Accounting has come a long way from the past to the present. In the early centuries everything was accounted for by hand. Bookkeeping was complicated and it was often difficult to pass a record on from one person to another. Today, with advanced accounting software, organized ledgers and methods of dividing assets, credits and debits, understanding these concepts while getting an accounting degree is a much easier task.
Barter System – In early centuries many cities and towns used bartering. Today we know this system as credit. The town’s people would collect information about the borrower and set up arrangements to either work the debt off or pay it back in installments. In some cases the barter might be years of labor. In today’s accounting system, invoices are used for businesses and credit accounts are used for individuals. In the new system an account number is used to track the debt. In the old days, a name and signature is all you need. Bartering was sometimes hard to track if people moved or ran away. In today’s accounting system, more information is gathered, references are used and people can be found if they move or change their phone number.
Balance Sheet – In today’s accounting balance sheets are used to track a company’s assets, liabilities, and shareholders’ equity. A balance sheet is very important in an audit and in earnings reports. This helps the company report their activity to the IRS and to the shareholders. In the old accounting days coins were given to shareholders to help identify inventory that belonged to them. Today more personal information is captured about shareholders and all the information is electronic. In the old days keeping track of coins and hand written sheets was difficult. Coins could be lost or stolen. Some mistakes on balance sheets may not be caught until it’s too late.
Record Keeping – Accurate record keeping is the backbone of accounting past and present. In present day accounting some of the latest software can help an accountant keep all of the records in order. Among popular software is Quickbooks. Microsoft has also launched SMB software for accountants called accounting express and Microsoft Office accounting professional. Both of these programs are designed for small businesses and home based businesses. Programs like Quickbooks are designed for larger operations, but can be used by small businesses. In the old days records were kept in tablets. The ancient bookkeepers used stone tablets. This was a tough system because there was no room for errors to be made. It was also hard to correct mistakes if they were found.
The past methods of accounting paved the way for new accounting measures to be created. The past was a more difficult and slower process but gave accountants the time and teaching tools to create innovative software that evolved into the software that accountants use today.
One of the most important lessons that can be learned from past processes is to learn to keep software based accounting records saved and backed up. Some records you may need in hard copy. In the event of a power outage access to paper files may prove important. The lesson the older accounting system creators could learn from the new accounting systems is to be forward thinking, creative and innovative. Creating new methods is a long process but worth it to future generations of accountants and bookkeepers.