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Various attempts have been made to locate the place and time of the birth of the double-entry system resulting in various scenarios. Most of these scenarios recognize the presence of some form of record keeping in most civilizations dating back to about 3000 BC. Included are the Chaldean-Babylonian, Assyrian and Sumerian civilizations - the producers of the first organized government in the world, and some of the oldest written languages and the oldest surviving business records; the Egyptian civilization - where scribes formed the pivots on which the whole machinery of the treasury and other departments turned; the Chinese civilization - with government accounting playing a key and sophisticated role of the great estate of Apollonius introduced an elaborate system of responsibility accounting in 256 BC; and the Roman civilization - with laws requiring taxpayers to prepare statements of their financial positions and with civil rights depending on the level of property declared by the citizens. The presence of these forms of bookkeeping in the ancient world has been attributed to various factors, including the invention of writing, the introduction of Arabic numerals and of the decimal system, the diffusion of knowledge of algebra, the presence of inexpensive writing material, the rise of literacy, and the existence of a standard of medium of exchange.

The Development of Accounting Principles

Various groups in the United States of America (USA), Australia and elsewhere, implementing a mix of approaches, have subjected accounting theory and principles to a constant re-examination and critical analysis. In order to simplify the discussion, four phases of this process may be identified. In the first phase (1900-33), management had complete control over the selection of financial information disclosed in annual reports; in the second phase (1933-59) and third phase (1959-73), the professional bodies played a significant role in developing principles; and in the fourth phase, which continues to the present, it has become increasingly noticeable that standard-setting bodies such as the Financial Accounting Standards Board (FASB) in the USA and the Australian Accounting Standards Board in Australia (AASB) and various pressure groups are moving towards a politicization of accounting.

Management Contribution Phase (1900-33)

The influence of management in the formulation of accounting principles arose from the increasing number of shareholders and the dominant economic role played by industrial corporations after 1900. The diffusion of share ownership gave management complete control over the format and content of accounting disclosures. The intervention of management may be characterized by the adoption of ad hoc solutions to urgent problems and controversies. The situation generated dissatisfaction during the 1920s. Two Americans, William Z. Ripley and J.M.B. Hoxley, were particularly outspoken in arguing for an improvement in standards of financial reporting. Similarly, Adolph A. Berle and Gardiner C. Means pointed to corporate wealth and the power of industrial corporations and called for the protection of investors.

In the United States, the main players of the time were a professional association of accountants, the American Institute of Accountant (AIA), which in 1917 established a Board of Examiners to create a uniform certified practicing accountant (CPA) examination, and the New York Stock Exchange (NYSE), which from 1900 required all corporations applying for listing to agree to publish annual financial statements. A theoretical and a controversial debate of the period was the question of accounting for interest costs. The FASB's Discussion Memorandum on Accounting for Interest Costs traces the background of the interest as a cost controversy. Another important event of the era was the growing effect, on accounting theory, of taxation of business income. While the Revenue Act 1913 (USA) provided for the calculation of taxable income on the basis of cash receipts and disbursements, the Revenue Act of 1918 was the first to recognize the role of accounting procedures in the determination of taxable income.

Institution Contribution Phase (1933-46)

This phase was marked by the creation and the increasing role of institutions on the development of accounting principles. In the US,

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