The earliest use of what is now called 'double entry' bookkeeping is thought to be some time during the twelve century. In fact the so called Piscan Document demonstrated a systematic but primative bookkeeping system in use by Italian merchants

Towards the end of the twelve century Tallies first appeared and evolved into credit instruments in England. Tallies were wooden sticks, notched to represent specific sums of money. The sticks would be split in two to serve as a receipt. These would be used for lending and the English Exchequer issued tally sticks as a form of credit

By the start of the thirteenth century accounting records of an Italian merchant Giovanni Farolfi documented a complete double entry bookeeping system in place.

A book on mathematics that covered the subject was written in 1494 by Pacioli, an Italian mathematician and from that we can see that modern systems have hardly changed. Known as the Summa de Arithmetica, Geometria, Proportioni et Proportionalita it referred to double entry bookeeping as the 'Venice system'. Thanks to Gutenberg's printing press, the Summa was printed and spread throughout Europe

Goldsmiths began to use 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 coin. The Bank of England was founded in 1694

In 1762 Barings Bank, Britain's first merchant bank was founded

Josiah Wedgwood the famous potter set up his first plant in 1759. To avoid bankruptcy during a recession in 1770, Wedgwood studied his books, manufacturing cost structure, overhead, and his market structure. He became an accounting pioneer and the firm has survived to the present day

The Bankruptcy Act of 1831 in Britain allowed accountants to be appointed "official Assignees", the first government recongition of the profession

The British Companies Act of 1844 established the incorporation of business by formal registration and required the annual appointment of auditors to examine the accounts and balance sheet of all public companies

William Deloitte opened his London firm in 1845, soon to be followed by Samuel Price and Edwin Waterhouse (1849), William Cooper (1854), and William Peat (1867). These were the beginnings of firms set up for the purpose of auditting public companies. Since the original establishment of these organisations the services they offer have expanded into many areas of business operations and the so called big five firms have become involved in all aspects of operations of large Companies. In 1923 General Motors in the USA adopted and developed the major cost accounting techniques which included return on investment, return on equity calculations and flexible budgeting Alfred P Sloan became famous for managing diverse operations with financial statistics such as return on investment; which were introduced to GM by Donaldson Brown. GM became the largest and most successful and profitable industrial enterprise the world had ever known.

(In 2005, Sloan's work at GM came under criticism for creating a complicated accounting system that has been placed upon American manufacturers that prevents the implementation of lean manufacturing methods thus leading to companies which cannot compete effectively with non-Sloan companies such as Toyota. In a nutshell, the criticism is that by using Sloan's methods a company will value inventory just the same as cash and thus there is no penalty for building up inventory. However, carrying excessive inventory is detrimental to a company's operation and induces significant hidden costs. Another factor is that Sloan considered people on the shop floor to be expendable as a variable cost item to manufacturing. This view is the opposite of how Toyota views employees. Toyota looks to shop floor employees as their main source of cost savings and productivity improvements)

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Last Update 28-Feb-2010

Date first published 08-Nov-2005