Why Government Should Not Invest Public Money in Sports Stadiums Used by Professional Franchises
In the previous article, we have already come across some of the reasons why the government should not encourage funding of stadiums that are to be used by private franchises. We have already seen that the entire mechanism of government funding ends up being a regressive tax on the citizens of a particular city who […]
Challenges Faced by Commercial Banks
Commercial banking has been around for a very long time. Ever since the birth of corporations more than three centuries ago, banks have been providing services to large corporations in one form or the other. Over the years, the commercial banking model has been relatively stable. Of course, with the passage of time, newer and […]
Dividend Discount Valuation: H Model
The dividend discount model makes a lot of assumptions. Some of these assumptions are not considered to be viable by analysts. For instance, consider the assumption regarding growth rates. During the horizon period, the analyst estimates that the growth rate will be high, let’s say 10% or 12%. Then, when the terminal value is to […]
Advantages and Disadvantages of Convertible Debt
In the previous article, we studied the concept of convertible debt and some of the common terms which are used while discussing convertible debt. In this article, we will have a closer look at some of the advantages and disadvantages of using this form of debt. Advantages of Using Convertible Debt Many companies continue to […]
Accounts Receivable Turnover Ratio
Accounts receivable are a very important part of the current assets of any business. Like inventory, accounts receivable are considered a necessary evil to do business. Large companies hardly conduct any transactions on cash basis with their wholesalers and distributors. The transactions are largely conducted on credit and therefore lead to the existence of accounts […]
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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An Overview of Contracts and Why They are Important to Business and Society
February 12, 2025
