The Origin Of Accounting And The Accounting Fundamentals

The infancy of accountancy can be traced from the early civilizations of the Sumerians in Mesopotamia. Simple accounting was used and was mostly applied in agriculture. Accounting is mentioned in the Islamic Quran and the Christian Bible.

Ibn Tamiyyah, an Arab writer in twelfth-century AD made an account on the use of the accounting system by the Muslim in his book Hisba, The accounting practices of the Arab Muslims are influences of the Persian and Roman civilizations that transacted with them.

The origin of modern accounting can be traced from the time of Benedetto Cotrugli and Luca Pacioli in the 13^th century. Benedetto Cotrugli, a merchant from the Republic of Ragusa wrote the first book of accounting. Republic of Ragusa is the modern day Dubrovnik, Croatia.

Cotrugli’s book entitled Della Mercatura et del Mercante Perfetto contained the elaboration of the principles of double-entry bookkeeping system. His lifework was finished in 1458 but published in 1573. Because of the late publication his contributions to the accounting field have been overlooked. Much of the credit of the birth of modern accounting was given to Luca Pacioli.

Also known as Friar Luca dal Borgo, Luca Pacioli codified the double accounting system. Although he did not invent the system, he is widely considered as the Father of Accounting.

The work of Pacioli, Summa de arithmetica, geometrica, proportioni et proportionalita, completed in Venice in 1494, is a publication that includes the description of the methods of keeping accounts. This account system is known as the double-entry bookkeeping system and was used by Venetian merchants during the time of Pacioli. He included in his publication the accounting cycle that is widely used in modern accounting nowadays. He made descriptions on the use of ledgers and journals. Account titles such as assets, liabilities, capital, income and expenses were part of the ledger accounts Pacioli described. Likewise, he made demonstrations on year-end clos

In the 14^th century, the first English book of accounting was published by John Gouge in London. It is the first known published in 1543. There have many publications in accounting created by different authors in Europe. Many of the authors of accounting books styled themselves as accountants. Many of the books provided the origin of the use of the double-entry bookkeeping system.

The double-entry bookkeeping system is the most widely used system of recording accounts and transaction by businesses. Although the single-entry bookkeeping system exists and is much simpler, the use of double-entry system is preferred by businesses that have complicated accounts. In double-entry bookkeeping system, the bookkeeper must see to it that the debit equals the credit to have an account balance.

Aside from the double-entry system, the accounting cycle is one of the fundamentals of accounting. The journalizing of transactions, posting of entries in the ledger, verification of the account balances in the trial balance and preparation of the financial statements are some of the steps in the accounting cycle.

The accounting cycle is the sequence of identifying and recording transactions. It begins with the identification of transactions to the creation of after-closing trial balance. After doing the after-closing trial balance, the bookkeeper or the accountant begins again with the identification of transactions. The accounting cycle recurs every accounting period.

The financial statement is significant in a business. It is used by business managers in decision-making, by creditors in the decision to extend a loan, by the shareholders in checking the financial status of the enterprise as well as the status of their investments and by governments in the audit of taxation. A business may use a periodic system or a fiscal period in the reporting of income or loss and presentation of balance sheet.

The double-entry bookkeeping system, accounting cycle and preparation of financial statements are the fundamental aspects of accounting.