Accounting

History of Accounting

Accounting is a system for recording, managing, and summarizing business activities. The earliest accounting tool was likely knots tied in a string or rope to count livestock. In the ancient Middle East, some of the first accounting records were written on cuneiform tablets. Some of these surviving tablets record stores of goods, taxes, and other business activities. The Egyptians recorded their business activities on papyrus rolls.

The earliest Chinese emperors used accountants to record and manage royal property. The ancient Greeks created a commercial empire using coins, which had only recently been invented by their Lydian neighbors. Accounting used by the Greeks was further extended by the Romans. The end of the Roman Empire created a millennium in which little use was made of accounting techniques besides simple bookkeeping.

At the height of the Italian Renaissance, Luca Bartolomeo de Pacioli, a Franciscan friar, published Summa de Arithmetica (1494) in Venice. The book was a mathematics textbook that used Arabic numerals and described both algebra and double-entry accounting. In effect, Pacioli described the method of bookkeeping that Venice merchants were using, the double-entry system of assets and liabilities (credits and debits) used to this day. He also described balance sheets, journals, ledgers, and different kinds of accounts, such as those for receivables and inventories. The Summa has earned Pacioli the title of the Father of Accounting. However, Pacioli never claimed to have invented it, instead citing Benedetto Cotrugli as the originator of double-entry bookkeeping. Cotrugil had written, but had not published, a short manuscript titled Delia Mercatura et del Mercanted Perfetto (Of Trading and the Perfect Trader) in which he gave a general description of the subject. Pacioli also included a discussion of ethics and accounting.

The Language of Business: Applied Ethics

The complicated field of accounting has been called the language of business. It often involves complex issues of business practices and tax laws. While accountants have a popular image as soulless drones, they are required by their work to [Page 5]have imagination and wise judgment. Accounting plays an important role in the management of finances and business operations in public, private, and nonprofit activities.

The field of accounting ethics, which studies moral values and judgments about accounting decisions, encompasses a variety of applied ethics. It is also a type of professional ethics. Ethics and accounting can be illustrated in the parable that Jesus told about the unjust steward (Luke 16:1–13) who skimmed his master's accounts in order to curry favor with his master's debtors.

The field of accounting has received renewed and increased attention in recent years because of the wide range of new accounting services and the unethical behaviors of corporate managers and accountants, some of which caused the collapse of corporations. Both public and private organizations have developed new regulations to promote ethical behavior among accountants. This emphasis on ethics is vital to the profession because businesses and investors depend on the accuracy and honesty of financial reports prepared by accountants. Without reliable accountants and auditors, business transactions are suspect, and are therefore unreliable for making sound business or investment decisions.

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