TUTORIAL SESSION 1

HISTORY OF ACCOUNTING

Ancient accounting system development

3 ESSENTIAL CONCEPTS 1. Time interval

2. Money Measurement

3 ESSENTIAL CONCEPTS (CONTD)

Entity

From Prehistoric Times to Written Record Keeping

Mesopotamia, Egypt and Rome

China and South America

Ancient Needs for Accounting Information

Importance of Accounting History

First, when you think about prehistoric accounting, it becomes clear that accounting information is a basic social need Second, accounting tools are developed to fulfil human information needs, and accounting evolves over time as human information needs change

Third, as accounting information systems evolve, like all human tools, they improve

Evolution of Double-Entry Accounting and Duality

Transactions also have two sides in a second sense. In a transaction, each party both gains something and gives up something

Luca Pacioli and Internationalisation of Double-Entry Bookkeeping

The bookkeeping method of Luca Pacioli has several distinct characteristics: 3 important things : cash, good accountant and arrange all business to debit (debito) and credit (credito). Pacioli explained the opening inventory, but he did not describe the closing inventory. three account books-that is, a day book, ledger and formal account book All things pertaining to a transaction must be written in the day book

A. C. Littleton describes seven "key ingredients

Private property Capital Commerce: Credit:

Writing:

Contd
Money: Arithmetic:

Rise of Modern Financial Accounting and Auditing

the separation of ownership from management in larger companies

the imposition of taxes on income (or profit)

This information may be used in a variety of ways:

It can be used by the organization's managers to help them plan and control the organization's operations;

It is used by owners and legislative or regulatory bodies to help them appraise the organization's performance and make decisions as to its future;

The information can be used by owners, lenders, suppliers, employees, and others to help them decide how much time or money to devote to the organization; by governmental bodies to determine how much tax the organization must pay; and,

On occasion, customers can use this information in order to determine the price to be paid when contracts call for costbased payments.