An Overview of Contracts and Why They are Important to Business and Society
February 12, 2025
What is a Currency War ? A currency war is a situation wherein devaluation of currency by one country is retaliated by a competitive devaluation from the other country. For instance if the United States were to devalue the dollar against the Pound Sterling and if the British retaliated with their own devaluation then the […]
The retail industry has already been undergoing a massive change since a long period of time. This industry has seen a huge impact of the rise of internet and associated technologies. It was also amongst the industries which were greatly impacted by the pandemic. The macroeconomic factors have always had a significant impact on the […]
If you are an investor who is even remotely connected to financial markets, the odds are that you have heard about the spectacular rise of Bitcoin. The crypto-currency has grown from $10,000 to $17,000 in a week. Many believe that this is a bubble. However, there are others who believe that the rise of Bitcoin […]
In the business world, Cash is King. Companies that do not have adequate cash cannot survive for very long. This is because of the fact that employees, vendors, tax authorities, and other creditors expect to be paid in order for the business to remain in operation. When a company is not facing bankruptcy, it obtains […]
Depreciation is an important concept in capital budgeting. This is because it is a non cash expense and ideally should not have any effect on the cash flows. This is the reason why it is added back during cash flow calculations. Since the amount of depreciation never actually left our bank account in the form […]
One can never really understand a subject, unless they know where it came from. Therefore, a short history of the subject of accounting may be of interest to students of accounting. Here is a very brief history of how accounting evolved:
Accounting is as old as financial transactions themselves. As soon as credit was invented, humans began to use accounting to simplify their lives. As expected, the oldest system of accounting used single entry accounting. This is the most intuitive form of accounting but is also incomplete. Records have been found on clay tablets in ancient Mesopotamia that show the existence of single entry accounting in that time.
Prior to rise of European commerce in the Medieval Ages, India was the primary center for bustling trade and commercial activity. Although there has been no record of this fact, but is claimed that Indian merchants had very advanced accounting systems at that time. These systems were called the Bahi Khata system. It is rumored that the westerners designed the double entry system based on the principles of Bahi Khata system but once again there is no conclusive proof.
The birthplace of modern day accounting is Venice. In the Medieval Ages, Venice was a center of trade and commercial activity. Merchants had giant businesses and they were struggling to run these corporations efficiently.
It is then that Luca Pacioli developed the double entry accounting system. There is still debate about whether he developed it or just improved it and made it available to the merchants. However, debate or no debate, Luca Pacioli is considered to be the “Father of Modern Day Accounting”.
In the era of colonialism, chartered corporations were common. The government would approve certain companies and give them exclusive rights to trade with certain colonies. Citizens were encouraged to invest in such companies. Shares of a few such companies had paid rich dividends and hence it was common to invest in such companies.
However, the performance of such companies had to be reported to the shareholders on a periodic basis. Therefore accounting systems were further developed. They were now providing information to external shareholders apart from providing information to internal management.
The chartered companies have long gone. The world is now a free market. But information still needs to be provided to the external shareholders about the conduct of operations. Accounting, therefore has been further developed and is highly regulated in most countries.
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