Accounting for change: A brief history of bookkeeping

Accounting for change: A brief history of bookkeeping


As human cultures and social relationships evolved, bookkeeping evolved with them. The history of bookkeeping is woven into the very beginnings of civilization, and advances in the art and science of bookkeeping led to new heights of innovation and creativity in Renaissance Italy and the early industrial United States.

Keep reading to learn more about the ways bookkeeping has impacted history and culture — and how today’s changing technologies have created some of the biggest challenges and opportunities bookkeepers have ever seen.

Agriculture and the dawn of bookkeeping

The earliest human societies, made up of hunter-gatherers who lived nomadic lives, had very little need for bookkeeping. Without permanent settlements, wealth and property accumulation was minimal, and trade consisted mostly of “gift” exchanges between tribes.

Everything changed when human society began to shift toward agricultural production and permanent settlements. Agriculture produced far more food calories than hunting and gathering, leading to the creation of government-controlled granaries, and eventually the creation of currency and taxation. From these developments, the first bookkeepers emerged: scribes, who kept track of what came into and went out of granaries and treasuries.

Without realizing it, these scribes were inventing technologies that would change the face of civilization. Early developments in counting and writing were led by these proto-bookkeepers, whose stampings into clay created the first cuneiform phonetic alphabet. Even the notion of verifying the accuracy of inventory — auditing — was developed by ancient Egypt and Babylon.

Middle-class merchants and double-entry bookkeeping

Government-employed scribes led the way in bookkeeping innovation for centuries. However, in the city-states of medieval Italy, availability of currency and private loans made it possible for non-noble individuals to accumulate wealth. This new “middle class” consisted largely of merchants profiting on a wide variety of trade goods — and for the first time, these merchants began to locate in permanent spaces, rather than peddling their wares nomadically.

Just as settling into cities had necessitated government accountancy, the newly settled class of shopkeepers and merchants necessitated a new kind of bookkeeper and (even more famously) a new kind of documentation.

By the late 15th century, a new “best practice” had emerged from the Italian city-states: double-entry bookkeeping, in which each credit requires a corresponding debit from another account. Luca Pacioli’s influential 1495 work on the subject led to its widespread use throughout Renaissance Europe. Use of Arabic numerals, which allowed for easier arithmetic, was also set by these merchants — they’re who kids today have to thank for not being taught math with Roman numerals.

The use of private bookkeeping led to a flourishing middle class, led by families like the Medicis, that spent lavishly on commissioning works of art, music, and science in the Renaissance and Baroque eras. Botticelli’s The Birth of Venus and Michelangelo’s David, both commissioned by Medicis, might never have been made without the rise of bookkeeping in the private sphere.

The rise of industrialism and the professional bookkeeper

Trade and exploration efforts were also strengthened by new systems of bookkeeping. The New World became accessible to European colonists and traders, leading to the formation of entirely new trade routes carrying goods never before seen in Europe. As Britain and the United States became wealthier, two developments would lead to major changes in how bookkeepers operated and why they were needed.

Early capitalism and the creation of stock exchanges made bookkeepers responsible for larger sums of money and more intricate calculations than ever before.  At the same time, industrial technologies like railroads and factories created wide-ranging business empires — getting bookkeeping wrong or failing to perform a proper audit could now be responsible not just for shuttering a shop or halting an expedition, but for crippling an industry or starting a panic that would destroy thousands of individual fortunes.

The skills required for the new way of bookkeeping didn’t necessarily correspond to business acumen. As one author of accounting books said in 1835: “You may be an excellent business man, and no book-keeper at all; or, an accomplished book-keeper and possess few requisites indispensable in the character of a merchant." To maximize the profitable use of their time, business owners began to delegate bookkeeping responsibilities to specific employees, rather than writing in their own ledgers.

Bookkeeping courses were offered all over the United States and Britain in the 19th century. To ensure that bookkeeping was done reliably, Scottish and English bankers began the process of professionalization, creating the first professional societies of bookkeepers.  In 1887, the first society of accountants in the United States was founded, leading to a trend of increasing professional education and licensing requirements for bookkeepers that extends to this day.

Bookkeeping in the modern service economy

From satellite communication to shipping containers, technological advances in the 20th and 21st centuries have led to massive changes for business and trade. The rise of calculators led to drastic cuts to the amount of time required to perform basic calculations, and when computers took over, the job of bookkeeper began to revolve, for the first time, around typing rather than manual, handwritten ledger entries.

The modern bookkeeper may be responsible for a roster of clients or may work in-house, and is likely to use several software tools that automate functions bookkeepers used to perform manually — functions like adding up columns of numbers, or calculating payroll deductions, or maintaining a calendar of appointments.

Today’s most advanced bookkeeping tools are at the cutting edge of innovation, incorporating cloud and SaaS technologies. These solutions allow bookkeepers to offer a wider range of services than ever, increasing their value and ability to retain clients.

For more information on how Avalara can power up your accounting practice, check out Avalara for Accountants.

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