Accounting History for students

Gunter Dreyer of the German Institute of Archaeology is perhaps the most prominent of a number of archeologists who believe that writing actually developed out of early marks that we

History of Bookkeeping and

The “Near East” – Cradle of Civilization

Dawn of Civilization

 Transition from hunter/gather to farmer

 Jordan River

Valley

 Jericho – Oldest fortified city

discovered so far

 Artifacts date back some 10,000 years!

“Jerry of Jericho”

The First Inventory

 Who was the first

Which came first – writing or numbers?

 Dr Gunter Dreyer of the German Institute

of Archaeology is perhaps the most

prominent of a number of archeologists

who believe that writing actually

developed out of early marks that were

used to tally the kinds and amounts of

goods in stock at ancient warehouses

Earliest writing = inventory control!

discovered numerous inscribed bone labels attached to bags of oil and linen in the tomb of King Scorpion I at Abydos, Egypt

years, are the world's earliest known writing, and describe inventory owners, amounts, and suppliers

One of the Oldest Professions!

 In ancient Egypt, the

accountant was called the

"eyes and ears" of the king

Simple Token System

 Simple token system did not require abstract concepts of

numbers, writing or money!

 Token system expanded – used

as evidence of transactions

 Clay “envelopes” date from around

4000 BC in Sumeria

Envelope & tokens - Susa, 3300 BC (Lourve)

Accounting pre-dates writing!

 Complex tokens evolved about 3700 BC

 Use of lines, notches and other markings used

as abstract representations of wealth and the development of numbers

 Evolved into cuneiform

Accounting records on pre-cuneiform tablet (Louvre)

Cuneiform Collection – SMM 7

Translation:

1 3 acres barley, for harvest,

2 Field of the Ash Trees

3 Dada, the swineherd

4 Seal(Ed by) Lugal-ema e

5 Month of barley harvest,

6 year Huhnuri was destroyed.

This tablet is a receipt for beer, sealed by a clerk named Umani

Sealing Tablets

Source: - Science Museum of Minnesota

http://www.smm.org/research/Anthropology/cuneiform/sealing.php

Babylonia – Base 60 numerals

 Here are the 59 symbols built from just two symbols

Ancient Egyptian Numbers



“Zero” had not yet been “invented

Sticks & Strings

The Inca Quipu

 The Inca (unlike the Maya and Aztec) had no true form

of writing

Tally Sticks

These sticks recorded expenses for illiterate

servants and masters As money or goods

changed hands, the tally sticks were carved with v-shaped grooves for "pounds," rounded grooves for "shillings," and slices for "pense."

At the end of a transaction, the stick would be split lengthwise and divided between the debtor and the creditor until the debt was paid.

Minted in Madhyadesha?, found near Mathura

Silver unit Seven punch marks Weight: 7.14 gm

Numismatic Digest # 22

Rare

Coins appear to be a simultaneous but independent development at about the same time in China, India, and Greece

Invention of Coins – around 630BC

 Castulo AE30 Augustus' (?) portrait right / Helmeted Sphinx right, star before, Iberian legend in ex - photos from

http://www.wildwinds.com/coins/sg/sg0015.html

Ancient Greece

 The public economy

of the Athenians had a highly developed

system of accounting & auditing

 Treasurer or manager of Public Revenue

 Accounts kept by clerks and controlled by

“checking clerks”

 Accountability assured by public exposure

of accounts on stone

 Monthly, the entries were transferred to the ledger (“codex tabulae”)

 The codex could be used in court to substantiate contracts and claims

 In government – separation of

responsibilities

 Accounting largely used to evaluate

efficiency of governmental programs and civil servants

 To date, no evidence of double-entry

bookkeeping before introduction from west

in 1800s

The Rise of Double Entry

Crusades – demand for exotic goods Genoa-Venice-Florence: A

Commercial Revolution

Littleton’s Antecedents of Bookkeeping

language)

The Father of Accounting:

Fra Luca Pacioli

 He was born in 1445

in Sansepolcro, Italy.

 A dedicated Franciscan, he showed a passion for mathematics

 Did not invent double entry – but wrote the most influential early

“textbook”

Traditional

1494 – The Summa

 The treatise’s official title: "Summma de Arithmetica,

Geometria: Proportioni

et Proportionalita"

 One section of the book was devoted to methods of recording merchant transactions, including ideas about double-entry

bookkeeping

Numbers in Medieval Bookkeeping

 Even though the Italian merchants

calculated with Arabic numerals as early

as the 13th century, Roman figures

dominated in their account books until the late 15th century (but with

decreasing frequency)

 Use of Roman numerals persisted in northern

Europe even longer as double entry moved north gradually

 The prolonged use of the ’old’ writing

style is mostly explained by with the

general belief of the contemporaries that the Roman were forgery-proof.

Sombart’s Theory (1924)

 Double entry bookkeeping was such a

powerful tool that it made possible the new social and economic system which we call capitalism

 “chicken and egg” arguments!

Rise of Cost Accounting

 Josiah Wedgwood – Entrepreneur & Cost

Accountant

 1770-2 financially difficult times with dropping demand and rising inventories

labor & allocated overhead costs

The Abacus

 The Abacus is an ingenious counting device based

on the relative positions of two sets of beads

moving on parallel strings The first set contains

five beads on each string and allows counting from

1 to 5, while the second set has only two beads per string representing the numbers 5 and 10 The

Abacus system seems to be based on a radix of

five Using a radix of five makes sense since

humans started counting objects on their fingers.

http://www.xnumber.com/xn

umber/mechanical1.htm00

The Exchequer

 in British history, the government

department that was responsible for

receiving and dispersing the public revenue

The word derives from the Latin scaccarium,

“chessboard,” in reference to the checkered cloth on which the reckoning of revenues

took place

Technology Changes What’s Possible

in Accounting

 William Seward Burroughs invented and patented the first workable adding

machine in 1885 in St Louis, Mo.

 Production increased dramatically after 1900