Financial History: The Evolution Of Accounting (Version of Pacioli)

Accounting is the language of business and, by extension, the language of all things financial. In the same way that our senses are needed to translate information about our surroundings into something understood by our brains, accountants are needed to translate the complexities of finance into summary numbers that the public can understand. In this article, we will follow accounting from its roots in ancient times to the modern profession that we now depend on. 

The Bookkeepers

Bookkeepers most likely emerged while society was still in the barter and trade system (pre-2000 B.C.) rather than a cash and commerce economy. Ledgers from these times read like narratives with dates and descriptions of trades made or terms for services rendered.

Example - Barter and Trade Bookkeeping ·        Monday, May 12 - In exchange for three chickens which I provided today, William Smallwood (laborer) promised a satchel of seed when the harvest is completed in the fall. ·        Wednesday, May 14 - Samuel Thomson (craftsman) agreed to make one chest of drawers in exchange for a year's worth of eggs. The eggs are to be delivered daily once the chest is finished.

All of these transactions were kept in individual ledgers, and if a dispute arose, they provided proof when matters were brought before magistrates. Although tiresome, this system of detailing every agreement was ideal because long periods of time could pass before transactions were completed.

Accounting in old Islam History:

Accounting in old Islam History Despite advances in historical knowledge the precise origins of accounting systems and recording procedures remain uncertain. Recently discovered writings suggest that accounting has played a very important role in various sections of Muslim society since 624 A.D. This paper argues that the accounting systems and recording procedures practiced in Muslim society commenced before the invention of the Arabic numerals in response to religious requirements, especially zakat, a mandatory religious levy imposed on Muslims.

The religion of Islam was founded in Makkah in the year 610 A.D. With the revelation of the Quran to the Prophet Mohammad, peace be upon him. At that time Arabs in the Arabian peninsula generally, and in Makkah especially, pursued a tribal life characterized by periods of war between the various tribes. Tribes were not subject to any conventional or written rule except the rules of the head of the tribe. Significant change occurred with the establishment of the Islamic state in 622 A.D. in Al-Madienah M-Munaw'warah when the principle of brotherhood was introduced. This required that all Muslims act as brothers with no regard to country of origin, race, language, colour, ethnic group or any other factor dividing human beings. This principle was the foundation for social harmonization among those who embraced Islam. Muslims denounced revenge, supported each other financially and socially regardless of their historical differences. They understood Islam as being a comprehensive code for spiritual and material life. They commenced the study, interpretation and application of what was revealed in the Quran. A new state ruled by the Quran emerged to replace the tribal nations and the various tribal rules. The Quran offered guidance on social and commercial teachings. Examples of the social teachings are the rules of marriage and inheritance. Examples of commercial teachings are the rules of contract, finance, business, zakat and ethical rules for conducting business and writing contracts.