The story of accounting is not simply a record of money and numbers. Rather, it consists of a gradual evolution of bartering items by local city states to the development of great dynastic empires (Babylonian, Egyptian, Persian, Roman) in a global context. Because so many historical documents are related to economic issues, accounting has become a measurement of developing civilizations.
Accounting records using single-entry listings were found in the ruins of Assyria, Babylonia, and Samaria dating back to 3,300 B.C. These early civilizations kept records for taxation and public works. Documents from temple-based Mesopotamian economies show lists of expenditures with goods received and traded. Over time, special officials were appointed to oversee these financial matters.
The art of accounting is closely related to writing, counting, and money, and some scholars believe accounting and writing developed simultaneously. As part of this growing societal development, ancient communities learned that cooperation provided more access to diverse resources. As a result, city states began trading with each other while keeping inventories of cattle, wheat, and cotton.
In fact, many primitive accounting techniques used in city states like Summer and Akkad, are still used today to determine crop surpluses or shortages. Affluent nobles in these societies wanted an account of their assets, including what they owed, and what was owed to them. As trade extended to different city states, a need to keep a common record of goods and currencies arose.
The invention of clay tokens as a form of book keeping was a huge cognitive leap in accounting. Buyers could match a token with each item in a shipment of goods to verify everything shipped in the agreement was accounted for. Thus, the modern accounting principle of “protection of assets” was utilized 10,000 years ago. The process was similar to the current accounting practice of insisting on a “bill of lading” or list of merchandise entrusted to the shipper.
Ancient book keepers also recorded overhead operational expenses like mercenaries to protect their caravans from brigands and pirates. In addition, seafaring Phoenicians invented a phonetic alphabet in conjunction with accounting to monitor trade. But monetary exchanges still took the form of manure, corn, and fabrics, since a common coinage system wasn’t invented until 500 B.C. by the Lydians
In ancient Egypt, one official was appointed “Controller of the scribes.” These scribes used papyrus scrolls to prepare accounts of transactions, including comprehensive building reports for the Pyramids. Minute care was taken by these early accountants, so that even small quantities of dates and corn were meticulously entered. Labels were also attached to jugs of olive oil, ivory, and linen.
More complex records of the royal inventory were retained by hundreds of scribes in the imperial palace. Written records have also been found in large buildings used for the storage of crops, including wages paid, temple assets, and tributes paid to the Pharaoh. Some workers were paid “in kind” with beer, which had a low alcohol content and was more sanitary than water.
The evolution of accounting techniques can be traced back to the use of the “abacus” which led to the development of accounting software today. The ancient Egyptians were the first to invent a bead and wire abacus. In the 4th century B.C., the Babylonians developed an auditing system for checking the movement of items out of storehouses, including “oral audit reports” to record payments.
However, it wasn’t until the emergence of Greek city states like Athens that a banking system appeared. Nevertheless, accounting continued to evolve during the rise the Roman Empire, where the Senate gradually gained access to detailed financial data. Consequently, the scope of accounting grew along-side the expanding empire, and records of cash and commodities were scrupulously maintained.
Accounts of the Emperor Augustus covered land grants, military pensions, and expenditures on gladiatorial “games.” One account listed amounts of cash held by the treasury, provincial coffers, and public contractors (publicans). Moreover, Roman forts in Judea, Gaul, and Britannia had to file official “letters of purchase and requisition” for itemized equipment (helmets, boots, shields).
By the 3rd century A.D., noble (patrician) estates were run by managers who used a standardized accounting system. Entries were arranged by sector, with expenses and profits extrapolated from different sectors of the estates. This data was summarized on a scroll in a yearly account. Totals from these accounts enabled estate owners to make decisions based on carefully selected information.
By the early Middle Ages, accounting reached a sophisticated stage of development, but the principles of modern accounting were not invented until the Italian Renaissance. Accounting Pro believes that knowing the “how and why” of accounting results in more effective service.