Accounting has been called the language of business. But who invented this ancient language? The personalities who forged the discipline of financial reporting are largely forgotten, but their stories are fascinating. Here we take a look at some heavyweights from economic history.
Fra Luca Bartolomeo de Pacioli (1447–1517)
De Pacioli was an Italian mathematician, a Franciscan friar, wingman to Da Vinci, and widely regarded as the father of accounting. Indeed, he was the first scholar to write on the double-entry system of bookkeeping in Europe.
His most famous work is Summa de arithmetica (1494). This text changed the world. It was the first treatise on algebra published in the language of the day. It introduced symbols for plus and minus. And it included the first description of the bookkeeping method used by Venetian merchants during the Renaissance, now known as double-entry accounting.
The system outlined closely resembles today’s accounting cycle. He describes the use of journals and ledgers, accounts for assets, liabilities, capital, income, and expenses — and reporting via balance sheet and income statement. These innovations made bookkeeping far more efficient and provided a transparent picture of a company's health.
De Pacioli also explored a host of related subjects, including accounting ethics and cost accounting. De Pacioli’s contribution to accounting was massive. He was a heavyweight of mathematics and a bastion of transparent financial reporting.
Hammurabi, King of Babylonia (2285 - 2242 BC)
5000 thousand years before double entry accounting, the Assyrian, Chaldaean-Babylonian and Sumerian civilizations did business throughout Mesopotamia (modern day Iraq), producing records of commerce. Indeed, Babylonian became the lingua franca of business.
At this time, Sumeria was a theocracy. Seeking to document their ownership of land and beasts, rulers developed legal codes that penalized the failure to record transactions. The Code of Hammurabi was born.
The code required that all commercial activity be recorded. This was before the days of bookkeepers, so the job of documenting deals was carried out by scribes. These prototypical accountants wrote up transactions and ensured they complied with the code. Temples, palaces and small businesses employed hundreds of scribes, and it was considered a prestigious profession. Indeed, visiting traders would seek out scribes at the city gates and outline agreements to them, so terms could be recorded.
King Hammurabi ruled for close to 42 years, from about 1792 to 1749 BC. In his own words, he developed the code to, “bring about the rule of righteousness in the land, to destroy the wicked and the evil-doers, [...] to enlighten the land, to further the well-being of mankind.”
But the code is more than a set of instructions for recording transactions - it’s a constitution, an ancestor to prevailing legal frameworks all over the world. In this way, Hammurabi’s contribution goes beyond the world of financial reporting to the genesis of the law itself.
Mary Harris Smith (1847-1934)
Mary Harris Smith’s father was a banker who recognised her abilities. At 16 she went to study mathematics at King’s College, London before establishing her own accountancy practice in 1888. That year, she applied to join the Society of Incorporated Accountants and Auditors, the preeminent professional association of accountants in England. She was rejected on the grounds of being a woman. She applied again. Again she was rejected. Finally, thanks to her persistence, the society finally named her an Honorary Fellow. But this wasn't enough for her.
In 1918 Harris Smith became the first woman to complete the ICAEW qualification, but she was denied membership due to her status as a woman, despite having been a practicing accountant for thirty years. In 1919, The Sex Disqualification (Removal) Act was passed, making it illegal for professional associations to bar women from membership. At this time, Harris Smith became the world's first female Chartered Accountant at the age of 72.
For countless years, women were barred from membership of accounting associations in the UK because of fears that male workers’ interests would be compromised if women had equal rights to compete in the workforce. During WWI attitudes began to change as women took on roles that had been the domain of men.
Through her talent and perseverance, Mary Harris Smith helped to demonstrate the rank inequality and injustice of discrimination against female accountants. She was a true pioneer.
The history of accounting and those who shaped it are far too seldom celebrated. But a brief leap into history reveals the huge contribution of a diverse and storied cast of trail blazers including a monk from Venice, a banker’s daughter from London and a king from Babylonia. It only remains to ask who will write the next chapter of this incredible story?