A short history of accounting

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Accountancy has seen a number of key developments throughout its history. Lily Howes hits the archives and brings you a potted history of accounting

Ancient Mesopotamia

The first accountancy records – from more than 7,000 years ago – were found in the ruins of BabylonAssyria and Sumeria. Primitive accounting methods were used to record the growth of crops and herds and keep note of what was bought and sold.

Father of Accounting

More distinguished methods of accountancy emerged in Italy in 1494 when Luca Pacioli wrote the first book on double-entry accounting. The Franciscan friar did not invent the method but his description of the approaches used by Venetian merchants laid the foundations for accountancy as we know it today.

Based on Pacioli’s mantra that a person should not go to sleep at night until their debits equalled their credits, his book served as the world’s only accounting textbook until well into the 16th century.

Origin of Chartered Accountants

The first professional organisations for accountants were established in Scotland. The Edinburgh Society of Accountants and Glasgow Institute of Accountants were set up in 1854, followed by the Aberdeen Society of Accountants in 1867. After the Glasgow Institute petitioned Queen Victoria the three organisations were granted a royal charter.

Fast-forward three years and the same designation was also adopted by the Institute of Chartered Accountants in England and Wales (ICAEW).

Women were unable to become chartered accountants for almost forty more years. Mary Harris Smith became the first female accountant in the world to attain chartered status when she was admitted to the ICAEW in 1919.

The move to accruals

Accruals based accounting was traditionally more the preserve of the private sector than of the state. Although it was not unheard of for branches of the public sector to use accrual methods – nearly all local councils were doing so after reforms in 1974 – cash based accounting still remained the norm elsewhere in state finance until the NHS reforms of the 1990s.

Following major changes, including the adoption of an internal market – later scrapped by Labour, the health service in England and Wales moved to accrual accounting.

In 2001, central government, led by Sir Andrew Likierman, followed suit.

Renewed regulations

Following the Enron scandal in the US, the American government passed the Sarbanes-Oxley Act to improve standards of corporate accountability. This spurred countries around the world to pass similar legislation to strengthen their own regulatory systems.

In 2004, the UK government made the Financial Reporting Council the single independent regulator of the accounting and auditing profession. It is responsible for issuing accounting standards and monitoring their enforcement.

Accountancy in the digital age

As the age of the internet dawned, quickly followed by the age of email and the age of i-everything, the practice of accountancy changed considerably.

Not only has it given accountants the opportunity to communicate with clients more quickly, but it has also opened the door to new software and technology. With 71% of accountants working away from the office on a regular basis (Sage, 2012) developments in web-based software have made communicating and collaborating remotely all the easier.

Software as a Service (SaaS) and, more recently, cloud services are making sharing reports and data quicker, safer and simpler. Some 42% of accountancy firms surveyed say there is growing interest from clients to collaborate online, so no doubt more firms will be adopting these savvy services very soon.


Lily Howes is a freelance journalist and content editor.

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