Evolution of Accounting Thought

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Eldon S. Hendriksen and Michael F. van Breda, Four Thousand Years of Accounting, Chapter 2 of Accounting Theory, 5th edition, Irwin, 1992 Accountancy, from Wikipedia, http://en.wikipedia.org/wiki/Accounting. Retrieved January 20, 2011. Contents of lecture notes: 1. Introduction 2. Why bother with the history of accounting? 3. The beginnings 4. So what is ‘accounting’ (or ‘accountancy’)? 5. Double-entry accounting 6. Why double-entry accounting? 7. The period 1500 to 1800 8. The period 1800 to 1955 9. The period 1955 to 1970 10. The period 1970 to the present 11. The Conceptual Framework Project 12. Summary of developments over the period 1800 to the present 13. Emergence of the profession 14. Legislation 15. The industrial revolution 16. Management accounting 17. Contemporary accounting challenges (profession) 18. Accounting research

1. Introduction Accounting in the world today is a highly developed research discipline and a well-organised and structured profession. We trace the development of accounting as a well-recognised discipline and profession, and the evolution of accounting thought, over many centuries. The practice of accounting today is directed and constrained by the pronouncements of professional bodies and by the requirements of legal statutes in many different jurisdictions around the world. It was not always so: as with all professional and other followings, accounting has developed progressively from small beginnings over a long time. Likewise from small beginnings, accounting research developed from individual and dis-connected contributions to a worldwide (and connected) discipline: hundreds of researchers disseminate their work through academic journals, conferences, congresses and departmental seminars and research curriculums. There are several lines of research and different approaches.

2. Why bother with the history of accounting? There are two reasons why a study of the development of accounting is important, and worth the effort. 1. In order to understand the present, it is useful to have an understanding of how we have arrived at the present. Absent such an understanding and appreciation, it is almost inevitable that old arguments are re-litigated and old blind-alleys re-entered: a lack of knowledge of history is counter-productive as far as progression of any discipline is concerned. 2. The story of the development of accounting is an interesting story in its own right.

3. The beginnings Some accounts of the history of accounting say that accounting began 500 years ago, some say four thousand years ago, some say seven thousand years ago, and so on. The wide difference in the time-scales can largely be explained by differentiating between ‘counting’, ‘accounting’ and ‘accountancy’. In ancient times (7,000 to 8,000 years ago), farmers in the ‘fertile crescent’ (the Tigris and Euphrates valleys) kept tallies of their livestock and their crops, were familiar with the concepts of surplus and deficit, saving and dis-saving, and transfer of goods from one party to another. Tokens were used to ‘keep account’ of personal wealth, and to facilitate trade (there was no written word). 1 This activity, however, amounted to ‘counting’ or ‘tallying’, and keeping a record in terms of small physical objects, rather than to ‘accounting’ as the term is understand today. 1

Languages (script writings) started to appear in the 3 Millennium BC (early Bronze Age). Sumerian and Egyptian are among the first to have appeared. Picture writing systems are known to have existed as early as the 7th millennium BC (early Neolithic period).


The parable of the talents in the bible indicates that people at the time of Christ were aware of the notion of the productivity of capital, and were aware of the existence of, and need for, recordkeeping: this parable has given us the term ‘stewardship function’. In Asia, people of ancient cultures developed systems of accounting and auditing. Archaeological discoveries...
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