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Development Of Accounting Essay

4609 words - 19 pages

1. INTRODUCTION..................................................................................................................... 2
1.1 Luca Pacioli: Father Of Modern Accounting ...................................................................................... 2
1.2 19th Century – The Beginnings of Modern Accounting in Europe and America ............................... 3
1.3 20th Century – The Development of Modern Accounting Standards................................................. 4
1.4 21st Century – Accounting Regulation in Modern Commerce ........................................................... 4

2. DEVELOPMENT OF ACCOUNTING ...view middle of the document...

This definition indicates the phases
involved in accounting. First the accounting/financial information would be obtained by the
accountant in respect of transactions from source documents such as payment vouchers, invoices
and receipts. Next the information would be recorded. During this stage the accountant would
classify and summarize the transactions into meaningful groups. Then the accountant would
analyze and interpret the information in a manner that would make them comprehensible for the
users so that they could, in turn make appropriate decisions.
1.1 Luca Pacioli: Father Of Modern Accounting
According to Burk (1973), Luca Pacioli (pot-chee-O-lee) set down in writing for the first time a
description of the double-entry system of accounting, which we still use today in much the same
form. Although he didn't actually invent the system he is called "the father of accounting" for his
contributions and for documenting the system.
According to Burk (1973), accounting was born before writing or numbers existed, some 10,000
years ago, in the area known as Mesopotamia, later Persia, and today the countries of Iran and
Iraq. This area contains the Tigris Euphrates river valley, a large fertile area 10,000 years ago
with a large thriving population and active trading between towns and cities up and down the two
rivers. Merchants faced many of the same problems businesses face today. They had to ship their
merchandise up and down the rivers, and that meant trusting a boatman with their goods.
Unfortunately, not all boatmen were honest, and disagreements often arose about how much was
shipped versus what was received at the other end. To deal with the problem, merchants came up
with an ingenious plan. They made small clay tokens, in various shapes and with various
markings, to indicate different products. One would mean a basket of grain; another would mean
a pot of oil, etc. They had over 200 such tokens to indicate a large variety of common goods,
including food, leather, clothing, utensils, tools, jewelry, etc.
Before shipping their goods, a merchant would take one token for each item in the shipment, and
encase the tokens in a ball of clay, called a "bollae" (pronounced "bowl-eye") - meaning ball.
The ball would be dried in the sun, given to the boatman, and then broken by the buyer on the
other end of the transaction. The buyer would match the tokens with the items in the shipment, to
verify that everything sent was accounted for. (Glenn and James (1974)
c. 8500 BC

Merchants begin to use bollae and tokens to protect shipments

c. 3500 BC

Making marks onto wet clay replaces use of bolla, gives rise to writing
and number systems

c. 3000 BC

Writing and number systems fully developed

c. Late 1400s

Luca Pacioli documents double entry accounting

Source: Glenn and James (1974)

According to Keister (1965), Modern accounting follows the same principles set down by Luca
Pacioli over 500 years...

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