Accounting History

Accounting history, very early:

  • Accounting has been around since man started to trade, thousands of years B.C.Accurate records were even a necessity then for those that were involved in trading.
  • Double entry accounting invented:

    • The double entry type accounting that is used today was believed to have been invented in Italy during the late 1400's. Double entry accounting has debit and credit entries for each transaction. The purpose of double entry accounting is to ensure that accounts remain in balance, and assets plus liabilities equal owners equity. This was truly a huge leap in record keeping and the world still uses this system, even after all these years.

    Recent history:
    • In relatively recent history, the profession has been guided by generally accepted accounting principles (GAAP). These principles are intended to be the standards for the profession, which all Accountants must comply with.

    • The two organizations that are responsible for creating new principles (GAAP), are:

      • The Financial Accounting Standards Board (FASB)

      • The Securities and Exchange Commission (SEC)

    Scandals create new regulations:
    • Throughout history, scandals have created new rules and regulations.

    • Recently, the scandals of companies such as Enron, Tyco and WorldCom, have been the cause of new regulations.

    • These scandals cost many investors their life savings, and many employees their jobs. This was due to improper and fabricated accounting.

      • The Sarbanes-Oxley (SOX) is the resulting regulation, but this regulation has been very burdensome and costly for many corporations. This regulation requires that the corporation's employees perform their jobs in such a way that they must get approvals for many daily tasks, and then maintain records of these transactions for Sarbanes-Oxley audits. The corporations must hire SOX auditors and then conduct audits on their employees. This is quite an expense and many corporations are citing this regulation as one of the reasons they are moving operations to other countries.