Evolution of Financial Accounting
Evolution of Financial Accounting
Introduction
Accountancy is the art of communicating financial information of a business entity to its stakeholders. It is the branch of mathematical science that assists in discovering the causes of success and failure in a business.
The American Institute of Certified Public Accountants (AICPA) defines accountancy as
"The art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof."
Earliest accounting records, which date back more than 7000 years, were found in ancient
Mesopotamia. The people of that time relied on primitive accounting methods to record the growth of crops and herds. Accounting evolved, improving over the years and advancing as business advanced.
Double-entry bookkeeping first emerged in Italy in the 14th century. Later with the development of joint stock companies wider audiences were created for accounting information, as investors relied on accounts to provide information on the profitability of their investments. This development resulted in a split of accounting systems for internal – management accounting and external – financial accounting purposes.
Some argue that accounting developed purely in response to the needs of the time, brought about by the changes in the environment and societal demands. Others claim that the development of the science of accounting has itself driven the evolution of commerce, since it was only through the use of more precise accounting methods that modern business was able to grow, flourish and respond to the needs of its owners and the public. Either way the history of accounting throws a light on economic and business history and may help us better predict what is on the horizon as the pace of global business evolution escalates.
1
Evolution of Financial Accounting
Accounting in Ancient
Introduction
Accountancy is the art of communicating financial information of a business entity to its stakeholders. It is the branch of mathematical science that assists in discovering the causes of success and failure in a business.
The American Institute of Certified Public Accountants (AICPA) defines accountancy as
"The art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof."
Earliest accounting records, which date back more than 7000 years, were found in ancient
Mesopotamia. The people of that time relied on primitive accounting methods to record the growth of crops and herds. Accounting evolved, improving over the years and advancing as business advanced.
Double-entry bookkeeping first emerged in Italy in the 14th century. Later with the development of joint stock companies wider audiences were created for accounting information, as investors relied on accounts to provide information on the profitability of their investments. This development resulted in a split of accounting systems for internal – management accounting and external – financial accounting purposes.
Some argue that accounting developed purely in response to the needs of the time, brought about by the changes in the environment and societal demands. Others claim that the development of the science of accounting has itself driven the evolution of commerce, since it was only through the use of more precise accounting methods that modern business was able to grow, flourish and respond to the needs of its owners and the public. Either way the history of accounting throws a light on economic and business history and may help us better predict what is on the horizon as the pace of global business evolution escalates.
1
Evolution of Financial Accounting
Accounting in Ancient