Key Factors in History that Created the Present Accounting System

History of Accounting > 7 Key Factors that Created Accounting

Almost as soon as man began to walk on our planet, they began to
accumulate various items of value. The very earliest hunter gatherers used
stone tools to help them survive. Later, they learned how to create fire on
their own, using specially developed rocks, wood, and string. While some
of us would not think of these are particularly valuable, in reality, these
items meant more to these people, than anything that we own today.

As our civilizations became more developed and prosperous, the wealthiest
people living in the Middle Ages acquired items like jewels, homes, and
ships that most people in today’s society would deem precious. Because of
this, an accounting system needed to be created that not only accounted
for this wealth, but also documented and protected it. In addition, the
accounting system needed to be able to facilitate trade and ensure that it is
able to grow at a steady and reliable rate. The following are the key factors
which lead to the creation of the accounting system we still utilize today.

Key Factor #1 – “Money” – All any accounting system does is to come
up with a set of numbers that is based on a currency, rather it be the US
Dollar, the Euro, or the Japanese Yen. This allows the shareholders or any
outside entities the ability to evaluate a firm using a common denominator.

Key Factor #2 – “Capital” – This ensures that the wealth a person or
company has accumulated is properly employed depending on the criteria
established by the owner of the wealth.

Key Factor #3 – “Commerce” – Accounting allows for the widespread
distribution of assets. If trading only occurred locally, there would not be

a need for a unified system that could be understood by people located
anywhere in the world.

Key Factor #4 –“Credit” – If every transaction involved an immediate
cash payment, there would not be any credit or detailed documentation of
complex transactions that makes all lending possible.

Key Factor #5 –“Private Property” – Accounting allows private property
to easily exchange hands because it records its ownership and the rights to
that property.

Key Factor #6 –“Writing” – Accounting records are supposed to be
permanent, as opposed to a human’s memory, which is sometimes fleeting.

Key Factor #7 –“Arithmetic” – The means accounting utilizes to record
and account for transactions.

The key factors mentioned above were and are the backbone of our
present accounting system. They allow business to function as it presently
does. If only a single element was missing, it would not be able to operate
nearly as efficiently and effectively as it does presently.

If you closely examine all of the concepts mentioned above, you would
realize that they all not only existed, but were very important to civilizations
dating all the way back to the Middle Ages. There can be no questioning
the fact that the accounting system that was developed way back when,
greatly contributed to the lives of everybody that has lived since its
creation.

VN:F [1.9.22_1171]
Rating: 10.0/10 (1 vote cast)
Key Factors in History that Created the Present Accounting System, 10.0 out of 10 based on 1 rating

Enter you Email and Win!

Sign up for our drawing for an Apple IPhone to help you organize your business contacts, calendar events, and more, by subscribing to our periodic newsletter. Simply add your email below and you will be enrolled. We will never, ever sell or spam your email, and you can cancel at any time!

Cite this page:

Contribute meaningful comments to the Accounting community...