History of Accounting
The history of accounting has been around almost as long as money itself.
Accounting history dates back to ancient civilizations in Mesopotamia, Egypt,
and Babylon. For example, during the Roman Empire, the government had
detailed records of its finances. 2 However, modern accounting as a
profession has only been around since the early 19th century.
Luca Pacioli is considered "The Father of Accounting and Bookkeeping" due
to his contributions to the development of accounting as a profession. An
Italian mathematician and friend of Leonardo da Vinci, Pacioli published a
book on the double-entry system of bookkeeping in 1494. 3
By 1880, the modern profession of accounting was fully formed and
recognized by the Institute of Chartered Accountants in England and
Wales.4 This institute created many of the systems by which accountants
practice today. The formation of the institute occurred in large part due to the
Industrial Revolution. Merchants not only needed to track their records but
sought to avoid bankruptcy as well.
The Alliance for Responsible Professional Licensing (ARPL) was formed in
August 2019 in response to a series of state deregulatory proposals making
the requirements to become a CPA more lenient. The ARPL is a coalition of
various advanced professional groups including engineers, accountants, and
architects.5
Types of Accounting
Accountants may be tasked with recording specific transactions or working
with specific sets of information. For this reason, there are several broad
groups that most accountants can be grouped into.
Financial Accounting
Financial accounting refers to the processes used to generate interim and
annual financial statements. The results of all financial transactions that occur
during an accounting period are summarized in the balance sheet, income
statement, and cash flow statement. The financial statements of most
companies are audited annually by an external CPA firm.
, For some, such as publicly-traded companies, audits are a legal
requirement.6 However, lenders also typically require the results of an
external audit annually as part of their debt covenants. Therefore, most
companies will have annual audits for one reason or another.
Managerial Accounting
Managerial accounting uses much of the same data as financial accounting,
but it organizes and utilizes information in different ways. Namely, in
managerial accounting, an accountant generates monthly or quarterly reports
that a business's management team can use to make decisions about how
the business operates. Managerial accounting also encompasses many other
facets of accounting, including budgeting, forecasting, and various financial
analysis tools. Essentially, any information that may be useful to
management falls underneath this umbrella.
Cost Accounting
Just as managerial accounting helps businesses make decisions about
management, cost accounting helps businesses make decisions about
costing. Essentially, cost accounting considers all of the costs related to
producing a product. Analysts, managers, business owners, and accountants
use this information to determine what their products should cost. In cost
accounting, money is cast as an economic factor in production, whereas in
financial accounting, money is considered to be a measure of a company's
economic performance.
Tax Accounting
While financial accountants often use one set of rules to report the financial
position of a company, tax accountants often use a different set of rules.
These rules are set at the federal, state, or local level based on what return is
being filed. Tax accounts balance compliance with reporting rules while also
attempting to minimize a company's tax liability through thoughtful strategic
decision-making. A tax accountant often oversees the entire tax process of a
company: the strategic creation of the organization chart, the operations, the
compliance, the reporting, and the remittance of tax liability.
The Accounting Profession
While basic accounting functions can be handled by a bookkeeper, advanced
accounting is typically handled by qualified accountants who possess
The history of accounting has been around almost as long as money itself.
Accounting history dates back to ancient civilizations in Mesopotamia, Egypt,
and Babylon. For example, during the Roman Empire, the government had
detailed records of its finances. 2 However, modern accounting as a
profession has only been around since the early 19th century.
Luca Pacioli is considered "The Father of Accounting and Bookkeeping" due
to his contributions to the development of accounting as a profession. An
Italian mathematician and friend of Leonardo da Vinci, Pacioli published a
book on the double-entry system of bookkeeping in 1494. 3
By 1880, the modern profession of accounting was fully formed and
recognized by the Institute of Chartered Accountants in England and
Wales.4 This institute created many of the systems by which accountants
practice today. The formation of the institute occurred in large part due to the
Industrial Revolution. Merchants not only needed to track their records but
sought to avoid bankruptcy as well.
The Alliance for Responsible Professional Licensing (ARPL) was formed in
August 2019 in response to a series of state deregulatory proposals making
the requirements to become a CPA more lenient. The ARPL is a coalition of
various advanced professional groups including engineers, accountants, and
architects.5
Types of Accounting
Accountants may be tasked with recording specific transactions or working
with specific sets of information. For this reason, there are several broad
groups that most accountants can be grouped into.
Financial Accounting
Financial accounting refers to the processes used to generate interim and
annual financial statements. The results of all financial transactions that occur
during an accounting period are summarized in the balance sheet, income
statement, and cash flow statement. The financial statements of most
companies are audited annually by an external CPA firm.
, For some, such as publicly-traded companies, audits are a legal
requirement.6 However, lenders also typically require the results of an
external audit annually as part of their debt covenants. Therefore, most
companies will have annual audits for one reason or another.
Managerial Accounting
Managerial accounting uses much of the same data as financial accounting,
but it organizes and utilizes information in different ways. Namely, in
managerial accounting, an accountant generates monthly or quarterly reports
that a business's management team can use to make decisions about how
the business operates. Managerial accounting also encompasses many other
facets of accounting, including budgeting, forecasting, and various financial
analysis tools. Essentially, any information that may be useful to
management falls underneath this umbrella.
Cost Accounting
Just as managerial accounting helps businesses make decisions about
management, cost accounting helps businesses make decisions about
costing. Essentially, cost accounting considers all of the costs related to
producing a product. Analysts, managers, business owners, and accountants
use this information to determine what their products should cost. In cost
accounting, money is cast as an economic factor in production, whereas in
financial accounting, money is considered to be a measure of a company's
economic performance.
Tax Accounting
While financial accountants often use one set of rules to report the financial
position of a company, tax accountants often use a different set of rules.
These rules are set at the federal, state, or local level based on what return is
being filed. Tax accounts balance compliance with reporting rules while also
attempting to minimize a company's tax liability through thoughtful strategic
decision-making. A tax accountant often oversees the entire tax process of a
company: the strategic creation of the organization chart, the operations, the
compliance, the reporting, and the remittance of tax liability.
The Accounting Profession
While basic accounting functions can be handled by a bookkeeper, advanced
accounting is typically handled by qualified accountants who possess
