History of Accounting

A Brief History of the Practice of Accounting

Accounting's early years

The history of accounting is closely linked to the development of human society and commerce. In fact, accounting has made significant contributions to both over the past five and a half thousand years.

The origins of accounting can be traced back to at least 3600BC when trade between tribes in the region of Mesopotamia required records to be kept on stone and clay tablets. In those times the 'scribes' who possessed a knowledge of writing also served as bookkeepers.

It is believed that many of the first examples of what we call 'writing' were actually records of transactions carried out more than 5,000 years ago. Some scholars believe that even then there were accounting systems in use that had counterparts for our modern ledgers and receipts.

Accountants and auditors in ancient Egypt

The ancient Egyptians had a far more sophisticated system, thanks largely to their having advanced systems of distribution that required quantities of various commodities to be stored in warehouses and disbursed over periods of time as required.

To keep track of where goods were and what had been consumed, there was one set of scribes that recorded amounts brought into the warehouse and another set of scribes that recorded outward movements.

A third set of scribes functioned as auditors, comparing both sets of records and checking them against the quantities remaining in the warehouses. It was a simple way to ensure that the Pharaoh wasn't being cheated in the transactions that were carried on.

Rulers of that period also required accounting records to be compiled for the purpose of taxation. The Roman Empire was run for profit and needed to identify the location and ownership of wealth so a share could be extracted and returned to finance the expenses and extravagances of its emperors.

Currency made calculations easier

The development of currency gave impetus to the growth of accounting when it made it much easier to prepare records of transactions. Instead of assessing the worth of domestic animals or agricultural products, it was much simpler to record details of precious metals or minted coins.

At first clay tokens etched with symbols to represent commodities were used as trading pieces, then later around 600BC coins made of precious metals came to have their own representative worth and could be exchanged for commodities.

Accounting as we know it today developed in the 14th century in the Italian city-states of Florence, Genoa and Venice. These cities were centers of maritime trade and banking and their wealthy merchants