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A Brief History of Accounting

The history of accounting can be traced back thousands of years to the cradle of civilisation in Mesopotamia.

One of the world's oldest continuously inhabited city (at least 11,000 years old) is Jericho, a city located to the west of the Jordan River.

It is believed that until about 7,500 B.C., the inhabitants of Jericho used a barter system when tokens and clay balls came to represent inventory figures for agricultural goods including wheat, sheep and cattle.

The use of tokens eventually expanded, and tokens and envelopes helped to formulate an ancient version of what may have been a balance sheet (company's list of assets, liabilities and shareholders' equity at a specific point in time).

Tokens also gradually came to represent completed trade transactions.

Tokens and bookkeeping scripts

Tokens and scripts have been discovered in Iran, dating from 300 BC. The Phoenicians invented an alphabetic system for bookkeeping, while the ancient Egyptians may have even assigned someone the role of comptroller (financial officer).

Modern Accounting

In 1494, the Italian Luca Pacioli, first described the system of double-entry bookkeeping used by Venetian merchants, in his publication “Summa de Arithmetica, Geometria, Proportioni et Proportionalita”. Luca Pacioli was the first to describe the system of debits and credits in journals and ledgers that is still the basis of today’s accounting systems and for that, he is considered the father of modern accounting.

The need for more advanced accounting came with the onset of the industrial revolution in 1760 when the expansion of corporations created larger groups of investors, and more complex structures of ownership.

Accountants and solicitors

For a long time accountants had belonged to associations of solicitors, which would offer accounting in addition to a firm’s legal services. In Scotland, in the mid-1800s when the Institute of Accountants in Glasgow petitioned Queen Victoria for a Royal Charter, so accountants could distinguish themselves from solicitors.

In 1854 the institute adopted ‘chartered accountant’ for its members, a term and demarcation that still carries legal weight globally today.

The varied skills required to be a professional accountant – in addition to mathematical skills, an accountant needed to be acquainted with general legal principles, as they were often employed by the courts to give evidence on financial matters – as they still are today.

Industrial revolution

In the mid-1800s, the industrial revolution in Britain was well underway and London became the financial centre of the world.

With the growth of the limited liability companies and large-scale manufacturing and logistics, demand surged for more technically proficient accountants capable of handling the growingly complex world of global transactions.

The increasing importance of accountants helped to transform accounting into a profession, first in the UK and then in the US and in 1904 eight people formed the London Association of Accountants to open the profession to a wider audience of people than was available through the UK’s older associations.

Importance of ethics

Accountants face harsh restrictions on their consulting engagements. They are in great demand, as corporate regulations have increased and more expertise is required to fulfill reporting requirements.

At Lynch & Associates Limited, the Accounting, Tax, Audit and Business Development team will not only guide you through all the legislation, they'll also help you understand what it means to you and find the best solution from not only a taxation perspective, but a commercial and if necessary an audit perspective as well.

Call us or email us to book time for a complimentary assessment

Phone: 09 366 6005

Email: [email protected]