The celebration of the UT Accounting Program’s centennial anniversary is fast approaching. What would be a better way to celebrate this longstanding success than looking back at how the field of accounting was born? This will be the first of a three-part series on accounting: how it started; how it’s viewed and used in today’s world; and how the accounting program was established and developed at UT.
It might be a surprise to some, but accounting is one of the oldest professions in history. Families and small communities had to account for food and other necessities in preparation for cold and harsh seasons. Researchers and anthropologists found evidence of accounting records that existed during the Babylon Empire. In other words, formal accounting records were already in existence since 4500 BC! They also found accounting records in the Code of Hammurabi which dates back to 2250 BC! This just proves that as business transactions and government tax systems became more complex, people knew that they had to account and keep track of their revenues and expenses.
During the Italian Renaissance, business centers sprouted in the country, with Venice being the leading merchant hub. It was in this period that traders invented and practiced the double-entry accounting system. The evident use of the system prompted Fra Luca Pacioli to include the topic in his text Summa de Arithmetica, Geomteria, Proportioni et Proportionalita. Summa discussed record-keeping and double-entry accounting and was the primary accounting textbook for societies for the next 500 years. His system included most of today’s accounting trails and documents such as memorandums, journals and ledger. His ledger also included assets, receivables, inventories, liabilities, capital income and expense accounts.
Luca also presented the concept of year-end closing entries and suggested the use of a trial balance to prove a balanced ledger. Because of Luca’s major contribution in the accounting field, he was dubbed as the “Father of Accounting,” and Summa would be still be referenced in certification and accounting textbooks even in today’s world.
In the next subsequent years since Summa was published, only a few modifications were done to Luca’s system. In fact, the present-day balance sheet did not get its form until 1868; while the present-day income statement was developed just before World War II.
The first accounting firm opened in 1845 in London. A group of clerks advertised their accounting services and regarded themselves as “accomptants.” It was also during this period that William Burroughs invented the first working adding machine. It improved Blaise Pascal’s initial calculating machine with an added printer, making it easier to keep track of all accounting numbers and entries. The adding machine led to fewer errors, greater liability and better work efficiency for the bookkeeper or accountant.
Indeed as technology developed, the accounting field progressed with it, as well. Even though the initial framework established by Luca is still used in today’s accounting, the process of bookkeeping and auditing has become so much easier with computers. Nonetheless, the greater efficiency of computers and other forms of technology could never replace the inquisitive, analytical and evaluative mind of a true accountant.