The History of Accounting

According to Wikipedia, Accounting is thousands of years old; the earliest accounting records, which date back more than 7,000 years, were found in the Middle East. The people of that time relied on primitive accounting methods to record the growth of crops and herds. Accounting evolved, improving over the years and advancing as business advanced.

In 1494, Luca Pacioli (Friar Luca dal Borgo), an Italian Monk and mathematician, wrote a book entitled "Summa de Arithmetica Geometria Proportioni et Proportionalita” meaning "Everything About Arithmetic, Geometry and Proportion". This was the fifth book he wrote and now accepted as the first accounting text book. He introduced a double entry accounting used by business and trade. There were approximately 36 chapters written to bookkeeping, accounting, and other general methods of conducting business. Pacioli wrote the double-entry accounting system in great detail and explained how it was applied to business during his time. By the time Pacioli wrote his book, the double-entry accounting system was in use in Italy for at least 100 years. At the time, the double-entry method of accounting was known as "the method of Venice". Today, it is commonly known as "double-entry accounting". 

For over the next hundred years, business and trade exchanges continued to evolve. The development of stock exchange during the Industrial Revolution age made the accounting became important. It required more formal practices and regulations as well as professional standards. This led to the development of accounting standards and laws to ensure the company agreed upon rules and regulations. During this time, accounting takes form as an organized profession. In England, many institutes, bodies and firms of accountants were formed. Coopers & Lybrand, Deloitte Haskins & Sells and and Price Waterhouse & Co is the only a few .of accountant firms that were formed during this time.

Until early 1900s, accounting records were applied up to management and accountants’ judgment. The lack of standards and rules resulted in accounting records that could not be compared between companies and different methods of accounting. At the same time, business and trade exchange became bigger and bigger, involving not only two or more companies, but also other countries and continents. Early standards of professional conduct had been set up in England by Institute of Chartered Accountants in England and Wales.

In United States of America, The Great Depression in 1930 has pushed accountants to form a body that set the accounting standards and regulations to be followed by everybody. The American Institute of Accountants (AIA) published a study titled A Statement of Accounting Principles that many accountants referred to as the authoritative source justifying current accounting practices. This was the start of published standards that was used within the accounting profession.

A Committee on Accounting Procedure (CAP) was set up by American Institute of Certified Public Accountants (AICPA). The Committee was formed to issue statements regarding accounting procedures and practices and to establish generally accepted practice. These statements were pubished as Accounting Research Bulletins (ARB's). ARB's were not mandatory and received their authority from general acceptance rather than from a governing body.

In 1959, the Accounting Principles Board (APB) was formed to address the standards that the Committee on Accounting Procedures was issuing their statements. While the member of the CAP was also member of AICPA, the member of APB included accounting profession, academia, the government, and business industries. APB issued statement that was called "opinion". APB Opinion was approved based on common accounting practice. If, during the implemantation of APB Opinion, a controversy exists, the APB Opinion can be superseded or amended by issuing new APB opinion or statement.

Early 1970s, APB was dissolved and replaced by Financial Accounting Standard Board (FASB) until now. The FASB continuously reviews current accounting standards to ensure their usefulness, reflect changes in business methods, address any areas of shortcomings, promote international accounting comparability with United States accounting procedures and improve the understanding of the underlying purposes of financial statements

World business grew more complex and accounting needed standards to be applied to countries around the world. In 1973, The International Accounting Standards Committee (IASC) was founded as a result of an agreement between accountancy bodies in the following countries: Australia, Canada, France, Germany, Japan, Mexico, Netherland, United Kindom, Ireland, and United States of America. The Committee was responsible for developing the International Accounting Standards and promoting the use and application of these standards around the world.

In 1997, IASC formed a Strategy Working Party (the Working Party) to consider and recommend to the Board what IASC's strategy and structure should be upon completion of the work programme agreed with the International Organization of Securities Commissions (IOSCO). In 1999, The Working Party recommended (Recommendations on Shaping IASC for the Future) as follow:

1. IASC should be working toward the convergence of standards to a set of global standards that require high quality, transparent and comparable information, 
2. The need for change in and finding an acceptable structure to achieve the objectives of IASC and build on its already significant contribution to improving accounting standards internationally in the interest of economic decision makers in the world’s capital markets. 
3. Support for IASC as the most appropriate organisation to play the pivotal role in the development of a single set of global standards.
4. Improving legitimacy in the development of Standards that is undertaken by an autonomous and independence body of relatively few, full-time and highly skilled experts who are independent of perceived economic incentives which might interfere with their role on the decision making body.
5. IASC should now make structural changes so that it can continue to meet the need for a set of high quality global accounting standards. If IASC fails to make those changes, other national, regional or international bodies are likely to emerge to fill the gap in response to market pressures and become de facto global or regional standard setters.

In 2001, based on the Recommendations on Shaping IASC for the Future, International Accounting Standard Board was formed and responsible for developing a single set of high quality, understandable, enforceable and globally accepted financial reporting standards based upon clearly articulated principles (i.e. International Financial Reporting Standards) and promoting the use and application of these standards.