As we consider who’s who in the accounting world today, let’s not forget that regardless of the size of the firm, the degrees earned, and years in the field, accountants all have one thing in common; the humble beginnings of the profession.
Whether you are a partner at the top three or four accounting firms, a staff accountant at a small firm or a sole practitioner running your own business, you can probably trace the beginnings of your vocation to an individual named Luca Pacioli.
Who is Luca Pacioli you ask?
Luca Pacioli was a Franciscan monk who is often called the "Father of Accounting". Although Pacioli did not invent the system of accounting as we know it today, he developed a simple bookkeeping method used by the merchants in Venice during the Italian Renaissance period.
Pacioli’s system can be considered the backbone of the modern accounting cycle. For example, he described the use of journals and ledgers. He even warned that a person should not go to sleep at night until the debits equaled the credits!
His ledger consisted of assets (including receivables and inventories), liabilities, capital, income and expense accounts. He demonstrated year-end closing entries and proposed that a trial balance be used to prove a balanced ledger.
Pacioli also penned numerous writings on a wide range of topics from accounting ethics to costaccounting.
Practitioners in all areas of accounting, as well as financial investors, lending institutions, business owners and anyone else who works with financial information are indebted to Luca Pacioli for his monumental role in the development of accounting.
Let’s consider how an accountant accomplished his work back when Luca Pacioli was on the scene:
Pacioli was only 49 years old when Columbus discovered America. The best proof that Pacioli's works were considered significant is the date of publication: 1494. Johannes Gutenberg had invented the movable type printing press only twenty-five years earlier and it was still an extremely expensive proposition to print a book.
So the accountant, back in the 1500s, probably didn’t have much in way of printed copy. Trial balances were hand-written. We can also be certain that he didn’t have a calculator to assist him in summarizing the debits and credits. If he wanted a copy of the chart of accounts to assist in posting to his journals, he probably had to write that by hand as well.
Have you considered the effort involved in preparing a balance sheet or income statement by hand?
Thankfully, times have changed and technology has certainly had a major effect on the accounting industry.
If you are an accountant in the 21st century, you most likely have a desktop computer, or you log into a main -frame computer to do your work. You hopefully have a computer system that does not allow out-of-balance transactions to get into your General Ledger. Even the idea of an out-of-balance trial is foreign to many accountants who have never had to work their way through a manually prepared trial balance, rife with mis-postings, omitted postings and incorrect postings.
One of the biggest developments in accounting is software such as Microsoft‘s Business Solutions division. With the acquisition of Great Plains, including Solomon, Axapta and Navision, Microsoft has positioned itself to dominate the mid-market space for financial and operational software. With programs such as these, accountants can easily integrate features from familiar Microsoft programs such as Outlook and Excel.
For example: Imagine a system that allows you to open an inquiry window in the General Ledger. You then have the ability to review not only current year transactions for the selected account number but also historical information as well. As your review progresses, you can “double click” on the line of summary data and drill down to the detail transactions that make up the summary amount you are looking at. You can then drill down even deeper and have the specific detail transactions available to you for further examination. This is just a sample of the capabilities of Microsoft GP.