Have you ever wondered how did the accounting practice arise? How did such phenomenon appear and who was the first one to be called an accountant? Even if you haven't, now you definitely want to know!
In the 13th century, there was the beginning of monetary economy in Europe, so merchants had to use bookkeeping to control all the transactions. But not every tradesman was able to handle all the numbers, therefore they employed bookkeepers who had to keep records of what merchants owed and who owed them. This is when single-entry bookkeeping appeared: all the records were of narrative style and contained numbers of paid or owed amount in one single column. Such method to keep records was rather time-consuming because a bookkeeper should read every column to understand whether there were losses or profits.
Luca Pacioli and the Double-entry System
Later in 1458, the double-entry system was invented by Benedetto Cortugli, and that was a true revolution in the area of accounting. Double entry system is the one that implies debit/credit transaction entries.
It is generally believed that Luca Bartolomes Pacioli was the first one to be called an accountant. In 1494 in his “Summa de Arithmetica, Geometria, Proportioni et Proportionalita” he described bookkeeping double-entry system that was used by Venetian tradesmen. He was a Franciscan monk who was also known as Italian mathematician and who introduced record keeping system using a ledger, journal, and memorandum. Pacioli was the one who explained the system of debits and credits on which accounting is based on the present, and he also wrote a lot of books on this topic.
First Treatise on Bookkeeping In History: "Particularis de Computis et Scripturis"
Pacioli’s famous book "The Collected Knowledge of Arithmetic, Geometry, Proportion, and Proportionality" included a chapter where bookkeeping was explained. This was a treatise of 27 pages and it was called "Details of Calculation and Recording". Other than it was the first material on a double-entry system and record keeping, it was also a tool for teaching others.
Thanks to this treatise one could educate about:
- ledgers and journals;
- liabilities, receivables, and capital;
- income and expenses;
- record keeping for assets;
- income statements;
- balance sheet keeping, etc.
After this book saw the world, Pacioli was invited to Milan to teach maths at the Court of Duke Ludovico Maria Sforza.
The Railroad and First Accountants Of America
When the European colonization took place, bookkeeping reached America. This is when the first mention of “accountant” happened. But still, this could be called bookkeeping rather than the profession of an accountant, because basic data entries and calculations were made. Business owners were aware of what was going on within their companies because there were no large enterprises, so there was also no need for fully-fledged accountants.
However, with a sequence of time, corporations began to appear, and it was especially connected with the railroad launch. This event implied lots of calculations and predictions, therefore a number of metrics were crucial. The only true accountant could make cost estimates, reports and financial statements as well as provide other necessary data to make business efficient.
Apart from it, up to the 19th century investing was similar to a roulette game. People invested in companies either because they just liked them, knew the owners or simply followed their intuition. There was no well-thought financial ground or strategy of the investments. But with the appearance of big corporations, the investment was no longer a game for the wealthy; it became deliberate, and this is where accountants were essential for maintaining investors’ interest and confidence.
Finally, in 1896 the profession of the accountant was officially mentioned in the law that stated that Certified Public Accountant is only the person who had passed appropriate examinations and had gained minimum 3 years of experience in accountant’s practice.
American Institute of Certified Public Accountants
The AICPA began its history from 1887 when American Association of Public Accountants was founded. Later, in 1916 AAPA transformed into the Institute of Public Accountants and was renamed. In 1957 the name was changed once again - to the current American Institute of Certified Public Accountants. Now it counts more than 410,000 members in 143 countries. This organization was created to set accounting standards and standards for audit of private, non-profit, federal and state organizations as well as local governments.
Interesting Facts From Accounting History
- The first accountant appeared in Ancient Mesopotamia and used clay token to keep records;
- Edinburgh Society of Accountants and the Glasgow Institute of Accountants and Actuaries were granted a royal charter;
- Bubble-gum was invented by the accountant named Walter Diemer in 1928;
- In National Museum of American History in Washington, there is a hanging dummy of tax collector;
- Bookkeeper and its derivative words (e.g. bookkeeping) are the only words in English language containing three sets of double letters.