Priyanka Agarwal

Abstract:

The world of business is ever changing. This forced accountancy to change itself from time to time in order to maintain its relevance and importance. Hence, there was enough scope to research on the evolution of accountancy.

An applied research was pursued with data collected from secondary sources. This research covered a period of 5,000 years before the first writing to the current era. The conclusion reached was that methods of accountancy have changed over the years but the principles and purposes remain the same.

Key words: Accountancy, double entry book-keeping, chartered accountant, software etc.

Introduction:

The world of business has changed itself from time to time. There was a time when all business activities were based on the barter economy. The seller had to grow/ manufacture/ acquire a commodity and sell it. There were few sellers in the market with a huge number of buyers. Profitability was very high. The entry barriers into business were low at this point of time. This attracted a huge number of entrants in the market. Thus, profitability went down. For the first time, in human history there was competition in the markets. The customer became the ultimate sovereign.

During this journey of business from the Stone Age to the current era of globalization, software, contact development and public relations, accountancy had to adapt to the situation and change itself from time to time. Thus, enough scope was provided for research on evolution of accountancy.

Literature Review:

Evidence Regarding Evolution of Professionalization in Accounting (1996):

An article titled “The Professionalization of Accounting: A Review of Recent Historical Research and Its Implications” was written by Brian P. Westand first published on May 1, 1996.

This paper reviews and considers the possible implications of a significant body of historical research that has gathered momentum throughout the last decade and challenged conventional explanations for accounting’s professional status. In place of traditionally espoused professional ideals, such as altruism, ethical behavior and control of specialized knowledge, this research has drawn attention to the importance of factors such as social class, gender and political acuity in explaining both the closure of the accounting profession and its elevation within the vocational continuum. If such factors are the foundation upon which the profession of accounting was constructed, then observable and persistent discord in accounting practice and theory is perhaps not unexpected. Further, the story told by recent research invites a rethinking of the nature of the accounting profession’s privileged status.

Evidence About Income Determination & Diversities in Accounting (2014):

Angus O. Unegbu of Department of Business and Management Sciences, University of Kurdistan Hewler, Iraq, pursued a research on evolution and developments of income determination and diversities in use. On the basis of this an article titled “Theories of Accounting: Evolution & Developments, Income – Determination and Diversities in Use” was written and published in Research Journal of Finance and Accounting.

In this article the writer wrote that accounting frameworks follow stipulations of existing accounting theories. This exploratory research sets out to trace the evolution of accounting theories of Charge and Discharge Syndrome and the Corollary of Double Entry. Furthermore, it dives into the theories of Income Determination, garnishing it with areas of diversities in the use of Accounting Information while review of theories of recent growths and developments in Accounting are not left out. The method of research adopted is exploratory review of existing accounting literature. It is observed that the emergence of these theories exist to minimize fraud, errors, misappropriations and pilfering of corporate assets. It is recommended that implementation prescriptions of these theories by International Financial Reporting Standard Committee and Practicing Accountants should be adhered to and simplified so as to avoid confusing and scandalous reporting of financial statements.

Research Methodology:

This research is not a first of its kind. The main purpose of this research is to apply the knowledge generated out of it for further research on the topic. So it is an example of applied research.

The data required has been collected from secondary sources like books, magazines, research articles on the same topic or related topics.

Analysis and Conclusions:

Accountancy is the process of comprehensive recording of financial transactions and analyzing them to understand the behavior of the business. It is a business necessity for many reasons like to –

• Understanding the financial position of trade
• Reporting financial data to the IRS for tax purposes or for personal requirement.

Frater Luca Pacioli, the father of accountancy, wrote a book known as ‘Summa de Arithmetica Geometria Proportional de Proportionalita’. This book included comprehensive summary of Renaissance mathematics. It also contained a section on accountancy. It was the first ever published description of the double entry book-keeping system. However, not all credit of development or creation of accountancy could be given to Pacioli because accountancy is an age old practice. Pacioli just presented the first published description of the practice.

In prehistoric times, people had to account for food and clothing to sustain their families. Earliest currency was made out of stone which could be used in exchange of commodities like grains. These methods were used for over 5000 years before the first writing.

In ancient Mesopotamia, circa 3500 BC, accountancy was carried out in a different manner. The Assyrian, Chaldeans – Babylonian and Sumerian civilizations flourished in trade and commerce and had more than one banking firm. These firms employed standard measures of gold and silver and extended credit in some transactions. The Babylonian dynasty also gave the renowned code of Hammurabi which stated that an agent selling goods for a merchant must give the merchant a price quotation under seal or face invalidation of a question agreement. In those times, Scribes were the closest thing to accountants.

In the Mauryan empire of India, Chanakya wrote a manuscript similar to a financial management book called ‘Arthashastra’.

Therefore, any view of accounting history that Luca Pacioli had given has a long evolution of accounting systems in ancient and medieval times.

Modern accountancy started developing in Scotland around 1800 AD. The Edinburgh society in England and Scotland adopted the title of the “Chartered Accountant” to identify its members. These members were certified public accountants. By 1921 all 50 states of U.S.A. adopted this concept and soon it spread throughout the world.

In 1973, the Financial Accounting Standard Board was founded with a goal to establish standard of financial accounting and reporting. Such standards are important for people who rely on credible or comparable information about finances.

Today, after so many modifications in the system of accounting, computers play an important role in accounting. Software has been developed for easy and efficient accounting.

Throughout the years the methods have changed but the principles and purposes remains the same.

Bibliography:

• West, Brian P. (1996), The Professionalization of Accounting: A review of Recent Historical Research and its Implications, SAGE Journals, Vol. 1, Issue 1.
• Unegbu, Angus O. (2014), Theories of Accounting: Evolution & Developments, Income – Determination and Use, Research Journal of Finance and Accounting, Vol. 5, No. 19.

Author’s Profile:

The author, Miss Priyanka Agarwal, is an 11^th standard student of commerce from Salt Lake City, Kolkata, India.  She is an aspiring accountant.