The Italian Method spread thoughout Europe in the sixteenth and seventeenh centuries later acquiring new characteristics and development, to become what we know as double entry model. In a effort to show that the double entry model has evolved in ways that closely resemble in the description of normal science. Cushing outlines a series of development. They include following:
1. Around the sixteenth century a few changes were made in bookkeeping techniques. Noticeable changes were the introduction of specific journals for the recording of different types of transaction.
2. The sixteenth and seventeenth centuries saw the evolution of the practice of period financial statement
3. The application of the double entry system was extended to other types of organizations.
4. The seventeenth century saw the use of separate inventory accounts for different type of goods.
5. Begining with the east India Company in the seventeenth century and countinuing with the growth of the corporation following the industrial revolution, accounting acquires a better status, characterized by the need for cost accounting and reliance on concepts of continuity, periodicity and accrual
6. The method of treating fixed assets evolved by the eighteenth century.
7. Up to the early nineteeth century, depreciating property was accounted for as unsold merchandise. In the last half of nineteenth century. Depreciation in the railroad industry was considered unneccessary unless the property was deemed to be in improper working condition.
8. Cost accounting emerged in the nineteeth century as a product of the industrial revolution.
9. The latter half of the nineteenth century saw the development of techniques of accounting for prepayments and accruals to allow the computation periodic profit.
10. Latter saw the development of funds statements
11. The 20 century saw the development of accounting methods for complex issues.
THE DEVELOPMENT OF ACCOUNTING PRINCIPLES IN THE USA
1) Management Contribution Phase (1900-1933)
The influence of management in the formulation of accounting principles arose from the increasing nimber of shareholders and dominant economic role played by industrial corporations after 1900. The consequances of the dependence on management initiative include :
ü Given the pragmatic character of the situation adopted
ü The focus was on the determination of taxable income and the minimization of income taxes
ü The techniques adopted were motivated by the desire to smooth earnings
ü Complex problems were avoided and expedient solution were adopted
ü Different firms adopted different accounting techniques for the same problem.
2) Institution Contribution Phase
The phase was marked by the creation and the increasing role of intitutions in the development of accounting principles. It including the creation of the securities and exchange commission. The dissatisfaction with the results professional intervention as expressed in the writing of Briloff, were equite effective in bringing to the attention of the general public the accounting abuses that dominated certain annual reports.
3) Politicization Phase (1973-present)
The limitations of both professional associations and management in formulating an accounting theory led to the adoption of a more deductive approach as well as to the politicization of the standard setting process a situation created by the generally accepted view that accounting number affect economic behavior and consequently that accounting rules should be estabilished in the political arena.
The process of formulating accounting standards is becoming political is better expressed by a repport released by the Senate Subcommittee on report Accounting and Management. The relationship of the major organizations suggests the ‘BIG EIGHT’ and AICPA have control over accounting standards approved by the SEC. After emphasizing the need for the federal government to ensure that publicly owned corporationd are properly accountable to the public the report made following recommendations aimed at enhancing corporate accountbaility.
ACCOUNTING AND CAPITALISM
Accounting and capitalism have been linked by some economics historians with the general claim that double entry bookkeeping has been vital to the development and evolution of the capitalism. Max Weber emphasizes the argument as follows : the modern rational organization of capitalism enterprise would not have been possible without two other important factors in its development the separation of business from the household...and closely connected with it, rational bookkeeping.
The thesis was best expanded by Somhart as follow:
One can’t imagine what capitalism would be without double entry bookkeeping : the two phenomena are connected as intimetaly as form and content. One cannot say wheter capitalism created double entry bookkeeping as a tool in the expansion or perhaps conversely, double entry bookkeeping created capitalism.
System accounting in the form of double entry bookkeeping made it posible firstly, form the capitalistic enterpreneur to plan conduct and measure the impact . The following four reasons are generally advance to explain the role of double entry in the economic ecpansion following the close of the Middle Ages:
· Double-entry contributed to a new attitude toward economic life
· This new spirit of acquisition was aided and propelled by the refinement of economic calculations
· This new rationalism was further enhanced by system organization
· Double entry bookkeepingg permis a separation of ownership and management and thereby promotes the growth of the large joint stock company
RELEVANCE OF ACCOUNTING HISTORY
Accounting history is important to accounting pedagogy, policy and practice. It makes it possible to better understand our present and to forecast or control our future. Accounting history may be narrated by relating episodes of accounting history in a particular, specific and non analytic manner.
With descriptions of theoris of knowledge the unique work of individuals, theis system of the values and the criticisms of the related work , or jnterpretational by providing explanation of these episodes. A good definite of accounting history follows:
“ accounting history is the study of the evolution in accounting thought, practice and institutions in response to change in the environment and social needs. It also considers the effect that this evolution has worked on the environment “
It this study of the heritage of accounting and its contribution to accounting pedagogy, policy and perspective. With regard to pedagogy, accounting history can be very helpful to a better understanding and appreciation of the field of accounting and its evolution as a social science.
With regard to policy perspective accounting history is instrumental to a better under standing of the accounting problems and their institutional context as well as the formulation of public policy. With regard to accounting practice, accounting history could provide a better assessment of the exiting practices by comparison with the method used in past.
The relevance of accounting history to accounting practice, policy and pedagogy call for more accounting history inquiry. The subject matter of this historical research will include such areas as biography, institutional history, development of thought, general history, critical history, taxonomic and bibilographic database and historiography.
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