History of Bookkeeping and Accounting

The Ancient WorldMedieval DevelopmentsIndustrial Revolution

Scribe - Sakkara about 2500 BC (Louvre)

The “Near East” – Cradle of Civilization

Ancient Names Sumeria Assyria Mesopotamia Babylon Persia

Dawn of Civilization

Transition from hunter/gather to farmer

Jordan River Valley Jericho – Oldest

fortified city discovered so far Artifacts date back

some 10,000 years!

“Jerry of Jericho”The First Inventory

Who was the first accountant? Someone who

needed to keep track of what was stored in temple or king’s granary?

Must “writing” come before record keeping?

Scribe - Sakkara about 2500 BC (Louvre)

Which came first – writing or numbers?

Dr. Gunter Dreyer of the German Institute of Archaeology is perhaps the most prominent of a number of archeologists who believe that writing actually developed out of early marks that were used to tally the kinds and amounts of goods in stock at ancient warehouses

Earliest writing = inventory control!

Dr. Dreyer recently discovered numerous inscribed bone labels attached to bags of oil and linen in the tomb of King Scorpion I at Abydos, Egypt.

The labels date back 5300 years, are the world's earliest known writing, and describe inventory owners, amounts, and suppliers.

One of the Oldest Professions!

In ancient Egypt, the accountant was called the "eyes and ears" of the king.

Simple Token System

Simple token system did not require abstract concepts of numbers, writing or money!

Token system expanded – used as evidence of transactions Clay “envelopes”

date from around 4000 BC in Sumeria

Envelope & tokens - Susa, 3300 BC (Lourve)

Accounting pre-dates writing!

Complex tokens evolved about 3700 BC Use of lines, notches and other

markings used as abstract representations of wealth and the development of numbers

Evolved into cuneiform

Accounting records on pre-cuneiform tablet (Louvre)

Cuneiform Collection – SMM 7

Translation: 1.  3 acres barley, for harvest,2.  Field of the Ash Trees3.  Dada, the swineherd4.  Seal(Ed by) Lugal-ema e5.  Month of barley harvest,6.  year Huhnuri was destroyed.

This tablet is a receipt for beer, sealed by a clerk named Umani.

Sealing Tablets

Source: - Science Museum of Minnesotahttp://www.smm.org/research/Anthropology/cuneiform/sealing.php

Babylonia – Base 60 numerals

Here are the 59 symbols built from just two symbols

Ancient Egyptian Numbers

“Zero” had not yet been “invented

Sticks & Strings

Other accounting systems for illiterate ages and societies

The Inca Quipu

The Inca (unlike the Maya and Aztec) had no true form of writing

Tally Sticks

These sticks recorded expenses for illiterate servants and masters.  As money or goods changed hands, the tally sticks were carved with v-shaped grooves for "pounds," rounded grooves for "shillings," and slices for "pense." 

At the end of a transaction, the stick would be split lengthwise and divided between the debtor and the creditor until the debt was paid.

Invention of Money

http://www.med.unc.edu/~nupam/ancient1.html

                    

First coin of India (?) Before 5th Century BC Minted in Madhyadesha?, found near MathuraSilver unit Seven punch marks Weight: 7.14 gmNumismatic Digest # 22 Rare

Coins appear to be a simultaneous but independent development at about the same time in China, India, and Greece

Invention of Coins – around 630BC

Castulo AE30. Augustus' (?) portrait right / Helmeted Sphinx right, star before, Iberian legend in ex. - photos from http://www.wildwinds.com/coins/sg/sg0015.html

Ancient Greece

The public economy of the Athenians had a highly developed system of accounting & auditing Treasurer or manager of Public

Revenue Accounts kept by clerks and

controlled by “checking clerks” Accountability assured by public

exposure of accounts on stone

Ancient Rome

Practices of private life led to public accounting process Transactions were first entered in a “day

book” (memorandum or “adversaria” in Latin)

Monthly, the entries were transferred to the ledger (“codex tabulae”)

The codex could be used in court to substantiate contracts and claims

In government – separation of responsibilities

China

Accounting largely used to evaluate efficiency of governmental programs and civil servants

To date, no evidence of double-entry bookkeeping before introduction from west in 1800s

The Rise of Double Entry

Crusades – demand for exotic goodsGenoa-Venice-Florence: A Commercial Revolution

Littleton’s Antecedents of Bookkeeping

1. Private property (power to change ownership)

2. Capital (wealth productively employed)

3. Commerce(exchange of goods)

4. Credit(present use of future goods)

5. Writing 6. Money 7. Arithmetic

The antecedents then require:

A methodology (a plan to systematically rendering the material into the language)

The Father of Accounting: Fra Luca Pacioli

He was born in 1445 in Sansepolcro, Italy.

A dedicated Franciscan, he showed a passion for mathematics

Did not invent double entry – but wrote the most influential early “textbook”

Traditional

1494 – The Summa

The treatise’s official title: "Summma de Arithmetica, Geometria: Proportioni et Proportionalita"

One section of the book was devoted to methods of recording merchant transactions, including ideas about double-entry bookkeeping.

Numbers in Medieval Bookkeeping

Even though the Italian merchants calculated with Arabic numerals as early as the 13th century, Roman figures dominated in their account books until the late 15th century (but with decreasing frequency). Use of Roman numerals persisted in northern

Europe even longer as double entry moved north gradually

The prolonged use of the ’old’ writing style is mostly explained by with the general belief of the contemporaries that the Roman were forgery-proof.

Sombart’s Theory (1924)

Double entry bookkeeping was such a powerful tool that it made possible the new social and economic system which we call capitalism

“chicken and egg” arguments!

Rise of Cost Accounting

Josiah Wedgwood – Entrepreneur & Cost Accountant 1770-2 financially difficult times with

dropping demand and rising inventories Found head clerk had been embezzling Began looking at costs of materials and

labor & allocated overhead costs Discovered economies of scale –

importance of volume Started differential pricing – elite vs.

mass-market New manufacturing equipment introduced

The Abacus

The Abacus is an ingenious counting device based on the relative positions of two sets of beads moving on parallel strings. The first set contains five beads on each string and allows counting from 1 to 5, while the second set has only two beads per string representing the numbers 5 and 10. The Abacus system seems to be based on a radix of five. Using a radix of five makes sense since humans started counting objects on their fingers.

http://www.xnumber.com/xnumber/mechanical1.htm00

The Exchequer

in British history, the government department that was responsible for receiving and dispersing the public revenue. The word derives from the Latin scaccarium, “chessboard,” in reference to the checkered cloth on which the reckoning of revenues took place.

Technology Changes What’s Possible in Accounting

William Seward Burroughs invented and patented the first workable adding machine in 1885 in St. Louis, Mo. Production increased

dramatically after 1900