The Origin of Double Entry Case Study Free Sample for Students

Questions: 1.Describe the Key Historical Events that you think have Shaped the Development of Accounting. In your answer you should Justify why you have Selected your events. 2.Describe the 'Socially Constructed' Perspective of Accounting History. What Arguments and Evidence is there to Suggest that Accounting is Socially Constructed? 3.What Aternative Perspectives can be used to Explain the History of Accounting? Do you agree with these Perspectives? Justify your Position. Answers: Introduction History of accounting has always been a concern for many years and many researches and case studies has been performed on this subject. In this paper many issues have been explained on the basis of given article. The article is based on the origin of double entry concept in the accounting procedure. Article discusses how significant changes have been carried out in the process of changing the accounting system to the double entry concept. For this many key historical events have been explained that have shaped the development of accounting. After this, various socially constructed perspectives of accounting have explained in detail to understand the impact of social perspective in making the conceptual framework. Other than these alternate perspectives are also explained that helps in explaining the history of accounting. 1.Key historical events that have shaped the development of accounting the development of contemporary accounting can be regarded as emergence of single-entry and double-entry bookkeeping. Single-entry bookkeeping system was used by Italy merchants and also in Europe (Mann, 1994). The system can be defined as recording an accounting entry in only one account. Single-entry bookkeeping uses only personal accounts and does not recognizes other nominal and real accounts (Brown, 2006). The daily business transactions are recorded in the journal and from there are transferred to Ledger. The double-entry bookkeeping system was developed to overcome the shortcomings of single-entry bookkeeping. Double-entry bookkeeping system records every financial transaction in two different accounts. It is named as double-entry accounting system as every financial entry requires corresponding entry in other account. The main advantage of double-entry over single-entry system of accounting is that businesses can easily assess their profit or loss and capital. The historical events of developing single and double-entry have shaped the development of accounting as they laid the foundation of contemporary financial reporting. Single-entry bookkeeping system enabled recording of daily financial transactions and thus facilitated proper management of financial records (Mann, 1994). On the other hand, double-entry bookkeeping system overcomes the deficiencies of single-entry bookkeeping system that relatively ignored the concepts of capital and income. The single-entry accounting system was not able to produce a complete balance sheet or profit/loss statement as it cannot provide all the relevant financial information. The double-entry accounting system enhanced arithmetical accuracy and thereby reduced chances of occurrence of any type of error and frauds. Also, it allowed timely production of profit and loss statement and balance sheet. The accounting system of double-entry bookkeeping has become a powerful concept that till date underlies pre sent day recording of accounting and financial entities (Mann, 1994). 2.Socially constructed perspective of accounting history Socially constructed can be defined as theory of sociology and communication that develops the basis for examining the relationships that exist between the individuals in a society. The theory states that a society functions properly when its different segments such as social, economic and political functions properly by communicating with each other (Mann, 1994). The field of accounting has a long history and can be said to be socially constructed as it has being practiced by people from ancient civilizations. Thus, it can be said to be socially constructed as accounting information has a large impact on society as it facilitates in taking proper decisions. The accounting information impacts everybody and thus a large influence in society as it provides sufficient information about the profitability of industries and thus helps in taking critical decisions. The traditional use of accounting system by merchants and other people clearly illustrates that accounting is socially constructed. The system of single-entry and double-entry bookkeeping was practiced by people in ancient civilizations and is used in present times too for financial management (Mann, 1994). The field of accounting has traditionally played a stewardship role as it facilitates in developing historical records that helps in measurement of accounting profits. The history of accounting depicts recording business transactions by people from various civilizations through varying methods till the development of double-entry bookkeeping. Thus, accounting was used to develop a proper understanding of economic information and social communication. It plays a larger role in societal development through depicting the industrial development and growth and establishing relationship between various sections of the society. The information provided by accounting system such as single and double-entry helps in taking various important decisions relating to effective management of scarce resources. 3.Alternative perspectives used to explain the history of accounting The alternative perspectives that can be used to explain the history of accounting includes development of basic accounting theories such as generally accepted accounting principles. The generally accepted accounting principles (GAAP) emphasizes on adhering to historical cost and matching principles. The principle of historical cost states that assets should be held at historical cost of purchase. In addition to this, the matching principle of GAAP states that all revenue and expenditures should be matched in the financial periods of their occurrence only. The development of generally accepted accounting principles has largely helped in improving the communication of financial information. The GAAP principles forms a strong basis of historic accounting as these are the commonly accepted international accounting standards that are used from past till present times for financial reporting. GAAP principles are a standard framework of guidelines for financial accounting and reporting and are largely helpful for explaining the history of accounting. The alternative perspective of GAAP besides single and double-entry can be regarded as major approach for explaining the history of accounting. The GAAP principles were developed on the basis of double-entry bookkeeping system and overcome the shortcomings present in single-entry bookkeeping system (Edwards and Walker, 2009). The GAAP principles incorporated the method of accrual accounting that requires matching of revenue and expenses that was not present in single-entry bookkeeping accounting system. As such, it can be said that GAAP principles form alternative perspectives for explaining the history of accounting. Conclusion The overall analysis shows that there are many social and alternative perspectives that can be used to explain the history of accounting. References Brown, R. (2006). A History of Accounting and Accountants. Cosimo, Inc. Edwards, J.R. and Walker, S.P. (2009). The Routledge Companion to Accounting History. Routledge Mann, G. (1994). The origins of double-entry. Australian Accountant, July, 17-21.