Accounting History

Evidence of the origin of bookkeeping can be found in ancient history.
From 5000-4500 p.m.ē. in the land of flourishing civilizations Mesopotamia there existed complicated relations in the society that called for the necessity to register transactions and property title. The historians describe clay tablets with complicated write-downs of sale and purchase of grain. Several persons took part in it. The accounting was simple nevertheless it corresponded to the needs of the society.

About 630 B.C. the Ancient Greeks invented coin forging that influenced accounting gradually. The historians mention the papers of Zenon: collected books of accounts. In the books of accounts record taking of liabilities was envisaged. In the ancient Rome the Greek system of accounting was adopted and developed. The historians describe books among them the ledger, in which entries had to be made no less than once a month.
Accounting has been given credit in religious books of faith such as the Islamic book of faith, the Qur’an, and in the New Testament of the Christian Holy Bible.

Most of the formal modern day accounting started at the end of the Crusades. As trade dramatically increased between Europe and Middle East, businesses grew to beyond what a single owner could manage. This brought about the need for written records so that business owners could keep track of their transactions and ensure that their agents performed profitably.

The double entry system was first used in Genoa, Italy around the 13th century and was further polished in Venice. The word Debit comes from the Latin word "debita" (Italian "debito"), which means owed to the proprietor.
The word Credit comes from the Latin word "credo" (Italian "credito"), which means owed by the proprietor.

The first evidence of use of a complete double-entry accounting has been found in Genoa municipal records of 1340. The first systematized description of double-entry bookkeeping appeared in 1494 in Venice. Its author is Luca Paciolo, a Franciscan monk, lecturer in the Universities of Perugia, Florence, Bologna and Rome.
Fra Luca Pacioli was born around 1445 in Sansepolcro, Tuscany. He was a mathematician and friend of Leonardo da Vinci. He wrote and taught in many fields including mathematics, theology, architecture, games, military strategy and commerce. In 1494 Pacioli published his famous book "Summa de Arithmetica, Geometria, Proportioni et Proportionalita" (The Collected Knowledge of Arithmetic, Geometry, Proportion and Proportionality ). One section of this book was dedicated to the description of double-entry accounting. The Summa was one of the first books published on the Gutenberg press, became an instant success and was translated into German, Russian, Dutch, and English. The Summa made Pacioli a celebrity and insured him a place in history, as "The Father of Accounting."

Luca Pacioli 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. He described the year-end closing entries and proposed that a trial balance be used to prove a balanced ledger. In addition, his Summa made reference to the certification of books, ethics and cost accounting.

There would be little modification to Pacioli's system for the next 500 years. The present day trial balance sheet did not get its form until 1868 and the income statement was developed before WWII. In the 1980s, statements of financial position were developed with the purpose to provide relevant "information about the operating, financing, and investing activities of an enterprise and the effects of those activities on cash resources”.

Luka Pacioli
Article archive
Phone: +371 67383604 | Fax: +371 67383600 | E-mail: integralsplus@integralsplus.lv