Although evidence of accounting practices date back to earlier civilizations, the founding father of modern double-entry bookkeeping was an Italian monk by the name of Luca Pacioli, who is also attributed with the identification of the geometric concept known as the Golden Section. The creation of private property rights, the growth of commerce, and the development of trading on credit served as incentives for the development of modern accounting. Luca Pacioli demonstrated an affinity for mathematics at an early age. Pacioli, like many of his contemporaries exchanged ideas with other Renaissance thinkers in what might be described as an early form of social networking.
Luca Pacioli, Renaissance Thinker
Pacioli began as a protégé of the painter, Piero della Francesca, who in turn introduced him to some of the great minds of the Renaissance. Pacioli eventually moved to Venice and studied at the Univerity in Padua. Later in life, he took his vows as a Franciscan monk and incorporated his moral beliefs and faith in God into his work. By asserting that merchants should make honest profits in an ethical way, Pacioli was perhaps one of the earliest proponents of accounting transparency.
The Development of Double-Entry Bookkeeping
Pacioli’s writing on the double-entry method for recording transaction data is the basis of contemporary accounting methodology. Although he did not create the system, he used his skill as a technical writer to codify the practice so effectively, that it remains essentially unchanged today. From this enlightened origin the accounting profession developed to encompass sub-disciplines and create a variety of related job classifications.
Bookkeepers and Accountants
Bookkeepers originally recorded economic data into journals and ledgers, today sophisticated computer programs have replaced bound volumes and both the debit and credit entries are usually made in one step. Bookkeepers are the record-keepers responsible for entering data from source documents into the accounting system. As businesses developed greater complexity, so too did the need for detailed analysis and predictive reporting tools. Accountants, like bookkeepers, record economic data, but their interpretative analysis and reports help management make informed decisions regarding a variety of business transactions, which affects the success of all types of private and public organizations, whether for profit or non-profit in nature.
Accounting Transparency
Modern accounting requires transparency. Information contained in balance sheets, income statements, statements of cash flow, and statements of owners’ equity must be accurate and reported according to standardized guidelines. Private companies use these reports to satisfy creditors and vendors; public companies provide this information to all interested parties, including investors and an assortment of oversight agencies. Bookkeepers, accountants, and CPAs provide professional services and follow established protocols to meet the legal, ethical, and informational needs of stakeholders.
CPAs: Public Accounting
As business transactions became more sophisticated a new type of accounting profession developed. Public accounting was established in the late nineteenth century and by the early part of the twentieth century many states had created licensing requirements for public accountancy, thereby establishing the career field known today as Certified Public Accounting. Today, CPAs must pass a uniform CPA exam and meet state licensing requirement before operating a CPA firm. Generally CPA services usually include at least two of the following categories:
- Accounting services.
- Auditing services.
- Income tax planning and reporting.
- Management advising and consulting.
A CPA has a choice of career paths; however, all CPAs are expected to adhere to the established codes of conduct. The American Institute for Certified Public Accountants (AICPA) publishes its own code of professional conduct to guide its members. In the course of performing their duties, CPAs apply their specialized skills to advise clients and improve business functionality.
Accounting Practices for a Complex World
From Pacioli’s early technical manual for double-entry bookkeeping to the sophisticated accounting structures used in today’s business environment, accounting systems have kept pace with the needs of society. The accounting profession has developed and expanded to include bookkeeping, accounting, public accounting, auditing services, tax preparation, and managerial consulting to facilitate organizational growth.
References:
Luca Pacioli. (2010). In Encyclopædia Britannica. Retrieved July 30, 2010, from Encyclopædia Britannica Online: http://www.britannica.com/EBchecked/topic/437818/Luca-Pacioli
The American Institute of Certified Public Accountants. (2006-2010). AICPA code of professional conduct--Current and historical versions. Retrieved from http://www.aicpa.org/Research/Standards/CodeofConduct/Pages/default.aspx
The American Institute of Certified Public Accountants. (2006-2010). Career Paths. Retrieved from http://www.aicpa.org/Career/CareerPaths/Pages/CareerPaths.aspx
The American Institute of Certified Public Accountants. (2006-2010). FAQs: Becoming a CPA. Retrieved from http://www.aicpa.org/BecomeACPA/FAQs/Pages/FAQs.aspx
Weis, W,L. and Tinius, D.E. (n.d.). Cengage Learning: Business Readings. Houghton Mifflin Company. Retrieved from http://college.cengage.com/accounting/resources/students/readings/01-weis.html
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