Early History of Accounting
Accounting in the contemporary sense of the world began in the 15th century, among the city states of Italy, with the "double entry" system, which proved useful in identifying and correcting errors. It also allowed for the preparation of detailed financial statements out of data taken directly from the accounts.
Other People Are Reading
-
Ancient Accounting
-
Babylonian accountants could use flowing water as an eraser. In ancient Babylon, circa 1800 BCE, accounts were kept on clay tablets. The Code of Hammurabi makes a provision for farmers who were in debt and whose harvest had failed. In effect, not only did Babylon have accounting, it had a bankruptcy law.
Fourteenth Century Italy
-
In late-medieval Italy, there was a lot of interest in keeping accurate books. The continuous and documented development of recognizably modern accounting begins with Luca Pacioli, who included a treatise on double-entry bookkeeping in his Summa de Arithmetica, published in Venice in 1494.
-
Double-entry Bookkeeping
-
Pacioli in effect codified the developing practice of "double entry" bookkeeping. If a customer has just paid a merchant, the merchant, following the new procedure, would record this both as a debit to the cash account and as a credit to revenue.
After the Account Book
-
The "cash" figure could show up on the balance sheet, both as an asset and as in increase in equity. The "revenue" entry would go into the income statement.
Consequences
-
Pacioli's book was one of the early beneficiaries of the recently invented printing press. Copies were soon available all over Europe, with enormous consequences for the development of commerce in the ensuing centuries.
-
References
- Photo Credit crisp sign in clay image by Han van Vonno from Fotolia.com venice image by jedphoto from Fotolia.com
