Accounting is the language of business and, by extension, all financial matters. Our senses receive data from our surroundings, which our brains interpret; accountants translate financial complexity into information that the final public can grasp. in this essay, we’ll trace the history of accounting from its beginnings in earlier periods to its present incarnation. Know net present value formula here.
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Accounting could be a language that has been utilized in various regions of the globe for thousands of years. During the Mauryan Empire in India, philosopher and economist Chanakya produced “Arthashastra” around the second century B.C. The book provided tips and specifics on the way to keep track of finances in a book.
Also called bookkeepers possibly appeared before 2000 B.C., when society was still trading on the barter system instead of a cash-and-commerce economy. Dates and descriptions of trades made or terms for services performed appear in ledgers from this era, which read like chronicles.
Here is a sample of how these ledger entries could have appeared:
- Monday, May 12: William Smallwood (laborer) promised a satchel of seed when the harvest was finished within the fall in exchange for 3 hens, which I gave today.
- Wednesday, May 14: In exchange for a year’s worth of eggs, Samuel Thomson (craftsman) agreed to make one chest of drawers. Once the chest is built, the eggs are delivered each day.
New and Improved Ledgers
Bookkeeping developed as currencies became available and traders and merchants began to accumulate substantial wealth. Business sense and numerical skill weren’t always found within the same individual long ago, as they’re now, so math-phobic merchants would hire bookkeepers to stay track of what they owed and who owed them money.
Until the late 1400s, this data was presented in a very narrative format, with all numbers in an exceedingly single column, no matter whether or not they were paid, owed, or otherwise. this can be named “single-entry” accounting.
When calculating something as simple as monthly profit or loss, the bookkeeper had to read the outline of every entry to work out whether to deduct or add the number. This was an inefficient and time-consuming way of tallying.
The Beginning of a Profession
Accountants were already important in attracting investors, and they quickly became even more important in retaining investor confidence. The American Association of Public Accountants (AAPA) was founded in 1887, and therefore the accounting profession was fully recognized in 1896 with the creation of the certified public accountant designation (CPA).
How Has Modern Accounting Evolved in Recent Years?
Accounting has evolved as a result of technological advancements. The bookkeeping process is now fully automated. Bookkeepers have utilized a range of apparatus since the start of time in America.
Today’s technology has resulted in a wide selection of accounting software. These new innovations are much more intuitive, allowing accountants to complete their tasks faster, more correctly, and with greater ease.
The net present value formula is one of several formulae that make an accountant’s life easier in the current day. The difference between the current value of withdrawals and cash inflows over a period of time is known as net present value (NPV). Click here to know about return inward in trial balance.