Evolution of accountancy
‘Only accountants can save the world – through peace, goodwill and reconciliations‘ –Unknown
Accountancy is a complex field and is constantly evolving. With accountants needing to understand not just finance, but legislation and business, too. Over the years, it has evolved from basic record-keeping. It now includes technology driven service that enable companies to grow and solve problems.
Gone are the days when your accountant turns up once a year to present your accounts and tax returns to you. Hands over a large invoice and says goodbye until next year. The technical revolution has begun and the role of the accountant is evolving.
Where accountancy began – record keeping and finance
The roots of accountancy can be found in ancient Mesopotamia more than 7,000 years ago. Records have been discovered that show a simple system of goods traded and received. The ancient Egyptians and Babylonians also used primitive accounting methods to record their transactions of animals and crops.
When the Roman Empire emerged, financial record-keeping became more detailed as the Deeds of the Divine Augustus demonstrates. The record of the life of Emperor Augustus not only quantified public expenditure, it also showed that the information was used for planning and decision-making.
The father of accountancy – Luca Pacioli – double entry is born
During the 13th century, Europe moved from bartering towards a monetary-based economy that needed a bookkeeping system. Double-entry bookkeeping (where there are credit and debit entries for each transaction) began to be used.
The system is credited to Luca Pacioli, a Franciscan monk and mathematician. He described the use of a double-entry bookkeeping system that Venetian merchants used in a book, the Summa de Arithmetica. The system allowed merchants to access their financial information and use it to make informed decisions about their business dealings. It remains the basis of today’s accounting systems.
The industrial revolution arrives
As economic activity increased in the 18th century, Great Britain became a centre for global trade. The development of transport systems and technical innovations brought rapid economic growth. These required more advanced accounting methods and technically proficient accountants. Businesses used their accounts to source funding and improve the efficiency of their operations.
The importance of accountancy increased, more regulation was introduced in response to a growing number of corporate scandals. Legislation such as the Bankruptcy Court Act 1831 and the Companies Act 1883 provided greater control over the audit and winding-up of companies. It also increased the demand for professional accountancy services.
The Chartered Accountant is born
Until the second half of the 19th century, accountancy was seen as an add-on to legal services offered by solicitors. Accountants wanted to establish themselves as an independent profession. The Institute of Accountants of Scotland, petitioned Queen Victoria for Royal Charter status which was granted in 1854. The charter gave formal recognition to the profession in Scotland and those working in it. The term Chartered Accountant was adopted and continues to be used today.
In 1880, Queen Victoria granted another Royal Charter and the Institute of Chartered Accountants in England and Wales (ICAEW) was created.
The creation of a national body for accountancy established stricter governance in the profession. Members elected a council, and standards of professional conduct created. A professional qualification was introduced, which combined practical work experience with exams. Those who passed were given Chartered Accountant status, which continues to this day.
Accountancy was a male-dominated profession. It wasn’t until the early 20th century that women were granted professional status. Mary Harris Smith became the world’s first female chartered accountant in 1920. By the turn of the century, the ICAEW had its first female president, Dame Shirley Masters.
Modern accountancy – embracing technology
The most significant influence on accountancy in recent years is the introduction of technology. While it hasn’t changed the fundamentals and complexity of accountancy, it has had a profound impact on the way accountants work.
Technology such as AI and machine learning has automated day-to-day routine tasks, improving productivity and reducing costs. Data analysis is now almost instantaneous. Rather than spending hours on research and calculations, accountants can now focus on interpreting results and providing crucial insights for their clients.
Predictive analytics tools and customer data are being used to make financial forecasts. Real-time reporting is allowing fast, informed decision-making. And by using cloud storage, accountants can aggregate client data in different sectors and benchmark performance.
Technology is also having an impact on accountants’ job roles. Advisory roles such as are replacing traditional administrative jobs. Business development and relationship management is becoming more prominent as firms move towards a more advisory-driven business model.
To complement conventional accounting activities, companies are offering a range of business advisory services. For example, tax planning, sourcing funding and investment and technology and app advice.
Technology is opening the door to higher-margin advisory and planning work. Accountants will be able to take on more strategic roles with a broader remit than pure finance. Compliance services are also likely to increase.
Primotax is a tech-driven specialist tax and accounting firm. We believe technology can help us deliver exceptional service to all our clients. Contact us today if you need any tax or accountancy advice or would like to find out more about our services.