The History of Accounting
Join now to read essay The History of Accounting
The History of Accounting
Business 100
Sherika R. Smith
For thousands of years, people have been coming up with ways to advance the accounting concept. Many have tried to develop their own way of measuring accounting. Though it has come along way, I will discuss some of the events that paved the way for accounting history from the past to the present day. First, I will discuss how the first accounting records came about and how writing helped to advance them. Second, I will see how Pacioli developed double entry bookkeeping. Third, I will discuss the rise of goldsmith bankers in England and the founding of the Bank of England. Fourth, we’ll look at the first federal income tax. Lastly, we’ll end by discussing how the Great Depression played a role in accounting and the regulation of financial accounting.

7500BC
The domestication of livestock and grains started at different sites about the same time. Simple tokens were associated with agricultural sites, clay balls of various shapes representing specific goods (e.g. two round tokens could be a pair of cattle, twelve oval tokens a dozen units of wheat. This was the first representation of inventory and the beginning of the concept of numbers (Besserat,1992).

3200BC
Over the next 5,000 years, accounting records advanced from simple to complex tokens representing inventory, to clay tablets, to the development of abstract symbols, and cuneiform writing in Sumeria. This paralled advances in agriculture, pottery, and textiles, building, war and nation-states (Gary, 1999).

1494
Luca Pacioli stated that three things were needed for merchants to be successful: sufficient cash or credit, an accounting system that can tell him how he’s doing, and a good bookkeeper to operate it. His accounting system consisted of journals and ledgers. It rested on the invention of double-entry bookkeeping. Debits were on the left side because that’s what “debit” meant, the left. The numbers on the right were named “credits”. If everything was done correctly, then the bookkeeper could do a trail balance or a “Summa Summarium”. Add up all the debits and then add up all the credits. If everything had been done right, the totals should match. If not, that would indicate a mistake in the ledger. Double-entry bookkeeping was so simple and met the needs of business well that it caught on immediately (Gary,1999).

1633-72
Goldsmiths used their safes for deposits of coins and other valuables and gradually became bankers. Beginning in 1633 goldsmith notes were used as receipts for reclaiming deposits and evidence of ability to pay. By 1660 goldsmith notes became banknotes, accepted in place of coins. These Seventeenth-century English goldsmiths developed the model of contemporary banking. The goldsmiths kept close accounts of the gold on hand and soon noticed that the amount of gold actually removed by all of the owners was only a fraction of the total stored (Wagner, 2003).

They soon began to lend other peoples gold, instead of their own. Now they held a promissory note for payment of the principle and interest. In time, paper certificates redeemable in gold coins were circulated instead of gold. This method, now called fractional reserve banking, is the way that all modern banks operate. In 1694, The Bank of England began to issue notes for deposit with the promise to pay the bearer the sum of the note on demand. Initially written by hand for specific deposits, these were gradually replaced by printed fixed denomination notes (Wagner, 2003).

1862-94
With the Civil War raging, sweeping new taxes were passed including an income tax. The Office of Internal Revenue established under the Treasury Department. The origin of the income tax on individuals is generally cite as the passage of the 16th Amendment, passed by Congress on July 2, 1909, and ratified February 3, 1913. During the Civil War Congress

Get Your Essay

Cite this page

Rise Of Goldsmith Bankers And Seventeenth-Century. (July 21, 2021). Retrieved from https://www.freeessays.education/rise-of-goldsmith-bankers-and-seventeenth-century-essay/