeping system.

Without such a system, all merchants who did not maintain their own records were at greater risk of theft by their employees and agents: it is not by accident that the first and last items described in his treatise concern maintenance of an accurate inventory.

With the growth of the limited liability company and large scale manufacturing and logistics, demand surged for more technically proficient accountants capable of handling the increasingly complex world of high speed global transactions, able to calculate figures like asset depreciation and inventory valuation and cognizant of the latest changes in legislation such as the new Company law, then being introduced.

As companies proliferated, the demand for reliable accountancy shot up, and the profession rapidly became an integral part of the business and financial system.