Mar 29 Significant Moments In Accounting History
Everything has to start somewhere. Generally, the longer that something has been around the more difficult it is to imagine its beginnings, or to imagine life without it. Accounting is such a ubiquitous part of the modern world, both for individuals and businesses, that it takes a lot of imagination to picture life without accounting. There was, however, a time without accounting—at least accounting as we know it today. Modern accounting practices, though they are an integral part of almost all financial activity, did not appear fully-formed from out of nowhere; they evolved over the course of time. Another interesting aspect of the accounting discipline’s long history is that it has seen so many other innovations come and go alongside it. Accounting is such a useful, versatile concept that it has been able to adapt itself to new innovations and entirely new ways of life. In this way, the history of accounting is less like the history an invention and more like the history of a useful way of thinking and analyzing. Here is a look at how accounting has both shaped and reacted to events in history and has been able to maintain such an important part of life for individuals and businesses all over the world.
Early Modern Venice
The roots of accounting go back to the earliest civilizations in recording history. There have been clay tablets used for record-keeping—inscriptions that listed citizens’ occupation and possessions, for example—that have been found dated to be roughly five thousand years old. So, in some sense, accounting is as old as history as we know it. One achievement that marks a significant shift in accounting practices, though, is the first use of the double-entry bookkeeping system that began in Venice, Italy around the turn of the 16th century. The method is attributed mainly to a man named Luca Pacioli, and he helped Venetian merchants become the first to use the double-entry system of recording debits and credits that is the foundation of accounting systems to this day.
The Industrial Revolution is most known for its technological advances and the widespread construction of factories and railroads. Another side of this story is that these technological changes necessitated major changes in the economic system, one of which was the creation of advanced cost accounting methods. The corporation also emerged during this time period, which had major implications for the accounting profession. The corporation created an entirely new economic category and introduced the concepts of shareholders and bondholders—outside parties with a stake in a corporation’s finances. While it is hard to imagine life without these economic concepts, it certainly altered the accounting world at the time. Perhaps surprisingly, CPAs also emerged as early as the late Industrial Revolution, and some were licensed as early as 1896.
The Great Depression
The Great Depression and the stock market crash obviously had major financial implications for the entire country and even the entire world. One result of the crash was that public companies were required in the aftermath to file certain reports on a consistent basis that had been certified by accountants. Again, the accounting profession was able to survive and thrive amidst changing economic circumstances.
Today, the accounting profession has continued to persevere and innovate. There is more specialization in the accounting industry than ever before. Local businesses and individuals turn to New Jersey accounting professionals for a wide range of financial services.