The history of accounting is as old as civilization, key to important phases of history, among the most important professions in economics and business, and fascinating. Accountants participated in the development of cities, trade, and the concepts of wealth and numbers. Accountants invented writing, participated in the development of money and banking, invented double entry bookkeeping that fueled the Italian Renaissance, saved many Industrial Revolution inventors and entrepreneurs from bankruptcy, helped develop the confidence in capital markets necessary for western capitalism, and are central to the information revolution that is transforming the global economy.
There are no household names among the accounting innovators; in fact, virtually no names survive before the Italian Renaissance. It took archaeologists to dig up the early history and scholars from many fields to demonstrate the importance of accounting to so many aspects of economics and culture. The role of accountants in the ancient world is coming into clearer focus with new archaeological discoveries and innovative interpretations of the artifacts. It is now evident that writing developed over 5,000 years–by accountants.
It is difficult to overestimate the importance of double entry bookkeeping. It was central to the success of Italian merchants, necessary to the birth of the Renaissance. Industrial Revolution firms required accountants to provide the information necessary to avoid bankruptcy and their role developed into a profession. Big business required capital markets that depended on accurate and useful information. This was supplied by what became an accounting profession. Today, a global real-time integrated information system is a reality, suggesting new accounting paradigms. Understanding history is needed to develop the linkages to predict this future.
1. What is accounting
Accountancy is the process of communicating financial information about a business entity to users such as shareholders and managers. The communication is generally in the form of financial statements that show in money terms the economic resources under the control of management; the art lies in selecting the information that is relevant to the user and is reliable. The principles of accountancy are applied to business entities in three divisions of practical art, named accounting, bookkeeping, and auditing. Accountancy is defined by the Oxford English Dictionary (OED) as “the profession or duties of an accountant”.
Accounting is defined by the American Institute of Certified Public Accountants (AICPA) 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.” Accounting is thousands of years old; the earliest accounting records, which date back more than 7,000 years, were found in Mesopotamia (Assyrians). 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. Early accounts served mainly to assist the memory of the businessperson and the audience for the account was the proprietor or record keeper alone. Cruder forms of accounting were inadequate for the problems created by a business entity involving multiple investors, so double-entry bookkeeping first emerged in northern Italy in the 14th century, where trading ventures began to require more capital than a single individual was able to invest. The development of joint stock companies created wider audiences for accounts, as investors without firsthand knowledge of their operations relied on accounts to provide the requisite information.
This development resulted in a split of accounting systems for internal (i.e. management accounting) and external (i.e. financial accounting) purposes, and subsequently also in accounting and disclosure regulations and a growing need for independent attestation of external accounts by auditors. Today, accounting is called “the language of business” because it is the vehicle for reporting financial information about a business entity to many different groups of people. Accounting that concentrates on reporting to people inside the business entity is called management accounting and is used to provide information to employees, managers, owner-managers and auditors.
Management accounting is concerned primarily with providing a basis for making management or operating decisions. Accounting that provides information to people outside the business entity is called financial accounting and provides information to present and potential shareholders, creditors such as banks or vendors, financial analysts, economists, and government agencies. Because these users have different needs, the presentation of financial accounts is very structured and subject to many more rules than management accounting. The body of rules that governs financial accounting in a given jurisdiction is called Generally Accepted Accounting Principles, or GAAP.
2.1. Ancient Accounting
In attempting to explain why double entry bookkeeping developed in 14th century Italy instead of ancient Greece or Rome, accounting scholar A. C. Littleton describes seven “key ingredients” which led to its creation:
• Private property: The power to change ownership, because bookkeeping is concerned with recording the facts about property and property rights.
• Capital: Wealth productively employed, because otherwise commerce would be trivial and credit would not exist.
• Commerce: The interchange of goods on a widespread level, because purely local trading in small volume would not create the sort of press of business needed to spur the creation of an organized system to replace the existing hodgepodge of record-keeping.
• Credit: The present use of future goods, because there would have been little impetus to record transactions completed on the spot.
• Writing: A mechanism for making a permanent record in a common language, given the limits of human memory.
• Money: The “common denominator” for exchanges, since there is no need for bookkeeping except as it reduces transactions to a set of monetary values. • Arithmetic: A means of computing the monetary details of the deal. Many of these factors did exist in ancient times, but, until the Middle Ages, they were not found together in a form and strength necessary to push man to the innovation of double entry. Writing, for example, is as old as civilization itself, but arithmetic – the systematic manipulation of number symbols – was really not a tool possessed by the ancients.
Rather, the persistent use of Roman numerals for financial transactions long after the introduction of Arabic numeration appears to have hindered the earlier creation of double-entry systems. Nevertheless, the problems encountered by the ancients with record keeping, control and verification of financial transactions were not entirely different from our current ones. Governments, in particular, had strong incentives to keep careful records of receipts and disbursements – particularly concerning taxes. And in any society where individuals accumulated wealth, there was a desire by the rich to perform audits on the honesty and skill of slaves and employees entrusted with asset management.
But the lack of the above-listed antecedents to double entry bookkeeping made the job of an ancient accountant extraordinarily difficult. In societies where nearly all were illiterate, writing materials costly, numeration difficult and money systems inconsistent, a transaction had to be extremely important to justify keeping an accounting record.
2.2. Accounting In Mesopotamia.
Five thousand years before the appearance of double entry, the Assyrian, Chaldaean-Babylonian and Sumerian civilizations were flourishing in the Mesopotamian Valley, producing some of the oldest known records of commerce. In this area between the Tigris and Euphrates Rivers, now mostly within the borders of Iraq, periodic floodings made the valley an especially rich area for agriculture. As farmers prospered, service businesses and small industries developed in the communities in and around the Mesopotamian Valley. The cities of Babylon and Ninevah became the centers for regional commerce, and Babylonian became the language of business and politics throughout the Near East.
There was more than one banking firm in Mesopotamia, employing standard measures of gold and silver, and extending credit in some transactions. During this era (which lasted until 500 B.C.), Sumeria was a theocracy whose rulers held most land and animals in trust for their gods, giving impetus to their record-keeping efforts. Moreover, the legal codes that evolved penalized the failure to memorialize transactions. The renowned Code of Hammurabi, handed down during the first dynasty of Babylonia (2285 – 2242 B.C.), for example, required that an agent selling goods for a merchant give the merchant a price quotation under seal or face invalidation of a questioned agreement.
Thus it is believed that most transactions were recorded and subscribed by the parties during this period. The Mesopotamian equivalent of today’s accountant was the scribe. His duties were similar, but even more extensive. In addition to writing up the transaction, he ensured that the agreements complied with the detailed code requirements for commercial transactions. Temples, palaces and private firms employed hundreds of scribes, and it was considered a prestigious profession. In a typical transaction of the time, the parties might seek out the scribe at the gates to the city.
They would describe their agreement to the scribe, who would take from his supply a small quantity of specially prepared clay on which to record the transaction. Clay was plentiful in this area, while papyrus was scarce and expensive. The moist clay was molded into a size and shape adequate to contain the terms of the agreement. Using a wooden rod with a triangular end, the scribe recorded the names of the contracting parties, the goods and money exchanged and any other promises made. The parties then “signed” their names to the tablet by impressing their respective seals.
In an age of mass illiteracy, men carried their signatures around their necks in the form of stone amulets engraved with the wearer’s mark, and were buried with them at death. Often the seals included the owner’s name and religious symbols, such as the picture and name of the gods worshipped by the owner. After these impressions from the amulets were made, the scribe would dry the tablet in the sun or in a kiln for important transactions which needed a more permanent record.
Sometimes a clay layer about as thick as a pie crust was fashioned and wrapped around the tablet like an envelope. For extra security, the whole transaction would be rewritten on this outer “crust,” in effect making a carbon copy of the original. Attempted alterations of the envelope could be detected by comparing it with its contents, and the original could not be altered without cracking off and destroying the outer shell.
2.3. Accounting In Ancient Egypt, China, Greece and Rome
Governmental accounting in ancient Egypt developed in a fashion similar to the Mesopotamians. The use of papyrus rather than clay tablets allowed more detailed records to be made more easily. And extensive records were kept, particularly for the network of royal storehouses within which the “in kind” tax payments were kept. Egyptian bookkeepers associated with each storehouse kept meticulous records, which were checked by an elaborate internal verification system. These early accountants had good reason to be honest and accurate, because irregularities disclosed by royal audits were punishable by fine, mutilation or death.
Although such records were important, ancient Egyptian accounting never progressed beyond simple list-making in its thousands of years of existence. Perhaps more than any other factors, illiteracy and the lack of coined money appear to have stymied its development. While the Egyptians tracked movements of commodities, they treated gold and silver not as units of fungible value, but rather as mere articles of exchange. The inability to describe all goods in terms of a single valuation measure made cumulation and summation difficult and the development of a cohesive accounting system all but impossible.
Pre-Christian China used accounting chiefly as a means of evaluating the efficiency of governmental programs and the civil servants who administered them. A level of sophistication was achieved during the Chao Dynasty (1122 – 256 B.C.), which was not surpassed in China until after the introduction of double entry processes in the 19 century. In the 5th century B.C., Greece used “public accountants” to allow its citizenry to maintain real authority and control over their government’s finances. Members of the Athens Popular Assembly legislated on financial matters and controlled receipt and expenditure of public monies through the oversight of 10 state accountants, chosen by lot.
Perhaps the most important Greek contribution to accountancy was its introduction of coined money about 600 B.C. Widespread use of coinage took time, as did its impact on the evolution of accounting. Banking in ancient Greece appears to have been more developed than in prior societies. Bankers kept account books, changed and loaned money, and even arranged for cash transfers for citizens through affiliate banks in distant cities. Government and banking accounts in ancient Rome evolved from records traditionally kept by the heads of families, wherein daily entry of household receipts and payments were kept in an adversaria or daybook, and monthly postings were made to a cashbook known as a codex accepti et expensi.
These household expenses were important in Rome because citizens were required to submit regular statements of assets and liabilities, used as a basis for taxation and even determination of civil rights. An elaborate system of checks and balances was maintained in Rome for governmental receipts and disbursements by the quaestors, who managed the treasury, paid the army and supervised governmental books. Public accounts were regularly examined by an audit staff, and quaestors were required to account to their successors and the Roman senate upon leaving office.
The transition from republic to empire was, at least in part, to control Roman fiscal operations and to raise more revenues for the ongoing wars of conquest. While the facade of republicanism was maintained, the empire concentrated real fiscal and political power in the emperor. Julius Caesar personally supervised the Roman treasury, and Augustus completely overhauled treasury operations during his reign. Among Roman accounting innovations was the use of an annual budget, which attempted to coordinate the Empire’s diverse financial enterprises, limited expenditures to the amount of estimated revenues and levied taxes in a manner which took into consideration its citizens’ ability to pay.
2.4. Medieval Accounting
The thousand years between the fall of the Roman Empire and the publication of Luca Pacioli’s Summa are widely viewed as a period of accounting stagnation, and medieval practices outside Italy are often ignored in historical summaries. Yet, as historian Michael Chatfield has observed, medieval agency accounting, “laid the foundations for the doctrines of stewardship and conservatism, and the medieval era created the conditions for the rapid advance in accounting technology that occurred during the Renaissance.”
While accounting under the Roman Empire was prescribed by the centralized legal codes of the time, medieval bookkeeping was localized and centered on the specialized institutions of the feudal manor. The systems of exchequer and manor necessitated numerous delegations of authority over property from the owners to actual possessors and users. The central task of accounting during this era was to allow the government or property owners to monitor those in the lower portions of the socio-economic “pyramid.” When William the Conqueror invaded England, he took possession of all property in the name of the king.
In 1086, he conducted a survey of all real estate and the taxes due on them, known as the Domesday Book. The oldest surviving accounting record in the English language is the Pipe Roll, or “Great Roll of the Exchequer,” which provides an annual description of rents, fines and taxes due the King of England, from A.D. 1130 through 1830. Compiled from valuations in the Domesday Book and from statements of sheriffs and others collecting for the royal treasury, the Pipe Roll was the final record on parchment of a “proffer” system which extensively used a wooden stick as a basis of account-keeping.
Twice a year, at Easter and Michaelmas (September 29), the various county sheriffs were called before the Exchequer at Westminster. At Easter, a sheriff would pay about half of the total annual assessments his county owed. In accepting a sheriff’s payment on account (the proffer), the treasurer would have a wooden tally stick prepared and cut as a record of the transaction. Used even before the introduction of the Pipe Roll, the tally stick was a nine-inch long, narrow, hazelwood stick, cut with notches of varying size to indicate the amount received. A cut the size of a human hand was 1,000 pounds; a thumb’s width, 100 pounds; a cut the thickness of a “grain or ripe barley,” one pound; and a shilling, just a notch.
2.5. Italian Renaissance: Birth of Double Entry Bookkeeping
The innovative Italians of the Renaissance (14th -16th century) are widely acknowledged to be the fathers of modern accounting. They elevated trade and commerce to new levels, and actively sought better methods of determining their profits. Although Arabic numerals were introduced long before, it was during this period that the Italians became the first to use them regularly in tracking business accounts – an improvement over Roman numerals the importance of which cannot be overstated. They kept extensive business records, as the use of capital and credit on a large scale developed: The evolutionary trend toward double entry bookkeeping was underway.
2.5.1. Luca Pacioli Biography
Luca Pacioli was one of the greatest men of the Renaissance. He is also one of the least well known. This is surprising, for Luca Pacioli’s manuscripts and ideas changed the way the world worked then, and continue to affect modern daily life. Luca Pacioli was born in Sansepulcro, in Tuscany. He was probably born during 1445. His family was poor so Pacioli joined a Franciscan monastery in Sansepulcro and became an apprentice to a local businessman. The young Pacioli had always loved mathematics though, and he soon abandoned his apprenticeship to work as a mathematics scholar.
Pacioli befriended the artist Piero della Francesca, one of the first and greatest writers and artists of perspective. Francesca and Pacioli journeyed over the Appenines, where Francesca gave Pacioli access to the library of the Count of Urbino. The collection of four thousand books allowed Pacioli to further his knowledge of mathematics. Francesca also introduced Pacioli to Leon Baptist Alberti, who would become Pacioli’s new mentor. Alberti brought Pacioli to Venice and arranged for him to tutor the three sons of the rich merchant Antonio de Reimpose. During this time, in the year 1470, Pacioli wrote his first manuscript at the age of twenty-five. The book was about algebra and was dedicated to the Reimpose boys. Alberti also introduced Pacioli to Pope Paul II.
Paul encouraged Pacioli to become a monk and dedicate his life to God. After Alberti died in 1472, Pacioli took the pope’s suggestion, and took the vows of Franciscan Minor. In 1475, Pacioli became a teacher at the University of Perugia, where he stayed for six years. He was the first lecturer to hold a chair in math at the University. In his lectures, Pacioli stressed the importance of putting theory to practical use. This emphasis on application of theory made him unique among his peers. While at the University of Perugia, Pacioli wrote his second manuscript, dedicated to the “Youth of Perugia.”
After 1481, Pacioli wandered throughout Italy, and in some areas outside it, until he was called back to the University of Perugia by the Franciscans in 1486. The year 1494 is the only date during Pacioli’s life that is absolutely certain. It was during this year that the forty-nine-year-old Pacioli published his famous book Summa de Arithmetica, Geometria, Proportioni et Proportionalita (The Collected Knowledge of Arithmetic, Geometry, Proportion and Proportionality). Pacioli wrote it in an attempt to redress the poor state of mathematics teaching in his time. One section in the book made Pacioli famous.
The section was about accounting. It was later described by some as “a catalyst that launched the past into the future.” Pacioli was the first person to describe double-entry accounting, also known as the Venetian method. This new system was state-of- the-art, and revolutionized economy and business. The Book made Pacioli a celebrity and insured him a place in history, as “The Father of Accounting.” It was the most widely read mathematical work in all of Italy, and became one of the first books published on the Gutenberg press. Pacioli’s important manuscript made him instantly famous, and he was invited to Milan to teach mathematics in Milan. One of his pupils would be Leonardo da Vinci.
During the seven years Pacioli and da Vinci spent together, the two would help each other create two masterpieces that would withstand the test of time. Da Vinci illustrated Pacioli’s next and second most important manuscript “Of Divine Proportions”. Pacioli taught da Vinci perspective and proportionality. This knowledge allowed da Vinci to create one of his greatest masterpieces, a mural on the north wall of the Santa Maria de Gracia Dominican cloister. This mural is the most famous painting of the fifteenth century, known as “The Last Supper.”
In the years that followed Pacioli’s relationship with da Vinci, he continued to teach and write. In 1509, “Of Divine Proportions” and a work on Euclid were published in Venice. In the same year, Pacioli gave an important lecture on “Proportion and Proportionality,” a lecture that emphasized the relationship of proportion to religion, medicine, law, architecture, grammar, printing, sculpture, music and all the liberal arts. In 1510, Pacioli was appointed director of the Franciscan monastery in Sansepulcro, much to the dismay of his fellow monks. In 1514, Pope Leo III called Pacioli to the papacy in Rome to become a teacher there. Scholars are unsure about what happened to Pacioli afterwards, but they are fairly certain that he never made it to Rome. Pacioli probably died on June 19, 1517 in the monastery in Sansepulcro.
2.5.2. Significance of the Summa
The Summa’s 36 short chapters on bookkeeping were entitled De Computis et Scripturis (Of Reckonings and Writings). “De Computis” begins with some basic instruction for commerce. The successful merchant, declares Pacioli, needs three things: sufficient cash or credit, good bookkepers and an accounting system which allows him to view his finances at a glance. Before commencing business, one should prepare an inventory listing all business and personal assets and debts. This inventory must be completed within one day, and property should be appraised at current market values and arranged according to mobility and value, with cash and other valuables listed first since they are most easily lost.
The memorandum, or memorial, was Pacioli’s equivalent of a daybook, for the recording, in chronological order, of business transactions as they occurred. The transaction could be entered in any of the various monetary units then in use in the Italian city-states of the time, with conversion to a common currency for double entry left for later. The journal was the merchant’s private account book. Entries consisted of a narrative debit, credit and explanation in one continuous paragraph. The journal had only one column, which was not totaled. There were no compound entries. Pacioli’s ledger was, of his three books, the most like its modern equivalent.
The money and date columns were almost identical to those in modern ledgers, with entries consisting of brief paragraphs, debits on the left side of a double page (deve dare) and credits on the right (deve avere). The bookkeeper posts “cash in hand” as a debit on page one of the ledger, just as it was entered first in the journal. As ledger postings are made, two diagonal lines are drawn through each journal entry, one from left to right when the debit is posted and the other from right to left when the credit is posted. The trial balance (summa summarium) is the end of Pacioli’s accounting cycle. Debit amounts from the old ledger are listed on the left side of the balance sheet and credits on the right.
If the two totals are equal, the old ledger is considered balanced. In the first century after its publication, the Summa was translated into five languages, and numerous books on double entry bookkeeping appeared in Dutch, German, English and Italian whose descriptions were obviously lifted from “De Computis.” Many consider these works inferior explanations of the system so clearly articulated by Pacioli. Nevertheless, they helped quickly spread the knowledge of the “Italian method” throughout Europe.
Perhaps most surprising is how little bookkeeping methods have changed since Pacioli. Both the sequence of events in the accounting cycle and the special procedures he described in “De Computis” are familiar to modern accountants. In fact, the primary differences between current bookkeeping practices and the “Method of Venice” are additions and refinements brought about by the needs of a larger scale of business operation.
2.6. Professional Accountancy Travels Across the Globe
George Watson (1645-1723), one of the early Scottish accountants, trained in Holland and passed along instructional materials used by his fellow professionals. By the middle of the19th century, England was in the midst of prosperous times brought on by the Industrial Revolution. It was the leading producer of coal, iron and cotton textiles, and was the financial center of the world. With this financial surge came a demand for accountants, both for the healthy concerns and those companies declaring bankruptcy in the midst of the competition.
In 1880, the newly formed Institute of Chartered Accountants in England and Wales brought together all the accountancy organizations in those countries. In addition to the 587 members initially enrolled, an additional 606 members were soon admitted on the basis of their experience. Standards of conduct and examinations for admission to the Institute were drawn up, and members began using the professional designations “FCA” (Fellow Chartered Accountant, for a firm partner or proprietor in practice) and “ACA” (Associate Chartered Accountant, signifying a qualified member of an accountant’s staff, or a member not in practice).
In the late 1800s, large amounts of British capital were flowing to the rapidly growing industries in the United States. Scottish and British accountants traveled to the U.S. to audit these investments, and a number of them stayed on and set up practice in America. Several existing American accounting firms trace their origins to one or more of these visiting Scottish or British chartered accountants. City directories from the year 1850 list 14 accountants in public practice in New York, four in Philadelphia and one in Chicago. By 1886, there were 115 listed in New York, 87 in Philadelphia and 31 in Chicago.
Groups of accountants joined together to form professional societies in cities across America. In 1887, the first national accounting society was formed – the American Association of Public Accountants, predecessor to the American Institute of Certified Public Accountants.
2.7. The Twentieth Century
However prosperous, the United States was still an infant nation when the American Institute of Certified Public Accountants was formed. The Civil War ended with the U.S. still a predominantly farming-based economy. It was only the year before that the Apache chief Geronimo had surrendered to the federal authorities. The ensuing decades saw enormous economic growth as industry began to overtake agriculture in financial importance. This period of growth also saw its share of financial scandals. Over-capitalization and stock speculation caused financial panics in 1873 and 1893. Watered railroad stocks were in the headlines, along with concerns about growing monopolies in several industries.
Labor unions developed in response to corporate exploitation of workers. Congress responded by passing the first Interstate Commerce Act and the Sherman Antitrust Act, marking the beginnings of federal regulation of business. When Theodore Roosevelt became President after the 1901 assassination of William McKinley, he supported the use of governmental power to control the growing industrial monopolies and the price increases they caused. The Roosevelt administration helped persuade Congress to establish the Department of Commerce and Labor to gather the facts needed to enforce antitrust laws.
The Interstate Commerce Commission’s powers over transportation were broadened, and the ICC established a uniform system of accounting – the first instance of accounting used as an instrument of federal regulation. Unlike the British, who used the balance sheet in an effort to monitor management’s use of stockholders’ monies, American corporations of the early 20th century had no comparable history of losses from stock speculation. Rather, American balance sheets were drafted mainly with bankers in mind, and bankers of the era cared more about a company’s liquidity than earning power. Beginning in 1920, business practices began changing drastically as the U.S. went through an inventory depression in which wholesale prices fell 40 percent.
Cash flow slowed, loans defaulted and credit became less available to corporations. In response, businesses sought financing from sources less tied to their current cash flow. The offering of corporate stock issues became a leading method of financing expansion. As stockholders, rather than bankers, became the primary audience of financial statements, the income statement began to take center stage over the balance sheet. Other factors, such as the rise of income taxation and cost accounting, also shifted the focus to revenues and expenses.
At the turn of the century, there were at least four types of funds statements in use – those that summarized changes in cash, in current assets, in working capital and overall financial activities. Accountant H. A. Finney led the movement for use of a funds statement that focused onliquidity by tracking the sources of changes in working capital. He used a worksheet approach to highlight meaningful balance sheet changes by aggregating most of the fluctuations that affect working capital, and offered a standardized method for calculating them. In the 1940s, the accounting profession increasingly used the funds statement to measure the actual flow of monies, rather than simply the sum of working capital changes between balance sheet dates.
The funds statement increasingly became a staple for the financial statement and, in 1971, the American Institute of Certified Public Accountants began requiring its inclusion in stockholders’ annual reports. Nowadays, with more than 330,000 members, the AICPA is the premier national professional association for CPAs in the United States. Their web site is full of useful resources, including the latest American accounting news, along with organization-specific materials.
3. How Technology has Impacted Accounting
The first accounting firm opened in 1845 in London, but accounting technology and technological advances in accounting such as accounting software didn’t come until much later. Accounting technology has always played a role in keeping track of numbers, and the idea of using machines to solve mathematical problems goes back centuries. Leonardo da Vinci actually designed a machine he called the “Codex Madrid” that contained thirteen wheels that registered digits. While there were several other attempts to build a numbers calculator, it was Blaise Pascal, a French scientist, who invented the early calculator (interestingly enough, he also is credited with inventing the roulette machine and the wrist watch).
In 1885, William Burroughs invented the first working adding machine. The first batch of machines didn’t sell very well since Mr. Burroughs was the only person who could use them, so they were recalled, and the corrective automatic adding machine was invented. Naturally, this model sold much better. Adding machines and then later—much later—calculators made the job of accounting much easier. They led to fewer mistakes, greater accountability, and sped up the work of the average bookkeeper or accountant.
Technological advances in accounting always mean increased speed and efficiency. While there were subtle changes in the field of accounting from its early days through the 1970s, the job remained virtually the same: paper records of columns of numbers. But with the invention of the computer and accounting software, that all changed. In 1930, Vannevar Bush, a professor at MIT, built an electronic differential analyzer. Other inventors such as Konrad Zuse and Howard Aiken built hybrid binary arithmetic machines and used electric relays to calculate sums. Professor Aiken worked with IBM, and in 1942 they built what could be called the first computer.
Over the course of the next fifty years, massive computers capable of only simple calculations went from filling entire rooms to the small desktop computer most of us use at home and the office today. Computers and accounting software allow accountants to use electronic spreadsheets—eliminating the need for adding machines, calculators, and pencils and ledgers in one fell swoop. It became much simpler for accountants to keep track of information on a minute-by-minute basis and completely eliminated most mistakes.
This has led to greater efficiency and accountability, and has changed the face of accounting considerably. Of course, all the technological advances in accounting and accounting software is prey to sabotage and other forms of destructive action. Fraud is still possible. But this has led to new areas of accounting work, such as forensic accounting. New computer programs help track any attempts to initiate fraud. This area of accounting protection and investigation will continue to grow and evolve.
The computer has not only revolutionized business accounting, it’s also changed how people keep track of their own money. Banking online, software programs that do your taxes, and automatic bill paying have dramatically altered how the individual handles their money. Most of us are grateful that we no longer have to use an abacus to balance our checkbooks, or clay tokens to figure out the grocery budget. As accounting technology continues to evolve, keeping track of our money will be easier and easier. In the future, new technological advances in accounting will no doubt make our lives easier.
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