Accounting For Managers - Basics of Accounting
Evolution Of Accounting
Accounting is as old as money itself. It has evolved, as have medicine, law and most other fields of human activity in response to the social and economic needs of society. People in all civilizations have maintained various types of records of business activities. The oldest known are clay tablet records of the payment of wages in babylonia around 600 b.c. accounting was practiced in india twenty-four centuries ago as is clear from kautilya’s book ‘arthshastra’ which clearly indicates the existence and need of proper accounting and audit.
For the
most part, early accounting dealt only with limited aspects of the financial
operations of private or governmental enterprises. Complete accounting system
for an enterprise which came to be called as “double entry system” was
developed in italy in the 15th century. The first known description of the
system was published there in 1494 by a franciscan monk by the name luca
pacioli.
The expanded business operations initiated by the industrial revolution
required increasingly large amounts of money which in turn resulted in the
development of the corporation form of organizations. As corporations became
larger, an increasing number of individuals and institutions looked to accountants
to provide economic information about these enterprises. For e.g. Prospective
investors and creditors sought information about a corporation’s financial
status. Government agencies required financial information for purposes of
taxation and regulation. Thus accounting began to expand its function of
meeting the needs of relatively few owners to a public role of meeting the needs of a variety
of interested parties.
Book Keeping And Accounting
Book-keeping
is that branch of knowledge which tells us how to keep a record of business
transactions. It is considered as an art of recording systematically the
various types of transactions that occur in a business concern in the books of
accounts. According to spicer and pegler, “book-keeping is the art of recording
all money transactions, so that the financial position of an undertaking and
its relationship to both its proprietors and to outside persons can be readily
ascertained”. Accounting is a term which refers to a systematic study of the
principles and methods of keeping accounts. Accountancy and book-keeping are
related terms; the former relates to the theoretical study and the latter
refers to the practical work.
