History of Bookkeeping and Accounting

1
History of Bookkeeping and Accounting

• The Ancient World
• Medieval Developments
• Industrial Revolution

2
The Near East Cradle of Civilization

• Ancient Names
• Sumeria
• Assyria
• Mesopotamia
• Babylon
• Persia

3
Dawn of Civilization

• Transition from hunter/gather to farmer
• Jordan River Valley
• Jericho Oldest fortified city discovered so far
• Artifacts date back some 10,000 years!

4
Jerry of JerichoThe First Inventory

• Who was the first accountant?
• Someone who needed to keep track of what was
  stored in temple or kings granary?
• Must writing come before record keeping?

5
Which came first writing or numbers?

• Dr. Gunter Dreyer of the German Institute of
  Archaeology is perhaps the most prominent of a
  number of archeologists who believe that writing
  actually developed out of early marks that were
  used to tally the kinds and amounts of goods in
  stock at ancient warehouses

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Earliest writing inventory control!

• Dr. Dreyer recently discovered numerous inscribed
  bone labels attached to bags of oil and linen in
  the tomb of King Scorpion I at Abydos, Egypt.
• The labels date back 5300 years, are the world's
  earliest known writing, and describe inventory
  owners, amounts, and suppliers.

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One of the Oldest Professions!

• In ancient Egypt, the accountant was called the
  "eyes and ears" of the king.

8
Simple Token System

• Simple token system did not require abstract
  concepts of numbers, writing or money!

• Token system expanded used as evidence of
  transactions
• Clay envelopes date from around 4000 BC in
  Sumeria

Envelope tokens - Susa, 3300 BC (Lourve)
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Accounting pre-dates writing!

• Complex tokens evolved about 3700 BC
• Use of lines, notches and other markings used as
  abstract representations of wealth and the
  development of numbers
• Evolved into cuneiform

Accounting records on pre-cuneiform tablet
(Louvre)
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Cuneiform Collection SMM 7
Translation  1.  3 acres barley, for
harvest, 2.  Field of the Ash Trees 3.  Dada, the
swineherd 4.  Seal(Ed by) Lugal-ema e 5.  Month
of barley harvest, 6.  year Huhnuri was destroyed.
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Sealing Tablets
This tablet is a receipt for beer, sealed by a
clerk named Umani.
Source - Science Museum of Minnesotahttp//www.s
mm.org/research/Anthropology/cuneiform/sealing.php
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Babylonia Base 60 numerals

• Here are the 59 symbols built from just two
  symbols

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Ancient Egyptian Numbers

Zero had not yet been invented
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Sticks Strings

• Other accounting systems for illiterate ages and
  societies

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The Inca Quipu

• The Inca (unlike the Maya and Aztec) had no true
  form of writing

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Tally Sticks

• These sticks recorded expenses for illiterate
  servants and masters.  As money or goods changed
  hands, the tally sticks were carved with v-shaped
  grooves for "pounds," rounded grooves for
  "shillings," and slices for "pense." 
• At the end of a transaction, the stick would be
  split lengthwise and divided between the debtor
  and the creditor until the debt was paid.

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Invention of Money
Coins appear to be a simultaneous but independent
development at about the same time in China,
India, and Greece
                     First coin of India (?)
Before 5th Century BC Minted in Madhyadesha?,
found near MathuraSilver unit Seven punch marks
Weight 7.14 gmNumismatic Digest 22 Rare

• http//www.med.unc.edu/nupam/ancient1.html

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Invention of Coins around 630BC

• Castulo AE30. Augustus' (?) portrait right /
  Helmeted Sphinx right, star before, Iberian
  legend in ex. - photos from http//www.wildwinds
  .com/coins/sg/sg0015.html

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Ancient Greece

• The public economy of the Athenians had a highly
  developed system of accounting auditing
• Treasurer or manager of Public Revenue
• Accounts kept by clerks and controlled by
  checking clerks
• Accountability assured by public exposure of
  accounts on stone

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Ancient Rome

• Practices of private life led to public
  accounting process
• Transactions were first entered in a day book
  (memorandum or adversaria in Latin)
• Monthly, the entries were transferred to the
  ledger (codex tabulae)
• The codex could be used in court to substantiate
  contracts and claims
• In government separation of responsibilities

23
China

• Accounting largely used to evaluate efficiency of
  governmental programs and civil servants
• To date, no evidence of double-entry bookkeeping
  before introduction from west in 1800s

24
The Rise of Double Entry

• Crusades demand for exotic goods
• Genoa-Venice-Florence A Commercial Revolution

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Littletons Ingredients for Double Entry
Bookkeeping (1933)

• Why did double entry bookkeeping not develop
  until the 14th century

• Private property
• Capital  
• Commerce 
• Credit  
• Writing
• Money
• Arithmetic

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Littletons Antecedents of Bookkeeping

• Private property (power to change ownership)
• Capital (wealth productively employed)
• Commerce(exchange of goods)
• Credit(present use of future goods)

• Writing
• Money
• Arithmetic
• The antecedents then require
• A methodology (a plan to systematically rendering
  the material into the language)

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The Father of Accounting Fra Luca Pacioli

• He was born in 1445 in Sansepolcro, Italy.
• A dedicated Franciscan, he showed a passion for
  mathematics
• Did not invent double entry but wrote the most
  influential early textbook

Traditional
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1494 The Summa

• The treatises official title "Summma de
  Arithmetica, Geometria Proportioni et
  Proportionalita"
• One section of the book was devoted to methods of
  recording merchant transactions, including ideas
  about double-entry bookkeeping.

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Numbers in Medieval Bookkeeping

• Even though the Italian merchants calculated with
  Arabic numerals as early as the 13th century,
  Roman figures dominated in their account books
  until the late 15th century (but with decreasing
  frequency).
• Use of Roman numerals persisted in northern
  Europe even longer as double entry moved north
  gradually
• The prolonged use of the old writing style is
  mostly explained by with the general belief of
  the contemporaries that the Roman were
  forgery-proof.

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Sombarts Theory (1924)

• Double entry bookkeeping was such a powerful tool
  that it made possible the new social and economic
  system which we call capitalism
• chicken and egg arguments!

31
Rise of Cost Accounting

• Josiah Wedgwood Entrepreneur Cost Accountant
• 1770-2 financially difficult times with dropping
  demand and rising inventories
• Found head clerk had been embezzling
• Began looking at costs of materials and labor
  allocated overhead costs
• Discovered economies of scale importance of
  volume
• Started differential pricing elite vs.
  mass-market
• New manufacturing equipment introduced

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The Abacus

• The Abacus is an ingenious counting device based
  on the relative positions of two sets of beads
  moving on parallel strings. The first set
  contains five beads on each string and allows
  counting from 1 to 5, while the second set has
  only two beads per string representing the
  numbers 5 and 10. The Abacus system seems to be
  based on a radix of five. Using a radix of five
  makes sense since humans started counting objects
  on their fingers.

http//www.xnumber.com/xnumber/mechanical1.htm00
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The Exchequer

• in British history, the government department
  that was responsible for receiving and dispersing
  the public revenue. The word derives from the
  Latin scaccarium, chessboard, in reference to
  the checkered cloth on which the reckoning of
  revenues took place.

34
Technology Changes Whats Possible in Accounting

• William Seward Burroughs invented and patented
  the first workable adding machine in 1885 in St.
  Louis, Mo.
• Production increased dramatically after 1900