History of accounting Lesson Note

The history of accounting refers to how accounting developed from simple methods of keeping records to the modern system of recording, analysing and reporting financial information.

History of Accounting Worldwide

Accounting has existed for thousands of years. In ancient times, people needed to keep records of their goods, money, debts and business activities.

Early forms of accounting were used in ancient civilisations such as Mesopotamia, Egypt, Greece and Rome. People recorded information about crops, animals, taxes, trade and other economic activities.

As trade became more developed, there was a greater need for better ways of keeping financial records.

One of the most important developments in accounting was the double-entry bookkeeping system. This system became widely known in Europe through the activities of Italian merchants.

Luca Pacioli, an Italian mathematician and Franciscan friar, is often called the Father of Accounting because he described the double-entry bookkeeping system in his book published in 1494.

As businesses grew, accounting also developed. Businesses began preparing financial statements and using accounting information for planning, decision-making and measuring profit.

Today, accounting is carried out with the help of computers and accounting software. Modern accounting also makes use of digital technology and electronic records.

History of Accounting in Nigeria

Before modern accounting was introduced, Nigerians used simple methods to keep records of their trade and property. Traders kept track of goods, money owed and money received.

Modern accounting became more established in Nigeria during the colonial period as banking, trading companies and government institutions developed.

The growth of businesses and financial institutions increased the need for trained accountants and proper accounting records.

Professional accounting also developed in Nigeria. The Institute of Chartered Accountants of Nigeria (ICAN) was established in 1965 to promote the accounting profession and regulate the activities of its members.

The Association of National Accountants of Nigeria (ANAN) was later established in 1993.

Today, accounting is widely used in Nigerian businesses, schools, government institutions, banks, hospitals and other organisations.

Users of accounting information are people or organisations that use accounting records and financial statements to make decisions.

Examples include:

Internal users are people within an organisation who use accounting information to manage and operate the business.

Owners

Owners use accounting information to know whether the business is making a profit or loss. They also use it to decide whether to expand, reduce or change the business.

Managers

Managers use accounting information to plan business activities, control expenses and make important decisions.

Employees

Employees may use accounting information to know whether the business is doing well and whether it can afford better salaries, bonuses and other benefits.

Supervisors

Supervisors may use accounting information to monitor the cost and performance of the activities under their control.

External users are people or organisations outside the business who need accounting information for different purposes.

Investors

Investors use accounting information to decide whether to invest their money in a business.

Banks and Lenders

Banks use accounting information to determine whether a business is financially strong enough to repay a loan.

Suppliers

Suppliers use accounting information to decide whether they can sell goods to a business on credit and whether the business can pay its debts.

Government

Government uses accounting information to monitor businesses, calculate taxes and make economic decisions.

Tax Authorities

Tax authorities use accounting records to determine the correct amount of tax a business should pay.

Customers

Customers may use information about a business to judge whether the business is financially stable enough to continue providing its goods or services.

General Public

Members of the public may be interested in the activities and financial performance of large businesses, especially businesses that have an effect on the community.

Good accounting information should have certain qualities that make it useful to users.

Accuracy

Accounting information should be correct and free from mistakes.

Relevance

The information should be related to the decision that the user wants to make.

Reliability

Accounting information should be trustworthy and based on proper records.

Understandability

Accounting information should be presented in a way that users can easily understand.

Comparability

Accounting information should allow users to compare the performance of a business from one period to another.

Timeliness

Accounting information should be available when it is needed. Information that comes too late may not be useful.

Completeness

Accounting information should contain all important information needed to make a proper decision.

Consistency

The same accounting methods should generally be used from one period to another so that meaningful comparisons can be made.