History of Accounting: Overview

Never in history, has one particular contribution served to shape and mold business in the way that accounting has done. Since the inception of trade and business, civilization understood the need for accurate records. What we were lacking was the means for a standard of accurate record keeping. Enter Luca Pacioli. This Franciscan monk was the father of double entry accounting, and set the business world on fire.

It was such a perfect fit for a long unfulfilled business need that it was like giving water to the thirsty. Businesses and business merchants saw at once the benefit of the double entry accounting system in maintaining accurate and indisputable records. This was the humble beginning of one of the most important and most widely used standards of business practice in the world today.

There have been many advances in the field of accounting, and many times the accountants performing the work have been called upon to provide a bridge between public trust and government regulation. Some of the more important milestones in the field of accounting have been the implementation of income tax laws, the Great Depression, and the more recent scandals involving corporate fraud.

The implementation of income tax laws was the great contributor to the determination that tax returns, tax audits, and almost everything else tax related would be the responsibility of accountants. In the beginning, many lawyers argued that tax laws and income tax returns should fall under a lawyer’s jurisdiction, and for a while it was tried this way. Lawyers however, were very slow to incorporate tax preparation into their practice, and the accountants saw a very lucrative opportunity to add to their practices. Here was created the tax accountant, and for many average citizens, their only contact with the accounting industry.

The next great feat came during the Great Depression. Thanks again to the lack of corporate governing, and the great degree of greed that was rampant during the 1920s, the stock market crash and the Great Depression are a part of our history. There is also a role that accounting played in this era of history that not many are aware of. The rules and regulations that resulted from the crash of the stock market incorporated the use of accountants to audit the corporate entity, and in a sense to hold corporations accountable for their financial transactions. In a sense, accountants had become moral guardians for the interest of the public, and did a great deal to restore the common citizenry’s confidence in the business world.

Once again, the field of accounting is playing a tremendous role in the business environment, again as a watchdog for the common, average investor. Over the course of the last several years, we have seen tremendous abuse of the corporate executive’s office, and on the part of some of the accounting professionals hired to report to them. Herein lies part of the problem, it’s very hard to police the very company that writes your paycheck. Regulating morals has never worked, and trying to legislate and regulate corporate responsibility has not worked well either, when it comes to their financial responsibility. We have not yet written the final chapter in the solution to the role accounting will play in auditing, regulating, and policing corporate tax liability and responsibility; or in the responsibility of the corporation to the shareholders for honest and forthright state of the business reporting, but I’m sure, just as in the past, the role of the accountant will forever remain one of the most influential.

Categories Accounting

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