A
Brief Look at the Origins of Bookkeeping
In ancient
times, most record keeping consisted of a
listing of assets:
4 pieces of gold
2 goats
12 chickens
You
can see how it would be difficult to compare the
asset list of one person to another, when there is
no common basis of
worth. How many chickens does one goat get you?
Four? Ten?
In
the second millennium BC, the
Chinese invented coinage:
pieces of metal
that carried a government stamp verifying their
value. Once this standard unit of account
existed, it became possible to express value by
using numbers and to compare relative net worth
and transactional values. Look at the following
example:
4 pieces of gold
= 12 units of money
2 goats =
6 units of
money
12 chickens
= 9 units of money
Total net worth = 27 units of money
There
still existed the problem of trade among peoples
with different coinage. Each would have to
determine the relative values of their money
against the money of other peoples. We still
face that issue today with foreign exchange.
The
second major breakthrough in both mathematics
and accounting was the development of the Arabic
numbering system. This system was not widespread
in Europe until the 13th century AD. The Arabic
system brought standard place values to
numbering systems, which allowed numbers to be
lined up in columns, making addition and
subtraction much easier.
Once
these two important concepts came into use,
bookkeeping prospered. The need grew great in
the 13th century. International trade flourished
between the Middle East and Europe. The Italians
were at the forefront of trade expeditions and
also of banking. They developed systems to track
lending and revenues. During this time, the
nature of business also slowly started to change
from individual transactions to long-term
partnerships, and it therefore became necessary
to track investment capital for the partners.
A Brief Look at
the Origins of Bookkeeping
