Accounting is simply a process of measuring and reporting the financial activities of corporations. Accountants must be able to identify a large number of transactions and measure it financially. They must also be able to present these transactions into meaningful financial reports.
Users of such report include a wide range of stakeholders such as shareholders, governments, creditors, concern groups, etc.
The history of accounting dates back to the earliest date of human civilization and agriculture when there was a need to keep proper records of quantities and value of the produce.
Even religious books have some mention of it.
Written in the 1st century, the bible mentions simple accounting in the book of Mathew in the parable of the Talents
Written in approx. 600 AD, the Quran has mentioned the accounting guidance for trade and credit arrangements.
3.Shlokas and Shastras
Written in 4th Century BC, these Sanskrit verses provide details on account keeping, capital, revenue, expenses, and profits.
With the growing trade and development of commerce, there was a need for methodical accounting work. During the 14th and 15th centuries, a systematic method of accounting was developed in the then world trade center, Italy.
Luca Pacioli, a well-known mathematician, wrote a book named “Summa de Arithmetica, geometrica, proportioni et proportionalita” (Review of Arithmetics, Geometry and Proportions) in 1494 AD. This book contained a brief section under the chapter heading “Particularis de computis et scripturis” (Particulars of reckoning and their recording) on a double-entry system of Book-keeping. Because of this codification, he is widely regarded as the Father of Modern Accounting.
It is also said that Benedetto Cortugli wrote a book on a double-entry system in 1458 but it was not published until 1573 AD.
Pacioli used the term Debito (owed to) and Credito (owed by) which is widely used as Debits and Credits in today’s accounting. He also described the use of journals and ledgers and suggested to ensure debits equaled credits. Further, he stressed to keep an eye on profit/loss at regular intervals. Moreover, he suggested the preparation of inventory, i.e., the financial position of a business (also called Balance Sheet)
In succeeding years, many improvements took place as per the convenience of the trade and organizations. However, the industrial revolution of the 18th Century and globalized trade demanded further improvements in modern accounting.
In the United Kingdom, the industrial revolution and numerous cases of embezzlement in British colonies increased scope of accountants into cost, tax, and public accounting.
In 1854, the Edinburg Society and Glasgow Institute of Accountants was formed and a royal charter was granted by Queen Victoria. Later it merged with the Aberdeen Society to form the Institute of Chartered Accountants of Scotland in 1951.
In 1880, the Institute of Chartered Accountant of England and Wales was formed. During the rapid growth of the American industry in the 1800s, many Scottish and British accountants moved to the US to keep track of the investment and are thought to have begun practice in America.
Similarly, Chartered Accountants of Ireland was granted charted in 1888, and the Association of Chartered Certified Accountants (ACCA) was founded in 1904.
In Canada, accounting rose in prominence with the booming business in the financial centers of Toronto and Montreal after the 1840s.
In 1879, North America’s first accountants’ organization, Association of Accountants in Montreal, received its charter. In 1902, the Dominion Association of Chartered Accountants (DACA) became Canada’s first national accounting organization. In 1908, the Canadian Accountants organization was formed in Montreal (later named as Certified General Accountants – CGA). In 1920, the Canadian society of cost accountants was created (later named as Certified Management Accountants – CMA). In 2013, all of these designations united to form a new designation – Chartered Professional Accountants or CPAs.
In Australia, the Institute of Accountants was incorporated in 1887 (now known as CPA). In 1928, a royal charter was granted to the Institute of Chartered Accountants of Australia (now known as CA ANZ). In 1923, the Institute of Factory and Cost accountants was formed in Melbourne, Victoria (now known as IPA).
In the US, during the 1870s it was common for investors to visit corporate offices to verify the financial statements. With the rise in corporate businesses, the role of accountant extended to detect any errors, fraudulent transactions and form an opinion on a true and fair view of the financial statements as per American Generally Accepted Accounting Principles (GAAP).
In 1887, the American Association of Public Accountants (AAPA) was formed which was replaced by the Institute of Public Accountants in 1916 until 1957 when it was finally named as the American Institute of Certified Public Accountants (AICPA).