HOW HAS THE DEVELOPMENT OF ACCOUNTING AFFECTED THE WEST?
Accounting in the West has gone through many changes since the medieval period, where it was used as a rudimentary means of assessing stewardship, to today, where it has become a vital and complex part of the economy on both a local and international stage, as will be shown throughout the essay, as well as how these changes have affected the social and political landscape in the West; who has benefitted, who has not, and the debate which continues today as to the position accounting should have in the world, compared to the position it currently occupies. Using eleven papers, in chronological order, this essay is separated in to two fields; financial accounting and management accounting in an attempt to reveal an underlying theme throughout the history of accounting which illustrates the benefits and drawbacks of the development of accounting in the West. Financial Accounting
Christianity plays a significant role in the development of accounting practices throughout the Middle Ages and in to the 15th Century. Volmer (1994) writes of Luca Pacioli, a Franciscan monk who embraced the belief of “number mysticism”, wherein all figures were created by God, and therefore were essentially God’s word. Pacioli wrote Summa, a collection of work from the artists and thinkers of the time edited by the author as a “detailed description of the best accounting practices used in the international commercial centre of Venice” (Volmer, 1994, p.7). Summa contains the first-known detailed description of double-entry bookkeeping, and describes the means by which accounting is a part of good business practice. “Pacioli’s conceptual framework meets the definition of a conceptual framework used by the [FASB] (1976)” (Volmer, p.7). His framework consisted of three books, still in use today: the memorandum (daybook); the journal; and the ledger. Modern concepts such as a true and fair view, consistency, reliability, relevance, understandability, materiality, and full disclosure in accounting practices are described in Summa. Pacioli also recognises that the nature of the business entity is to make profit and recommends that accounts are balanced yearly, indicating the use of prudence. Volmer (1994) also argues that in another of his works, De Divina Proportione (1509), Pacioli first hints upon the idea of visually displaying trends and proportions in accounting figures, via graphs and charts. This will have been of enormous influence throughout the centuries, as evidenced by the five examples of Summa in existence in Scotland, one of which belongs to the Edinburgh Society of Accountants, one of the precursors to ICAS. It has helped to codify business practices and shape the principles at the heart of accounting, and by doing so will have helped to develop a consensus on both in the West. The original was also published in the common language of the time, and therefore made this knowledge accessible to all. This inclusivity is not mirrored in modern accounting however, as evidenced by McKinstry (2013), who observes a growing trend from the birth of ICAS onwards of exclusivity, in both general and nationalistic terms. This will have been contrary to the intentions of one of accounting’s most venerable icons, as Pacioli had used the common language of the time in his writing “so that educated and non-educated would benefit from it to the same extent” (Volmer, 1994, p.6).
19th and 20th Century Practices
The practices established by Pacioli are seen in use in the 19th century, although not in quite the unified and recognisable manner seen today. Edwards & Baber (1979) assess “the accounting policies and procedures” (p.139) of DIC from the 1830s onward, a period of sustained growth for the company. They point out that such growth could not have happened without comprehensive record keeping of all the transactions and movements of resources that this would...
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