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Accounting: Historical Perspectives

the accountant’s knowledge and judgment are frequently THE EMERGENCE OF
required to determine the adjustments that are needed at ACCOUNTING
the end of the reporting period. The mechanics of the sys- Prior to the late 1800s, the terms bookkeeping and
tem, however, can easily be handled by the computer. accounting were often used interchangeably because the
recording/posting process was central to both activities.
SEE ALSO Accounting
There was little need for financial statements (e.g., income
statements) because most owners had direct knowledge of
BIBLIOGRAPHY their businesses and, therefore, could rely on elementary
Dansby, Robert, Kaliski, Burton, and Lawrence, Michael (2004). bookkeeping procedures for information.
Paradigm College Accounting (5th ed.). St. Paul, MN: EMC- Although corporations (e.g., banks, canal companies)
Paradigm. were present in the United States prior to the early 1800s,
Ingram, Robert W., Baldwin, Bruce A., and Albright, Thomas L. their numbers were few. Beginning in the late 1820s,
(2004). Financial Accounting: A Bridge to Decision Making however, the number of corporations rapidly increased
(5th ed.). Cincinnati, OH: South-Western College Publish- with the creation and expansion of the railroads. To oper-
ing. ate successfully, the railroads needed cost reports, produc-
Larson, Kermit D. (1997). Essentials of Financial Accounting: tion reports, financial statements, and operating ratios
Information for Business Decisions. Chicago: Irwin/McGraw- that were more complex than simple recording procedures
Hill. could provide. Alfred D. Chandler, Jr. (1977) noted the
Meigs, Robert F., Meigs, Mary A., Bettner, Mark, and Whitting- impact of the railroads on the development of accounting
ton, Ray (1998). Financial Accounting. Boston: Irwin. in his classic work, The Visible Hand, when he stated “after
Needles, Belverd E., Jr., and Powers, Marian (2005). Financial 1850, the railroad was central in the development of the
Accounting (8th ed.). Boston: Houghton Mifflin. accounting profession in the United States” (p. 110).
Porter, Gary A., and Norton, Curtis L. (2004). Financial With the increase in the number of corporations,
Accounting: The Impact on Decision Makers (4th ed.). Mason, there also arose a demand for additional financial infor-
OH: Thomson/South-Western. mation that A.C. Littleton (1933) in his landmark book,
The Rise of the Accounting Profession, called “figure” knowl-
edge. With no direct knowledge of a business, investors
Allie F. Miller
had to rely on financial statements for information, and to
create those statements more complex accounting meth-
ods were required. The accountant’s responsibility, there-
fore, expanded beyond simply recording entries to include
ACCOUNTING: the preparation, classification, and analysis of financial
HISTORICAL statements. As John L. Carey (1969) wrote in The Rise of
the Accounting Profession, “the nineteenth century saw
PERSPECTIVES bookkeeping expanded into accounting” (p. 15).
With the establishment of the first English colonies in Additionally, as the development of the corporation
America, accounting, or bookkeeping, as the discipline created a greater need for the services of accountants, the
was referred to then, quickly assumed an important role in study of commerce and accounting became more impor-
the development of American commerce. Two hundred tant. Although there had been trade business schools and
years, however, would pass before accounting would sepa- published texts on accounting and bookkeeping, tradi-
rate from bookkeeping, and nearly three hundred years tional colleges had largely ignored the study of business
would pass before the profession of accounting as it is and accounting. In 1881, however, the Wharton School
of Finance and Economy was founded, and two years later
practiced in the twenty-first century would emerge.
the school added accounting to its curriculum. As other
For individuals and businesses, accounting records in
major universities created schools of commerce, account-
Colonial America often were very elementary. Most
ing secured a significant place in the curriculum.
records of this period relied on the single-entry method or
With a separation of management and ownership in
were simply narrative accounts of transactions. As rudi-
corporations, there also arose a need for an independent
mentary as they were, these records were important
party to review the financial statements. Someone was
because the colonial economy was largely a barter and needed to represent the owners’ interest and to verify that
credit system with substantial time passing before pay- the statements accurately presented the financial condi-
ments were made. Accounting records were often the only tions of the company. Moreover, there was often an expec-
reliable records of such historical transactions. tation that an independent review would discover whether

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