INTRODUCTION TO
FINANCIAL ACCOUNTING
A very brief history of
accounting and a staring point
for thoughts on the subject
MGT 132 SESSION 1
Humans and accounting
‘ As far as one can tell, regardless time
or place, human being give and receive
accounts as an inevitable part of who
and what they are’
(Rob Gray in Intrinsic Capability, Birkin and Polesie,
2019)
Earlier evidence of accounting record
application
Application of accounting traced back to Ancient Civilisations
(circa 3000 BCE - 500 CE)
Ancient Egyptians and Chinese also kept records of wealth, tax,
and resources.
There are very early numeration systems such as the Greek and
Roman, ancient systems of accounting, such as recording on
tablets, early forms of accounts. These evidence provide
information to puzzle together history of auditing, history of
bookkeeping and history of accounting as a social subject
(similar to law, medicine, education)
Accounting revolution: a double-entry accounting
method
Medieval Europe: Italian Luca Pacioli ”accountant”
(1447 –1517), an Italian mathematician and
Franciscan friar
In mathematical book Summa de Arithmetica (1494) - introduction
of double-entry bookkeeping. This revolutionised how businesses
oversaw their operations, enabling improved efficiency and
profitability. 500 years on and the essential of the method is still is
use as the foundational idea for financial recording. Why? (ALWAYS
LOOK FOR A REASON )
Industrial Revolution: development of corporate modern
financial and management accounting practices
The Industrial Revolution led to the growth of
large businesses, factories, and mass
production, increasing the need for more
sophisticated accounting systems. Owners
needed to track not only costs but also
profits, inventory, and production levels.
To protect independent investors' capital
Cost Accounting: accounting focuses on calculating
production costs to optimise efficiency and
profitability.
The 19th and 20th Century: Modern Accounting
Emerges and Develoipes
19th Century Professionalisation of
Accounting and Auditing
20th Centiry The Generally Accepted
Accounting Principles (GAAP) were
developed in the U.S. in the 1930s, providing
a framework for consistent financial
reporting. WHY?
The International Accounting Standards
Committee (IASC) was established in 1973
WHY?
The mid-20th century revolutionised
accounting by automating processes
Manual accounting: Accountant as the bean counter
Last century saw a development in growth is
demand for professionally trained labour force
at different levels
The 21st Century: Digital Transformation and Sustainability
Rise of technological solutions coupled with growing concerns over
capital-holders disregards ecological and social well-being of all the
planetary stakeholder.
Emergence of : Accounting Software, Forensic Accounting;
Sustainability and Integrated Reporting
What shape should accounting of the future take and the role it
should play?
A NOTE
Please try not to use
this lecture slides
information only for your
portfolio task 1
Two aspects of ‘accounting’
Conventional Accounting as a
accounting social subjects :
techniques: An (interdisciplinary)
A set of tool applied to subject within the
measure capital-holder realm of social
financial wealth as sciences that looks at
well as measure risks the role and
to potential to increase application for
financial wealth. accounting and
reporting of
organizational actions
Future:
Options to consider:
Carry on with fully monetised accounts
Application of integrated accounting and
reporting
Multiple Accounts (Accounting that include
economic, social and environmental accounts)
Sustainability accounts (accounting developed in
line with UN’s Sustainable Development Goals)
Ecosystem services accounting model
And much more
Before moving on to study conventional accounting
techniques. Please remember:
Financial accounting: In communicating reality,
we construct reality
(Hines, 1995)
Convectional accounting – the arena of
expertise and practice normally associated with
accountants – has little or no natural capacity
for environment, ecology or indeed, society.
(Gray,
To think: Accounting in its different forms has a2019)
power to enable social changes.
Convectional accounting has very limited application.
It is counter-sustainable.
