7 November 2021


Accounting has evolved in a manner similar to law, medicine and most other fields of human activity, in response to the social and economic needs of society. Book-keeping and accounting did not emerge as chance phenomena, but as a pragmatic response to a specific world need.' This is true not only of the days of Paciolo' but also important for present-day accounting survival. Sieveking, one of the few historians who have paid attention to the subject, says that book-keeping developed as a direct response to the establishment of partnership on a large scale

Picture : AlexanderStein

For centuries after the system of double-entry book-keeping appeared, accounting was practised without a uniform methodology or any form of theory. It was only during the 19th century that a distinct move from book-keeping to accounting a move from relatively simple recording and analysis of transactions towards a comprehensive accounting information system was effected. The close of 19th century was marked by the most extraordinary expansion of business.

Company form of organisation, a phenomenon which was becoming increasingly common in business world, grew at a great speed. Books about business transactions were written, conventions were followed and accounting was recognised as a system of analysing and maintaining records of business transactions.

In part, the new significance of accounting gained recognition because of separation between ownership and control and also due to diversification in ownership. The increased reliance on capitalas a factor of production necessitated extensive record-keeping, and finally, in the 19th century, a theoretical framework began to evolve. This framework or methodology provided a technical means to measure, evaluate, and communicate information of economic and financial nature.

Modern business is marked by continuity, a never-ending flow of economic activities. Therefore, accounting has grown to meet a social requirement and to guide the business and industry accord ingly. Accounting is moving away from its traditional procedural base, encompassing record-keeping and such related work as the preparation of budgets and final accounts, towards the adoption of a role which emphasises its social importance. Welsch and Anthony comment:

"The growth of business organisations in size, particularly publicly-held corporations, has brought pressure from stock-holders, potential investors, creditors, governmental agencies, and the public at large, for increased financial disclosure. The public's right to know more about organisations that directly and indirectly affect them (whether or not they are shareholders) is being increasingly recognised as essential. An open society is one that has a high degree of freedom at the individual level and typically evidences an effective commitment to measuring the quality of life attained. These character istics make it essential that the members of that society be provided adequate, understandable, and dependable financial information from the major institutions that comprise it".

Profit calculation is no longer a simple comparison of financial values at the beginning and end of a transaction or series of transactions. It is now related to a complex set of allocations and valuations pertaining to the operational activities of a business enterprise. The concept of accountancy or accounting has broadened to include description of the recording, processing, classifying, evaluating, interpreting and supplying of economic-financial information for presentation of finan cial statements and decision-making purposes.

Further refinements in cost and management accounting followed later on in the 20th century along with large-scale production and high-capital investment. These developments created a need to allocate costs correctly over the units of production, and also to provide a measure of productivity and efficiency. Thereafter, cost accounting evolved naturally to meet recognized managerial requirements of pricing and costing for competitive purposes, and towards determining and setting forth of operational information for decision-making purposes.

Traditionally, governmental accounting was linked to taxation and revenue control, and to the recoding of, and accountability for, receipts and expenditures, Development in budgeting in the 20th century created a much larger scope for governmen. accounting. The national budget became a managerial and policy-making instrument and developed into a mechanism for the forward planning of receipts and expenditures, Budgeting has now developed to form one of the bases of-and is closely associated with-economic planning and programming.

The use of enterprise accounting for the purpose of macro (economic or national) accounting is largely a present-century development. For purposes of economic policy and economic planning, the

national data to a large extent derived from commercial data-have assumed greater significance. This, in turn, has given rise to the concept of macro accounting which has presented the professional with a new sphere of operation and perspective. Macro accounting has particular importance in helping build the bridge between economics and accounting, and thus offers accounting a significant scope to make a contribution towards macro economic policy.

Accounting, thus, has gone through many phases--simple double-entry book-keeping. enterprise, government, and cost and management acounting, and recently, social accounting. These phases have largely been a product of changing economic and social environments. As business and society have become more complex over the years, accounting has developed new concepts and techniques to meet the ever increasing needs for financial information.
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