Please enable JavaScript.
Coggle requires JavaScript to display documents.
EVOLUTION OF ACCOUNTING, MIDDLE AGES, THE FLORENTINE APPROACH - Coggle…
EVOLUTION OF ACCOUNTING
Accounting history is important to accounting pedagogy, policy and practice
-
PRIMITIVE ACCOUNTING
People have counted and kept records throughout history. The origin of keeping accounts has been traced as far back as 8500 B.C. the date archaeologists have established for certain clay tokens - cones, disks, spheres and pellets - fond in Mesopotamia (Modern Iraq)
Tokens represented such commodities as sheep, jugs of oil, bread or clothing and were used in the Middle East to keep records. Tokens were often sealed in clay balls, called bullae which were broken on delivery so the shipment could be checked against the invoice; bullae, in effect were the first bills of lading
Later, symbols impressed on wet clay tablets replaced the tokens. Some experts consider this stage of record-keeping the beginning of the art of writing, which spread rapidly along the trade routes and took hold through the civilized world
Account records date back to the ancient civilizations of China, Babylonia, Greece and Egypt. People in these civilizations maintained various types of records of business activities
During the 1st dynasty of Babylonia (2285-2242 B.C.) its law which was based on the Code of Hammurabi, requires merchants trading goods to give buyers a sealed memorandum containing the agreed price before it can be considered enforceable
The agreed-upon transaction was recoded by the Scribe (the predecessor of the modern accountant) on a small mound of clay with the parties affixing "their signature" on it. This clay was allowed to dry and served as the record of the transactions. For the important ones, the record can be kiln-dried
Around 3600 B.C. in Babylonia, clay tablets also recorded payments of wages. The rulers of these civilizations used accounting to keep track of the costs of labor and materials used in building structures as in the case of the pharaohs of Egypt in building their great pyramids
Accounting is one of our oldest skills The earliest collections of understandable writing track how many bushels of grain came into the king's warehouse. Tablets recorded who brought in the grain and how much the king took as his share. Even in the early days, tax collecting is an activity closely linked to accounting
The presence of bookkeeping in the ancient world has been attributed to various factors including (i) the invention of writing; (ii) the introduction of Arabic numerals; (iii) the decimal system (iv) the diffusion of knowledge of algebra; (v) the presence of inexpensive writing materials; (vi) the rise of literacy; and (vii) the existence of a standard medium of exchange.
A.C.Littleton in Accounting Evolution to 1900 lists 7 preconditions for the emergence of systematic bookkeeping:
The Art of Writing, since bookkeeping is first of all a record; Arithmetic, since the mechanical aspect of bookkeeping consists of a sequence of simple computations; private property since bookkeeping is concerned only with recording the facts about property and property rights; Money (i.e. among economy), since bookkeeping is unnecessary except as it reduces all transactions in properties or property rights to this common denominator; Credit (i.e. uncompleted transactions), since there would be little impulse to make any record whatever if all exchanges were complete on spot; Commerce since a merely local trade would never have created enough pressure (volume of business) to stimulate men to coordinate diverse ideas into a system; Capital, since without capital commerce would be trivial and credit would be inconceivable.
MIDDLE AGES
-
As a result of the Crusades from 11th to the 13th centuries, Northern Italy's literacy has become widespread
Arabic numerals were being used as a result of trade with the Near East allowing columns of numbers to be added and subtracted
The use of credit was prevalent and a semblance of an international banking system was also functioning
The Inca Empire, which spanned the west coast of South America throughout the 11th to 14th centuries, used knotted cords of different lengths called quipu to keep accounting records
Development of more formal account-keeping methods is attributed to the merchants of Florence, Venice, and Genoa during the 13th to 15th centuries
Doube-entry bookkeeping is not a discovery of science; it is the outcome of continued efforts to meet the changing necessities of trade
German philosopher Oswald Spengler wrote in The Decline of the West (1928) that the invention of double-entry bookkeeping was the decisive event in European economic history
THE FLORENTINE APPROACH
-
Renaissance Florentine markets were a fascinating combination of formalization, in the form of account books and double-entry bookkeeping, and of informal social networks, constructed to cut out of the surrounding rules of Florentine sociality