Accounting is one of the most important aspects of running a business. Whether you are working as a sole trader or you have a business that is quickly growing, you’ll need to pay attention to your accounts. These days, accounting is often something done on the computer. Spreadsheets and accounting software has made accounting much simpler and more straightforward. But how was accounting done before spreadsheets? Here is a quick look back at history.
The Start of Accounting
The early accountants were most likely more like barters that made sure that people kept their word. There is evidence detailing how people have kept accounts as early as 2,000 BC on who owes what to whom. This is fascinating and means that humans have long been interested in bookkeeping.
When currencies were introduced, the need for a ledger type of accounting grew. In the early days, bookkeeping followed a single-entry formula. This meant that accountants only worked with one column and detailed whether an amount was paid, owed or otherwise in use. As anyone who understands modern accounting knows, this is quite a time consuming way of keeping track who owns what.
Therefore, there was a real need for improving the accounting system. In the 15th century, an Italian monk by the name Luca Pacioli developed the roots for modern bookkeeping. For instance, according to the Accounting Degree Online website, Pacioli gave us terms such as balance sheet and separate debits and credits columns. Naturally, this helped to make accounting a lot easier and more efficient.
The Role Continues to Grow
As accounting became more efficient and accountants were able to keep track of detailed information, the role of an accountant grew as well. It wasn’t just about taking note of the ins and outs of money, but people started to analyse the information as well. This meant that financial analysis was available for businesses, which helped to grow many small businesses.
Unfortunately, as the need for analysis grew, the workload became bigger as well. At this point bookkeeping was done with a simple paper and pencil method and going through the data was very slow.
No Room for Errors
Looking after bookkeeping with just pencil and paper can be quite difficult. It takes a lot more time and you need to be extra careful to avoid mistakes. When it comes to accounting pre-spreadsheets you didn’t have much room for errors. Finding out you’ve made a mistake was devastating, because it could take hours to spot and fix the mistake.
You had to manually add the numbers with a calculator and when you are dealing with thousands of numbers, the likelihood of a minor mistake grows.
Luckily, the advances in technology helped to develop a computerised system for bookkeeping. The use of spreadsheets has made bookkeeping a lot more straightforward and fun. According to Biz/Ed, you are now able to make very detailed formulas that almost do all the work for you. It is much easier and quicker to analyse the data and find ways to improve your financial situation.
Learning more about accounting is fun and it shows how much the field has advanced. Technology has made bookkeeping simpler. Although there are difficulties that have come up with the computerised system, in the end it has made business accounting easier. You can find other informative articles from our resource section, if you are interested in understanding accounting more.