A Brief History of Bookkeeping – How the Role of Bookkeepers Evolved

Rahul Maingi

By Rahul Maingi, Mar 20, 2020

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Bookkeeping is a vital and ancient accounting tool that helps businesses in analyzing financial statements.  Bookkeeping has existed for millennia, but the methods we use today are the result of an evolution.

In this post, we outline the history of bookkeeping from ancient times and the ever-changing roles of bookkeepers.

A Brief History of Bookkeeping

Bookkeeping probably started as early as the Mesopotamian civilizations.   Let’s take a look at the first instances of bookkeeping.

Agriculture and the Dawn of Bookkeeping

In the earliest societies, when hunters and gatherers lived nomadic lives, there was no need for bookkeeping. Without wealth and property accumulation, there was only the tradition of gift exchanges between tribes.

But with society shifting towards agriculture and finding ways to settle permanently, this way of life changed. As humans produced more food through agriculture than they could ever accumulate by hunting and gathering, they created granaries which gave birth to currency and taxation. The earliest bookkeepers emerged while civilization was still in the trade system mode (pre-2000 BC).

Ancient Bookkeeping

The need to count and measure the results of labour and effort began with the Sumerians, Babylonians and ancient Egyptians.

For this, a form of abacus was created. For commercial transactions and payments, the code of Hammurabi was the standard. This is how the first bookkeepers came into existence. Known as “scribes” in ancient Egypt, they were the first people to read and write. They also invented technologies that would forever change civilization, without even realizing it.

The earliest developments in counting and writing were made by this first generation of bookkeepers. Even the tendency to verify the accuracy of inventory and auditing was invented in ancient Egypt and Babylon.

Middle-Class Merchants and Double-Entry Bookkeeping

Initial innovations in bookkeeping were developed mostly by government-employed scribes, and only the moneyed class had access to (and a need for) bookkeeping.

In medieval Italy, common citizens began to acquire wealth thanks to the availability of currency and private loans. Hence, a new class was born, who could profit from trading goods. As a result, there was a need for a new kind of documentation and a new generation of bookkeepers.

Modern-Day System – The Father of Bookkeeping

Double-entry bookkeeping came into the picture by the late 15th century to strike a balance. In this new system of bookkeeping, every credit to an account needed a corresponding debit from another account.

Frater Luca Pacioli’s influential book Everything About Arithmetic, Geometry and Proportion (1495) described this system in detail and set the standard of today’s accounting system. In it, Pacioli explained various bookkeeping tools, such as journals and ledgers. For this reason, he’s considered the father of modern bookkeeping.

Before Pacioli, there was Benedetto Cotrugli, whose The Book of the Art of the Trade (1475) explained double-entry bookkeeping. However, it was Pacioli who’s given credit for codifying accounting.

In double-entry bookkeeping, all transactions are maintained in at least two accounts, with each transaction having two columns. This was a more accurate way to track financial transactions, especially in bigger organizations.

The rise of bookkeeping in the private sphere led to the rise of families like the Medicis. They commissioned beautiful and lavish works of art, music and science during the Renaissance and Baroque eras.

The Rise of Professional Bookkeepers – Dawn of Industrialism

These new types of bookkeeping empowered trade and exploration, making the world more accessible to European colonists and traders. The rise of early capitalism and stock exchange led to the keeping of records for larger amounts of money, and that led to more intricate calculations. Making a bookkeeping mistake could now not just close a shop or halt an expedition but cripple an entire industry.

The Evolution and Changing Role of Bookkeepers

The advent of computers and accounting software changed the financial industry forever. One of the greatest benefits of the digital age is productivity. (Digital bookkeeping refers to the formation, representation and transmission of financial data in electronic form.) Now, you can interpret and report financial data faster and more efficiently than ever.

Digital bookkeeping falls into four primary categories:

E-Business

Electronic business processes help team members coordinate better. They automatically improved internal management and combined client information with data given by a financial professional using digital networks.  Its greatest aspect is that your information gets distributed from a single and highly encryted source.

Cloud Computing

The core of cloud computing is SaaS, or software as a service, which eliminates the need to install software to run certain applications. More and more businesses are switching to customized cloud computing platforms for faster accessibility from any part of the world. .

Enterprise Resource Planning (ERP)

If you want to bring your business’s different departments into the same collaborative environment, then you need the help of ERP systems. They allow information to be distributed among different groups and permit activities from different locations. With ERP your business performance increases and allows management to view it more fully. This is immensely helpful when you’re trying to make big business decisions.

Digital Technology Advancements

Digital bookkeeping systems make it easy to access and retrieve data through integrated systems and real-time reporting, which is the latest in digital bookkeeping. Online accounting solutions give small business owners better control over their finances, reduce risks and increase productivity. Thanks to today’s cloud bookkeeping services, developing strategies has become about more than simply creating financial reports.

The change in the relationship between data management and bookkeepers is undeniable. So is the transformation of the role of bookkeepers. It’s fascinating to imagine the future of bookkeeping in the fast growing digital world. Keep visiting this page for interesting posts!

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