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The Development of Bookkeeping and Accounting

development of accounting thought

Bookkeeping and accounting have a long and complicated history. The first records of bookkeeping date back to Mesopotamia around 3000 BC.

The Mesopotamians used a system of clay tablets to record trade transactions.

Archaeologists continue to be interested in ancient Mesopotamia, where they excavate in the hopes of finding clay tablets that record the earliest known examples of written language. The vast majority of these clay tablets have records of financial transactions, lending credence to the theory that the demand for written communication was the impetus behind the development of writing.

It is also possible to contend that the pre-eminence of these ancient civilisations compared to their neighbours was due in part to the well-developed accounting systems which these civilisations utilised.

Fast forward a few thousand years and we see the development of double-entry bookkeeping in Italy in the 1400s. This system is still used by businesses today and is the basis for modern accounting.

In the centuries that followed, bookkeeping and accounting evolved and became increasingly sophisticated. Today, it is an essential part of any business. Without accurate financial records, businesses would quickly become chaotic and would find it very difficult to function.

Luca Pacioli

It is thought that double-entry accounting developed in the Italian city-states in the 1300s. The Franciscan monk, Luca Pacioli, wrote the first known book on double-entry accounting, published in 1494.

It is important to note that he did not invent double-entry accounting. It is also interesting to note that Pacioli was a mathematician, and further that he was good friends with Leonardo Da Vinci. In fact, this famous artist provided illustrations for some of Pacioli’s books.

Pacioli’s book was essential to double-entry accounting because his writings were copied (plagiarised?) throughout Europe over the next few centuries. The double-entry accounting system that we use today still bears distinct traces of the original system described by Pacioli.

Since Pacioli’s time, two inventions of mankind have developed the importance of accounting to modern society. The first of these is the development of the company or corporation with shared ownership. This invention gives rise to the need to develop detailed accounting records so that the many owners of the enterprise can be informed of the efficiency and effectiveness of the management of the enterprise in which they have invested their money.

The other invention which has increased the importance of accounting is called income tax. All modern governments charge income tax on individuals and corporations in their countries. Some accounting records are necessary to calculate income tax.

Also, note that Pacioli and Leonardo da Vinci were good friends and collaborated on a book by Pacioli on ‘Divine Proportions’ published in 1509. Pacioli was the author, and Leonardo did some illustrations, including the famous Vitruvian Man. Pacioli and Leonardo da Vinci had a mutual interest in measurement.

A bestselling novel (and movie), ‘The da Vinci Code’ by Dan Brown uses the Vitruvian man as part of the plot. Unfortunately, Pacioli doesn’t get a mention in Brown’s book. It seems a bit unfair.