Accounting History

• Accounting is linked to the evolution of societies and parallels the antiquity of commerce, existing since the beginning of humanity.

Chronological Periods of Accounting Development

• Accounting has evolved and adapted to the economic and social needs over time
• Key stages of accounting development: Ancient times, Middle Ages, Renaissance, Industrial Age, and the 20th and 21st centuries

Ancient Times

• Early accounting records emerged in ancient civilizations, prominently in Mesopotamia using clay tablets to control agricultural and commercial transactions.
• These records were mainly used for managing assets and tax collection.
• Ancient civilizations like Egypt, Greece, and Rome developed basic financial control methods for managing state resources.

Middle Ages

• Significant commercial growth led to more complex accounting systems like double-entry bookkeeping among Italian merchants.
• Double-entry bookkeeping enabled the precise recording of transactions, reflecting both income and expenses.
• Italian cities such as Venice, Florence, and Genoa were important centers for the development of commerce and accounting.

Renaissance

• In 1494, Franciscan friar Luca Pacioli published "Summa de Arithmetica, Geometria, Proportioni et Proportionalità" which formalized double-entry bookkeeping.
• Pacioli is considered the father of accounting and his work marks the formal beginning of accounting as an organized discipline
• Pacioli's focus was on maintaining balance in accounting records to facilitate decision-making and business administration.

Industrial Age

• During the 18th and 19th centuries, accounting transformed to meet the needs of growing industrial companies.
• Accounting processes were systematized, leading to the initial attempts to establish accounting standards.
• Financial operations grew complex with the emergence of corporations which demanded more accuracy in financial records and auditing.
• Cost accounting became increasingly important for optimizing production and improving business profitability.

20th and 21st Centuries

• In the 20th century, accounting evolved with the development of international standards and regulatory bodies like the IASB.
• Globalization and technological advancements transformed how accounting records are maintained through digital systems and automation.
• In the 21st century, accounting continues to adapt to changes in the economic environment, addressing topics like environmental accounting, social responsibility, and financial transparency.

Doctrinal Positions in the Conceptualization of Accounting

• Pacioli published a systematized work on bookkeeping in the 15th century, leading to accounting theories.
• Accounting theory schools emerged in the 18th century to provide a foundation for double-entry bookkeeping principles.
• Accounting sought to place itself within the broader context of scientific knowledge.
• Various doctrinal currents have contributed diverse approaches for understanding accounting that are categorized into several schools of thought.

Personalist School

• Sees accounting's is to reflect the legal relationships between individuals (creditors, debtors, owners)
• Accounts represent individuals or entities to which the company is linked
• Giuseppe Cerboni, who developed "Accounting by Personal Accounts" is a key proponent

Materialist School

• This views accounts as representing assets, rights and obligations, contrasting with Personalist school
• It emphasizes economic resources over legal relationships
• Benedetto Cotrugli initially proposed this perspective, it was further developed by Fabio Besta.

Patrimonialist School

• Focuses on representing equity as the fundamental object of accounting by registering, measuring, and controlling an entity's elements of equity
• Vicente Vianello emphasized the importance of financial statements in reflecting the equity situation of a company/entity.

Neocontist School

• Considers accounting a system that provides useful data for decision-making, not limited to the company alone
• They incorporate financial analysis and useful accounting information for various users
• Key representatives: Masi and Capparozzo

Positivist School

• Based on the scientific method, it argues accounting should objectively observe, measure, and analyze economic phenomena
• It is oriented towards empirical research and validating hypotheses through evidence
• Yuji Ijiri is a notable author of this school

Approaches to Accounting Concepts

General Considerations

• Accounting is essential in business and finance
• Accounting is as ancient as humanity
• It was used because people needed to keep track of their properties and belongings
• As ancient civilizations evolved, so did recording systems

Object of Accounting

• The object can exist, be thought of, spoken of, or be the subject of action
• Objects can be individuals or collections, concrete (material) or abstract (ideal), natural or artificial.
• Companies are tangible objects, whereas numbers are abstract
• The distinction is between material objects (or concrete) and conceptual (or formal).

The Material Object

• Many prior researchers link accounting to economic activity and the consensus is that it is the economic reality

The Formal Object

• IT gives a discipline true unity or substance, revealing the logical structures, concepts, prepositions or theories, or the particular method used to study a specific area
• The formal object concerns the methodological approach and techniques used to process, classify, register, and interpret financial information, for decision-making
• Examples: Applying double-entry bookkeeping, creating financial statements (balance sheet, income statement), using accounting standards, performing audits and internal control.

Objectives or Purposes of Accounting

• Objective or purpose is the unique property of a deliberate action that seeks to achieve particular goals through specific means
• Accounting involves material and formal objects
• The relationship between them is that the first relates to the field of action (economic activity), and the second relates to the logical structure of the concepts, propositions, theories, and methods of study for that reality
• Over time accounting has been assigned to various objectives, such as:

Establish a Registration System

• This refers to registering all the organization’s transactions in a clear and accurate way to provide quantitative and qualitative equity variations
• Done on books or sheets known as accounting or trade books, either manually, mechanically, or electronically through PED
• All records must have proper justifying documentation.

Provide a True Picture of the Entity's Equity

• Accounting, through processing of accounting data, provides the organization’s true equity, including assets, liabilities and ownership
• Formal goals of accounting, attention must be paid when capturing data, adapting a unit of measure to keep prices stable, valuing equity while being factual, and accurately representing accounting events

Give the True Result of the Organization

• Organizations aim for maximum profit in the capitalist system
• With each period, the activities of a business unit leads to certain results and accounting must capture, measure, control interpret them
• An essential purpose of accounting is to determine the true result achieved

Supply Information for Decision Making

• Accounting information is part of the information system, where decisions are made such as owners, managers, and various other sectors on the accounting statements
• Accounting objectives have changed, its main focus was on calculating business profit, which was seen as the true benefit benchmark.

Establish a Control System

• Through methodical and systematic accounting, this can establish a system of control including measuring and evaluating goal fulfilment.

Management Control

• Controlling basic business operations like buying, selling, charging and paying for commercial and service businesses; and buying, manufacturing, selling, charging and paying for industrial ones.

Control of Planned Goals and Objectives

• This is focussed on achieving goals comparing the expected versus outcomes using accounting figures.

Serve as Proof and Source of Information in Court

• Accounting records support knowledge of the merchant's rights and obligations to third parties and also follows law in the global and local scale for compliance.

Accounting Functions

• Has designed functions based on objectives or purposes, referring to tasks or activities.

Things or objects, entities, organizations, or a discipline determine

• Accounting is formed with concepts and processes where data on economic, entrepreneurial, and financial nature are collected, processed, summarized, and given to users for decision making.

Identify

• Selects from innumerable transactions, those economic activities and events that are highly significant to accounting
• The accountant has to identify the right criteria to be collected

Measure

• Accounting information is communicated in money form. To provide the economic and administrative events, it establishes rules for measurements to grant values in currencies when valuing it for others

Register

• Function consists of annotating business transactions to accounting books, files and other storage to be used for administrative and managerial purposes. This is the bookkeeping function.

Classify

• Economic, entrepreneurial, and financial data must fit a logical conceptual framework
• The accountant classifies the data based on their nature, by grouping them through titles known as ACCOUNT to be put to the accounting books such as assets, liabilities, equity accounts, negative earnings, and earnings records.

Summarize or Report

• Accounting has the financial accounts recorded and classified, summarizing it by ordering the information to eliminate unnecessary details to give a clear financial statements.

Interpret

• Presenting the data through accounting is never enough
• An explanation of the related accounting process, its uses and limitations to the user is needed
• The aim is for the user to understand the information, doing it through notes and comments to the respective accounting records
• The accounting involves identifying, measuring, summarizing, and interpretation to decision making

Definition of Accounting

• The profession experts in Accounting, offers related services, those that offer certification where reports can be used for the public
• For a public accountant, there are certain knowledge one must know such as the title and knowledge for proper practice

Micro Accounting

• Application of accounting to societies and entities and more

General Accounting

• Studies of the theories, the rules and principles in which economic interpretation, description, attributes and state is sought

Applied Accounting

• Aims to adapt the fundamentals from the general accounting to real life economic units

Financial Accounting

• Related to the accounting describing obligations, resources and financial activities, relating to the financial state
• The income statement has information provided to third parties.

Management or Managerial Accounting

• Covers internal operations of the company, with analytics of the results
• Management accounting’s evolution has made this possible offering analytic information inside the company

Government Accounting

• Undertakes the public sector’s administrative control at a national, local, and municipal scale.

Tributary or Fiscal Accounting

• Deals with tax planning so that the business transactions can be structured so to the extent that they diminish tax’s burden.

Social Accounting and Environmental Accounting

• Application from accounting to social, which in turn relates to classification, measurement, and the social and economical repercussions

Critical Accounting

• Covers review of accounting records and revaluation of accounts and balance sheets and analysis.

Prospective Accounting

• Accounting focus in projecting future financial information for decision making and direction

Macro accounting or National and Supranational accounting

• Focus in analysis by studying monetary operations at a national and global level