Professional Documents
Culture Documents
17thCentury
Colonial expansion in the 17th century and demand for foreign goods saw the rise of
chartered companies, the first corporations. The scale of these endeavors required
large investment, the reward for investors being that assets were divided between
stock holders at the end of each voyage. However this was not always possible, with
permanently invested capital required to support future voyages. Bookkeeping had to
develop to keep track of the assets and profits of many distinct trading ventures at
different stages of completion.
In 1657, the company ruled that stock was to be valued, and four years later the
governor of the company stated that future distributions would consist of the profits
earned (dividends) and not divisions as in the past.
This was a big progression towards the modern conditions under which corporations
operate and was the first large-scale example of stock exchange, investment and
corporate finance. These accounting practices continued to develop through the next
centuries. Many guides for investors and accountants were written during this
development period. Examples include Stock Exchange Accounts; with an appendix
of forms which details stock exchange bookkeeping, Haight and Freese Cos Guide to
Investors which lists the stock prices for various companies between 1890-1900 and
A Corporate Venture which states that unless the stockholder in a corporation knows
the ropes they may be pulled to his disadvantage.
The Phonopore Company Limited certificate is an example of a shares certificate
from 1893 indicating that William Robert Pullman Esquire was the holder of 120
shares in the Phonopore Company, valued at 1 each.
18thCentury
During the Industrial Revolution, methods were required which could be used to track
costs related to large scale production in factory-manufacturing operations. Josiah
Wedgwood, the founder of famous pottery manufacturer Wedgwood is considered by
many to be a pioneer in cost accountancy. After examining business accounts, Josiah
Wedgwood discovered that his head clerk had been embezzling from the company
and so after hiring a new clerk he implemented weekly account reviews to keep track
of his finances. These reviews allowed him to calculate detailed costs for materials
and labour, leading to the discovery of overhead costs and economies of scale.
19thCentury
The early evolution of accounting was dominated by advances in bookkeeping
practice. There are numerous books chronicling this progression. The century
following the industrial revolution saw great progress from the method of
systematically recording [financial] exchanges into a means of giving business
management
an
effective
control
over
its
affairs.
1816 - John Croaker, a bank clerk from England, was caught and charged with
embezzling from the bank and was sent to the colony of New South Wales. Upon
arrival he was granted an immediate ticket of leave and began working as a clerk in
the justiciary and set himself up as a commodities dealer. At this time, the first Bank
of New South Wales opened, and John Croaker helped to establish their bookkeeping
practices, instigating double-entry bookkeeping for the first time in Australia.
1854 - On the 6th of July 1854, a petition was signed by forty-nine accountants in
Glasgow asking Queen Victoria for the grant of a Royal Charter. Thus the formal
accounting profession emerged in Scotland with the formation of Edinburgh Society
and Glasgow Institute of Accountants. The title Chartered Accountant was decided
upon and adopted for members of the Society, and was soon adopted by the Glasgow
Institute and the later formed Aberdeen Society. However the Institute of Chartered
Accountants of Scotland was not formed until the three societies merged in 1951.
1880 - In 1880, the Institute of Chartered Accountants in England and Wales was
formed, bringing together members from a number of individual accounting
organisations. The newly formed institute developed standards of conduct and
examinations
for
admission.
Books such as Book-keeping exercise for accountant students, The students business
methods and commercial correspondence and Australian elementary bookkeeping
represent examples of the shift towards professional education and accreditation in the
accountancy profession.Double Entry Bookkeeping for technical classes and schools
gives examples of civil service examination papers for accountants from this period.
1887 - During the rapid growth of American industry in the 1800s, many Scottish and
British accountants travelled to the United States to audit and keep track of British
investments in the country. A number of these professionals remained in the US and
are thought to have begun the practice of accountancy in America. In 1887 the
American Association of Public Accountants was formed.
20thCentury
On the 19th of June 1928, a Royal Charter was granted by George the Fifth,
establishing The Institute of Chartered Accountants in Australia upon recognition that
the profession of Public Accountants in the said Commonwealth [Australia] is
practiced by a considerable number of persons and the duties and functions of such
public accountants are of great and growing importance in respect of their
employment in the capacities of Liquidators acting in the winding up of Companies
and of Receivers under Decrees and Trustees in Bankruptcy or Insolvency,
arrangements with creditors and in various positions of trust under the Courts of
Justice in the said Commonwealth of Australia, and also in the auditing and
certification of the accounts of Public Companies and other business, and various
other kindred matters, in all of which a technical knowledge of the duties imposed is
of essential importance.
Accounting entries
Increase in provision
Dr Profit and Loss
45,000
1,000
54,000
31
Balance c/f
($40,000*10%)
4,000
36,000
Debit
100,000
Credit
100,000
Debit
40,000
Credit
40,000
A few months later, a collection agency succeeds in collecting $15,000 of the funds
that the company had already written off. The company can now reverse part of the
previous entry, thereby increasing the balances of both accounts receivable and the
allowance for doubtful accounts. The entry is:
Accounts Receivable
Allowance for Doubtful Accounts
Debit
15,000
Credit
15,000
4. Financial Statements
Financial statements are a collection of reports about an
organization's financial results, condition, and cash flows. They are
useful for the following reasons:
To determine the ability of a business to generate cash, and the sources and
uses of that cash.
To determine whether a business has the capability to pay back its debts.
To derive financial ratios from the statements that can indicate the condition of
the business.
Balance sheet: Shows the entity's assets, liabilities, and stockholders' equity as
of the report date.
Income statement: hows the results of the entity's operations and financial
activities for the reporting period.
Statement of cash flow: Shows changes in the entity's cash flows during the
reporting period. Which classified into three categories: operating cash flows,
investing cash flow, financing cash flow