The History of Accounting

The history of accounting is as old as civilization and is among the most important professions in economic and cultural development. Much of what we know about the daily lives of ancient people comes from accounting records, such as inventories and sales records, found at archeological sites. People in all civilizations have maintained various types of records of business activities and the earliest known records kept are the clay tablet records for the payment of wages in the Mesopotamian Valley around 3500 BC.

The Mesopotamian Valley is now mostly in the borders of Iraq. The Valley, which included the city of Babylon, was an especially rich area of agriculture. As farmers prospered, support businesses and small industries developed and the area became a regional center for economic commerce. In fact, the Babylonian Empire was the most powerful state in that time and Babylonian became the language of business and politics.

The Mesopotamian equivalent of today’s accountant was the scribe. Scribes invented record keeping systems. They also kept running inventories of wealth, trade, and tribute payments. Temples, palaces and private businesses employed hundreds of scribes, and it was considered a prestigious profession. Clay, which was plentiful in the area, was molded to size and then the information required was written into the clay with a sharpened wooden rod. The clay tablet was then dried and was kept as a permanent record.

The Egyptians also used a system similar to the Babylonians. Instead of the clay tablets, they used papyrus, which allowed them to create more detailed records. These records were kept for the royals to document their “in kind” tax payments. The Egyptian accountants were required to be honest and accurate, if they were not they were punished by fine, mutilation or death.

The Greeks in about 600 B.C. introduced coined money. Although coined money took time to become widespread, it was an important contribution to accounting and business. The Greeks, who were quite developed in banking, kept account books, changed and loaned money, and even arranged for cash transfers for people through affiliate banks in distant cities.

Accounting in ancient Rome, apx. 50 B.C., became more commonplace. Each head of family was required to keep their own adversaria or daybook. They were then required to submit regular statements of assets and liabilities, which were used as a basis for taxation and even civil rights. The Roman government themselves had an elaborate system of checks and balances which they used to manage the treasury, pay the army and manage the governmental books. Julius Caesar personally supervised the Roman treasury, and Augustus completely overhauled treasury operations during his reign.

By far the most well known person in accounting history is Fra Luca Bartolomeo de Pacioli. He was an Italian mathematician and Franciscan friar. He published several works on mathematics, including Summa de arithmetica, geometrica, proportioni et proportionalita in 1494. He collaborated with Leonardo da Vinci who prepared the illustrations in the book. The book included the first published description of the double-entry accounting system. The system he described used journals and ledgers and included most of the accounting cycle we know today. Although Pacioli did not invent the double-entry system he is known for spreading the knowledge and is regarded as the “Father of Accounting”.

The concepts of “Debit”