the accounting experts

the accounting experts

The Evolution of Accounting: From Ancient Times to Modern Practices

1. Introduction to the History of Accounting

The history of accounting is very old and can be traced back to ancient times when human society was in a very primitive stage. Since the dawn of civilization, however, society has recognized the need for methods of keeping track of present and previous economic activities. This historical research allows the accountant today to see how the numerous components of his profession have been combined into a single unit, as we know it now. There have been several key events or influences responsible for the evolution of accounting practices and the development of the accounting profession. This section is dedicated to the evolution of accounting concepts and principles that have helped the accounting field to be able to fulfill its users’ information needs better to make better decisions.

Ever since man developed the ability to count, he has been in need of quantitative information. The need for record-keeping at the simplest level can be seen in the cave drawings, where cattle were counted, and in marks and notches on bones to record headcounts. Such forms of record-keeping are an elementary means of controlling the disposal and safeguarding of valuable resources, but they are not the accounting that we know today. The earliest battles of accounting and record-keeping that have survived are some 7,000 years old and were discovered in the temple of the sun of God Uruk at Sumer, in what is now south Iraq. These, and the ancient Egyptian and Babylonian records that lay claim to being older still, although very rudimentary systems, can be seen as being of relevance to modern accounting. Central to the concept of accounting are the principles of recording and reporting activities, which are undertaken to achieve a future outcome. This applies whether one looks back 7,000 years ago or ahead 7,000 years into the future.

2. Key Developments in Accounting Practices

Italian Renaissance could be considered as the foundation of modern accounting. The double entry system, originally written in the 14th century, was finally described in a book by Luca Pacioli Da Borgo in 1494. The title of the book, translated as “Accounting Practices and Principles”, also includes chapters on many concepts still in use in computer-based accounting applications, such as period and perpetual inventory, accounting for sales of goods with discounts, and for different sources of income and expenses.

The Egyptian times most probably provide the earliest examples of bookkeeping. The first book was a single entry system then called a journal, that contains records of mostly debt transactions. The second book, a ledger, then called the receiving order, is believed to be an application of the single entry system, according to the studies of Verriest (1964) and Abdelkrinieg (1983). The different quantities of the commodities, tried by similar people at the same time, were located in each folio of the ledger. Ayin, a payment whose value is equal to the remaining stock, is declared for everyone by a transaction, which can be considered as proof of the original price. A fudub graph of periodic prices, which was another Egyptian invention, seems also to be an application of the single entry or journal system.

During the following centuries, these basic methods seem to have evolved into double entry. The development of the ancillary services of banking, such as money deposit, which necessitated the recording of currency transactions, is believed to be a significant driver of the evolution of the double entry system.

3. The Role of Technology in Accounting

Technology has always had an influence on the practice of accounting in some form or other. But today’s reality is an environment in which systems are not only quicker but also rather more complex. One view is that accounting, like all other routine systems, has been affected in four main ways. First, any manual system of evidence recording, however elaborate, is bound to be rather slow by today’s high-speed standards. Second, the intensification of competition has forced organizations of all sorts to look for ways to improve their performance and increasingly necessitates the use of special techniques and procedures. On the other hand, recession compels organizations to use technology in ways that will reduce operating costs or even cut overheads. Third, to take an exaggerated example, a hospital patient is very unlikely to be killed on the operating table as a result of a simple error in cash discount quantum that was made during a supplier’s computer match on a monthly invoice.

Another outcome is that the professional judgments that lie behind debits and credits are amplified by expert system programming. Expert systems in accounting have been developed that allow the application of such knowledge areas as taxation and management decision making. Probably one of the most exciting areas that has been developed is that of Telesoftware. As with word processing and satellite technologies, which are, of course, the basis of Telesoftware, it is possible that these services will provide significant challenges for the commercial functions of financial institutions, including those where accounting functions form a major part of what they currently do. It is not just that Telesoftware will produce applications in programming arenas such as cost-effective end-user data processing, but also that service activities, including select accounting.

4. Emerging Trends and Future Directions in Accounting

As the financial markets continue to evolve across the increasingly connected global village, the accounting discipline is having to rapidly adapt in order to meet and address the latest emerging trends and associated compliance matters. In order to remain relevant in contemporary society, accounting education and research are having to change to effectively contribute to the learning culture and meeting of emerging challenges of stakeholders. The integration of online technologies in facilitating learning among digital natives is an example of how accounting education is changing to support the knowledge needs of accountants’ future work roles. At the same time, traditional tax and audit services are showing signs of merging as a combined assurance service in response to the recently released, internationally published, practical guidance note regarding providing assurance services in relation to carbon emissions and sustainability reports.

The accounting profession is also working to reduce the theoretically-induced expectation gap between financial statement user perceptions of what auditors do and the leading practitioners’ perceptions of the auditor roles and responsibilities embedded in their work processes that are performed to provide the necessary assurance over the published financial report. Furthermore, accountants are working to create a single set of high-quality international accounting standards that are accepted widely by the global community to improve the uniform comparability of reported financial results issued by companies, charities, and pension funds, and non-governmental organizations with an international presence. In doing so, accountants are engaging in setting the latest emerging trends in accounting. Such efforts imply that the practice of accounting is both dynamic and evolving. The accounting discipline predominantly participated through the semi-profession of accountants is therefore the primary driver of a discipline that is changing to meet new accounting challenges presented by contemporary society.