Volume I of Accounting History covers the first 10,000 or so years of the rise of accounting and civilization. Conveniently, accounting was part of the developing culture from the start. Before civilization, big-brained humans still developed language, stone tools, started trade, and made both bread and beer from wild wheat. The beer and bread combo may have been the big push to settled agriculture, villages, and the start of civilization. With fortified villages and towns, accumulating wealth meant inventory accounting, first using tokens (clay balls). Increased technology, population, and power followed, as did the need for better bookkeeping. Accountants turned inventory control into symbols and eventually writing, plus developed the abstract concepts of numbers. Cultures evolved in Mesopotamia, Egypt, Persia, China, and India, then shifted west to the Greeks and Romans. Romans mastered engineering, were professional conquerors and accomplished accountants. The fall of Rome turned Europe dark for a thousand years. After the Crusades, Italian city states created merchant wealth based on the creation of double-entry bookkeeping and the valuable information created—the Renaissance was born. Mercantile success traveled north. Luca Pacioli’s Summa described the Venetian system of double-entry bookkeeping; Summa traveled north thanks to Gutenberg’s printing press then in operation in Venice and across Europe. Development in science, technology, and intellectual societies brought the Enlightenment, systematic thinking, and the importance of evidence and experimentation. Enhanced forms of manufacturing, banking, and merchant trade continued. England proved to be a special place, thanks in part to the evolving Common Law, which viewed contracts and property rights as sacrosanct. Here was born the Industrial Revolution with all its promise of exploding productivity and economic growth as well as growing income inequality and poverty, depressions, and pollution. “Creative destruction” of textile handcrafts meant previously well-off occupations such as spinners and weavers became obsolete—a never ending process in budding industrial capitalism. Along the way, accounting sophistication rose as entrepreneurs discovered the need for enhanced information to survive, especially because of fairly regular economic downturns.
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Accounting became a profession as business became big and important enough to employ professionals for bankruptcy proceedings, audits, and tax calculations and issues. The story shifts to America as 13 diverse colonies joined to fight what they considered a common enemy, Britain (or, more specifically, George III). The American Revolution was won, a new Constitution established republican principles, and a government framework created to provide revenue, representation, and institutions flexible enough to last for centuries. The United States went from an agrarian backwater to a competitive industrial power in 100 years. Accountants played a growing part, as accounting, auditing, and financial reporting sophistication had to match business growth and complexity. In about 150 years American manufacturing cost accounting went from the equivalent of the Medieval Italian merchant system to sophisticated accounting and control techniques capable of providing the necessary information to run giant diversified manufacturing firms effectively.
Keywords
accounting, auditing, capitalism, civilization, cost accounting, double- entry bookkeeping, financial accounting, industrial revolution, information technology