Essay about Learn: Debits and Credits and Balance Sheet

Submitted By NAwid
Words: 1777
Pages: 8
Open Document
Financial History: The Evolution Of Accounting
By Andrew Beattie on February 26, 2009 A A A
Filed Under: Accounting, Balance Sheet, Bookkeeping, Financial Statements, Ledgers & Journals
Accounting is the language of business and, by extension, the language of all things financial. In the same way that our senses are needed to translate information about our surroundings into something understood by our brains, accountants are needed to translate the complexities of finance into summary numbers that the public can understand. In this article, we will follow accounting from its roots in ancient times to the modern profession that we now depend on.

The Bookkeepers
Bookkeepers most likely emerged while society was still in the barter and trade system (pre-2000 B.C.) rather than a cash and commerce economy. Ledgers from these times read like narratives with dates and descriptions of trades made or terms for services rendered.
Example - Barter and Trade Bookkeeping
Monday, May 12 - In exchange for three chickens which I provided today, William Smallwood (laborer) promised a satchel of seed when the harvest is completed in the fall.
Wednesday, May 14 - Samuel Thomson (craftsman) agreed to make one chest of drawers in exchange for a year\'s worth of eggs. The eggs are to be delivered daily once the chest is finished.

All of these transactions were kept in individual ledgers, and if a dispute arose, they provided proof when matters were brought before magistrates. Although tiresome, this system of detailing every agreement was ideal because long periods of time could pass before transactions were completed.

The New and Improved Ledger - Now With Numbers!
As currencies became available and tradesmen and merchants began to build material wealth, bookkeeping also evolved. Then, as now, business sense and ability with numbers were not always found in one person, so math-phobic merchants would employ bookkeepers to keep a record of what they owed and who owed them. Up until the late 1400s, this information was still arranged in a narrative style with all the numbers in a single column whether an amount paid, owed or otherwise. This is called single-entry bookkeeping and is similar to what many of us do to keep track of our checkbooks.
Example - Single-Entry Bookkeeping
Date
Item Details
Amount
Monday, May 12
Bought one sack of seeds
-$48.00
Monday, May 12
Sold three chickens
+$48.00
Wednesday, May 14
Bought a chest of drawers
-$900.00
Wednesday, May 14
Sold one year\'s worth of eggs
+$900.00

It was necessary for the bookkeeper to read the description of each entry to decide whether to deduct or add it when calculating something as simple as monthly profit or loss. This was a very time consuming and inefficient way to go about tallying things. (To learn all about the history of money through the ages, see From Barter To Bank Notes.)

The Mathematical Monk
Continuing in the tradition of monks doing high-level scientific and philosophical research, in the 15th century, Italian monk Luca Pacioli revamped the common bookkeeping structure and laid the groundwork for modern accounting. Pacioli published a textbook in 1494 that showed the benefits of a double-entry system for bookkeeping. The idea was to list an entity's resources separately from any claims upon those resources by other entities. In the simplest form, this meant creating a balance sheet with debits and credits separated. This innovation made bookkeeping more efficient and provided a clearer picture of a company's overall strength. This picture, however, was for the owner who hired the bookkeeper only. The general public didn't get to see these records, at least not yet.
How Stocks Could Build YOU $4,192 Month in Passive Income
Example - Basic Double-Entry Bookkeeping
-
Debit
Credit
Sold chickens
Debit cash
$48.00
-

Credit chickens
-
$48.00
Bought seeds
Debit seeds
$48.00
-

Credit cash
-
$48.00
Sold eggs
(daily
Show More

Related Documents: Essay about Learn: Debits and Credits and Balance Sheet

Essay on Accounting Seminar 2 Problems

P 3-3 Part 1 Balance Sheet Income Statement Part 2 Transactions Assets Liabilities Stockholder Equity Revenues Expenses Net Income Where transaction is recorded on Statement of Cash Flows (a) Purchased food and paper product; paid part in cash and rest on account. +/- + NE NE NE NE O (b)Purchased additional investments +/- NE + NE NE NE I (c)Incurred restaurant operating costs in company owned facilities; paid part in cash rest on account - + - NE + - O (d)Served food to customers for cash. + NE…

Words 575 - Pages 3

Generally Accepted Accounting Principles and Income Statement Essays

withdrawals for personal use Revenues These represent those ANWSER which were caused by when ANWSER Example: We perform maintenance for a customer for $200 cash Think about it..Revenue represents an increase in equity An increase in equity requires a credit entry Therefore, the Fees Earned (revenue) is ANWSER GAAP - The Revenue Recognition Convention The revenue recognition convention states that revenue must be recorded in the accounts at the time the transaction is completed Usually this means…

Words 1310 - Pages 6

Notes On Financial Systems And Auditing

|NAME OF STUDENT |Hoang Ngoc Bich | |REGISTRATION NO. |3052 | |UNIT TITLE |Unit 11: Financial Systems and Auditing | |ASSIGNMENT TITLE |Accounting and Management Control Systems…

Words 6680 - Pages 27

Essay about Accounting 20Cycle 20Project 2 1

Accounting Cycle Project Purpose: This assignment has been developed to provide you with an opportunity to complete all of the steps in the accounting cycle for one Company, Success Systems. This allows you put together the information you will learn in Chapters 1-4 in one project. In addition, you will analyze the Company's financials in a business memorandum. Instructions: This problem is based upon the Serial Problem in your textbook at the end of Chapters 2, 3 and 4. Please refer to pages…

Words 1292 - Pages 6

Wk2 ComparativeSummaryPaper

difficulties they face. Financial structure of three organizations The way to learn the financial structure of any organization is by studying their financial statements. The investor or individual should begin with the balance sheet, and moving on to studying the income statement, cash statement, and any other financial statement that the organization uses to keep track of the yearly finances. Starting with the balance sheet as it should provide information on such things as short/current long-term…

Words 1989 - Pages 8

RB1 Very Short Essay

Retail Banks as Financial Intermediaries Professor John B Holland The University of Glasgow January 15th 2015 RETAIL BANKING – Juggling risks - for profit How do it? How learn how to do it? How develop Retail Bank? How get Competitive Advantage? RETAIL BANKING – Juggling risks - as teams & organisation How do it? How learn how to do it? How develop Retail Bank? How get Competitive Advantage? Real world Models of Retail Banks Overview – ‘juggler’ Retail banking – juggling financial risks -…

Words 2982 - Pages 12

Reflection Paper

class is the most difficult class among accounting class because of there is a lot of materials to cover in very short time. There are around 15 chapters to cover in a semester so that we have to learn a chapter in a week because we have to use some classes to take the exams and quizzes. And if I want to learn this course well and get a good grade as what I did in ACC221 and ACC222. I will have to read the book, listen to the teacher carefully, do the quiz well, prepare for the exam well and finish all…

Words 1797 - Pages 8

SYLL 161 Essay

Revenue recognition Proper accounting for items in the balance sheet, recognize relationships with income statement accounts: Cash Marketable securities Investments Accounts receivable Inventory Property, plant and equipment Intangible assets, including accounting for research and development and IPR&D Current liabilities and contingencies Fair value Preparing and interpreting the income statement Preparing and interpreting the balance sheet Preparing and interpreting the statement of cash flows…

Words 3202 - Pages 13

2010 11 05 014716 Richard1121 November Essay

market for. For me personally, the idea of controlling my own schedule is the greatest benefit to starting a new business. With a family and children the standard 8 AM to 5 PM work schedule does not work well. In fact, having a better work-life balance is the top reason many people often start their own businesses (Kenny, 2010). Further, the ability to work out of my home, particularly as the work I would do could easily be done using only a computer and my knowledge, would help me be available…

Words 5702 - Pages 23

They Spen More Than They Make: And It's Our Fault

the register as they have to sort through week old McDonald’s receipts, 4 month old packs of chewing gum, discount cards and other unmentionables as they search for the Holy Grail. Buried deep inside of pursues and wallets of our young people, the Credit Card. Is there any better feeling for a twenty-something than having just cashed a paycheck, leaving a little in the bank for next week’s lunch and pocketing the rest? And with that pocket of hard earned wages, walking out of the best stores with…

Words 3352 - Pages 14