History of Accounting from Ancient Times to Today

The Medieval and Renaissance Revolution of Bookkeeping

Portrait of Luca Bartolomeo de Pacioli or Paciolo (Borgo Sansepolcro, 1445 circa-Rome, 1517), Italian mathematician, Franciscan friar, Painting attributed to Jacopo de' Barbari (1460-1470 circa-1516)
DEA / A. DAGLI ORTI/Getty Images

Accounting is a system of recording and summarizing business and financial transactions. For as long as civilizations have been engaging in trade or organized systems of government, methods of record keeping, accounting, and accounting tools have been in use.

Some of the earliest known writings discovered by archaeologists are accounts of ancient tax records on clay tablets from Egypt and Mesopotamia dating back as early as 3300 to 2000 BCE.

Historians hypothesize that the primary reason for the development of writing systems came out of a need to record trade and business transactions.

Accounting Revolution

When medieval Europe moved toward a monetary economy in the 13th century, merchants depended on bookkeeping to oversee multiple simultaneous transactions financed by bank loans. 

In 1458 Benedetto Cotrugli invented the double-entry accounting system, which revolutionized accounting. Double-entry accounting is defined as any bookkeeping system that involves a debit and/or credit entry for transactions. Italian mathematician and Franciscan monk Luca Bartolomes Pacioli, who invented a system of record keeping that used a memorandum, journal, and ledger, wrote many books on accounting.

Father of Accounting

Born in 1445 in Tuscany, Pacioli is known today as the father of accounting and bookkeeping. He wrote Summa de Arithmetica, Geometria, Proportioni et Proportionalita ("The Collected Knowledge of Arithmetic, Geometry, Proportion, and Proportionality") in 1494, which included a 27-page treatise on bookkeeping.

His book was one of the first published using the historical Gutenberg press, and the included treatise was the first known published work on the topic of double-entry bookkeeping.

One chapter of his book, "Particularis de Computis et Scripturis" ("Details of Calculation and Recording"), on the topic of record keeping and double-entry accounting, became the reference text and teaching tool on those subjects for the next several hundred years.

The chapter educated readers about the use of journals and ledgers; accounting for assets, receivables, inventories, liabilities, capital, income and expenses; and keeping a balance sheet and an income statement. 

After Luca Pacioli wrote his book, he was invited to teach mathematics at the Court of Duke Lodovico Maria Sforza in Milan. Artist and inventor Leonardo da Vinci were one of Pacioli's students. Pacioli and da Vinci became close friends. Da Vinci illustrated Pacioli's manuscript De Divina Proportione ("Of Divine Proportion"), and Pacioli taught da Vinci the mathematics of perspective and proportionality.

Chartered Accountants

The first professional organizations for accountants were established in Scotland in 1854, starting with the Edinburgh Society of Accountants and the Glasgow Institute of Accountants and Actuaries. The organizations were each granted a royal charter. Members of such organizations could call themselves "chartered accountants."

As companies proliferated, the demand for reliable accountancy shot up, and the profession rapidly became an integral part of the business and financial system. Organizations for chartered accountants now have been formed all over the world.

In the U.S., the American Institute of Certified Public Accountants was established in 1887.

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Bellis, Mary. "History of Accounting from Ancient Times to Today." ThoughtCo, Oct. 16, 2017, thoughtco.com/history-of-accounting-1991228. Bellis, Mary. (2017, October 16). History of Accounting from Ancient Times to Today. Retrieved from https://www.thoughtco.com/history-of-accounting-1991228 Bellis, Mary. "History of Accounting from Ancient Times to Today." ThoughtCo. https://www.thoughtco.com/history-of-accounting-1991228 (accessed May 23, 2018).