"The time has come," the Walrus said,
"To talk of many things:
Of shoes--and ships--and sealing wax--
Of cabbages--and kings..."
                    Lewis Carroll

Step right up to the Great Accounting Ride. No crowds. Sponsored by your favorite Big Six firm and Fortune 500 company. Jump in a car; off we go. We start at the dawn of civilization. Mud and wood huts, the village is planting seeds for grain crops. It's the late stone age, but real progress is evident. The village potter is bartering with a wandering shepherd, the beginning of commerce.

Climbing slowly, we move on to the small settled village of Jericho some 10,000 years ago for a Dead Sea stroll. The village is bigger and now fortified. No accounting here--but wait. A temple priest is taking inventory of the village livestock using tokens to keep track of the herd size and count the grain harvest.
Envelopes & tokens -Susa 3300BC (Louvre)
On we go. The late stone age is over. Copper tools are used to construct the great stone temples and palaces. City states are forming, based on military might. Crafts are expanding, merchants are trading wares on an ever-increasing basis to foreign lands. It's Sumeria of 3,000 B.C.E. Here we see a scribe: the penetrating gaze, the intelligent eyes, the love handles and pot belly--this may be the first accountant! Scribbling figures on a wet clay tablet, developing a better scheme to record the ruler's wealth, the tribute of grain and livestock and gold, foodstocks entering and leaving the stores, gold delivered to the artisans to craft jewelry. The symbols are abstract and the record-keeping complex. These pictographs will be called cuneiform writing, which will spread rapidly among the developing city-states. The emerging civilizations will adapt writing for religious purposes, a literature based on heroes and gods. The Egyptians develop a different form of writing, now called hieroglyphics, and build the magnificent pyramids. Meanwhile, bookkeeping procedures continue to improve.
   Scribe - Egyptian Sakkara about 2500 BC (Louvre)
Through the bronze age, into the iron age. It is now the 7th century B.C.E., five centuries after the Trojan War. Gold ingots are used as money by the Lydians. The Phoenicians develop the alphabet and, perhaps more important, soap. Greece introduces the first coins, soon followed by the first money changers and the first counterfeiters. The Greeks invent the bill of exchange and banking becomes widespread. The Age of Pericles brings democracy to Athens and philosophy flourishes. But the fragile city states are crushed by Alexander the Great.
  Italian coin with stamped barley ear (6th century BC)
We are entering Rome: big, prosperous and rich, developing great engineering marvels, each prosperous Roman citizen keeping his own diary of financial transactions. The Romans pioneer coin debasement and discover inflation. Rome rules much of the "known" world and trades with most of the rest of it. But Rome is now in flames, the Roman Empire has fallen. The ride drops into darkness.

Up ahead a candle is burning, as a Florentine merchant is keeping his diary-like financial records of the cloth trade on parchment. Relying on Roman numerals, an abacus, and recording transactions in many different currencies, he's inventing double entry bookkeeping. The Italian city-states are becoming rich as merchant powers, following the Crusades, meeting the European demands for spices, silk, and luxury goods in exchange for grain, leather, wine, and textiles. The Medici family starts lending money on an international scale, relying on their sophisticated bookkeeping methods.

On to the lecturing monk, Luca Pacioli, the mathematician who was the first writer of the Italian bookkeeping methods. Aided by the printing press, Pacioli's Summa spreads the "Venetian system" across Europe. The Renaissance is flourishing, trade is expanding, Columbus sets out to discover Asia by sailing west. Spain will become the superpower of Europe, eclipsing Italy as the dominant merchant state in the world.
  Luca Pacioli
In the distance is Tudor England, beginning to prosper as sea power develops. The English merchants are slowly adopting the Italian bookkeeping methods under a laissez faire system of enterprise. Wool is a major export, but trade broadens as the New World is exploited. Colonies are founded and mercantilism matures--the colonies provide the raw materials and markets for finished goods as England becomes an industrial giant. The process takes centuries to perfect.

Wood in England becomes scarce and royal decree limits its use to shipbuilding. Fortunately, Abraham Darby invents the reverberating furnace for iron making and the technique is adapted for steel making. James Watt invents the steam engine and the Industrial Revolution is born. The spinning jenny and waterframe transform textile manufacturing and the factory system begins. England becomes the manufacturing powerhouse of the 19th century.

  James Watt's steam engine
Accounting lags industrial innovation. Firms learn to cost out materials and labor, but overhead remains a mystery for decades. There's Josiah Wedgewood, the famous potter. Although still using craftsmen, production is on a major scale. Trying to survive a depression, Wedgewood becomes a pioneer in cost accounting.

Big business discovers the business cycle and bankruptcy. But British accountants discover a profession--bankruptcy proceedings. Accounting firms such as Price Waterhouse, Deloitte, Peat, and Cooper start in mid-19th century. Accountants form professional societies, leading to the designation Chartered Accountants in Britain and Canada and Certified Public Accountant in the U.S. Self regulation and government regulation of business would become important components of the accounting profession.

We're entering London's financial district. Royal decrees allow joint stock companies to form. Investors buy stocks based on little, if any, financial information. Unscrupulous brokers sell shares with little value. Speculation drives up prices before inevitable collapse. The public demands regulation and the British Companies Acts regulate securities issued, including accounting and auditing rules. The role of British accountants grows.

We cross the seas to the New World in the 19th century. Railroads criss cross the U.S. and railroad controllers try to figure out what to charge for services. The tracks and rolling stock are expensive. How long do they last? Should depreciation be charged? If so, how? Answers develop slowly, but differ from one railroad to another. Congress is not satisfied and begins government regulation with the Interstate Commerce Commission Act of 1887.

The Manhattan skyline is visible, near the turn of the century. The mechanical office age is here, with the racket of adding machines and typewriters and an occasional tabulating machine. On the right is Frank Broaker, America's first CPA, auditing a client, checking every transaction, every voucher, every receipt. The American accounting industry is booming. The prestigious English firm, Price Waterhouse, has a thriving New York office; the firm of Haskins and Sells opens a branch office.

The burgeoning accounting firms service big business--the result of successful and sometimes brutal entrepreneurs, trusts, mergers, and holding companies. Gigantic companies, beginning with U.S. Steel, form after the turn of the century. They need capital and, consequently, auditors to give their balance sheets credibility. U.S. Steel hires Price Waterhouse, which produces the first audited consolidated financial statements in 1903. The Wright Brothers fly at Kitty Hawk. Soon Henry Ford will invent the moving auto production line.

Great strides are made in cost accounting. On the left is Frederick Taylor, an innovator of scientific management, conducting time and motion studies for a client. Standard costing is invented by engineers. Du Pont develops the bonus plan and return on investment criteria. Over there Alfred Sloan inspects an assembly line at a Chevy plant. By the early 1920s General Motors under Sloan's Chief Financial Officer, Donaldson Brown, develops the first modern accounting system. The Jazz age has arrived, with its optimism and speculation.

Suddenly, down, down, down: the Market Crash of 1929. It's chaos. The Great Depression has started. Unemployment, soup kitchens, bank failures. The car comes to a screeching halt to watch the inauguration of Franklin Roosevelt. Suddenly the car is going again and makes a sharp turn to the left. Social programs, bank reform, the Securities and Exchange Commission, bureaucratic red tape, the payroll tax, persistent federal budget deficits. The accounting profession will never be the same. Committees form and accounting standards start to role off the presses. The term "generally accepted accounting principles" is used for the first time. In the huge bookcases on the right are all the pronouncements produced since then, including SEC Accounting Series Releases, Accounting Research Bulletins of the Committee on Accounting Procedures, Accounting Principles Board Opinions, and Financial Accounting Standards Board Statements.

The recovery begins slowly. Accounting continues to have problems. The McKesson & Robbins scandal demonstrates major flaws in auditing practices. The profession starts to standardize auditing and "generally accepted auditing standards" are born. World War II interrupts the progress, which continues after the war is won. World War II also brought payroll deductions of income tax and big tax increases. The U.S. is the most powerful country on earth both militarily and economically and takes a leading political and economic role globally. Big business and the Big Eight flourish in the international arena.

Up ahead is IBM Headquarters in the late-1950s. In the lobby is an IBM 702, the first IBM computer for business use. With this machine IBM begins its domination of the computer field and the computer becomes essential to accounting and business. Shortly, IBM will join the ranks of billion dollar multinational corporations. Hardware innovations and software applications to business continue without interruption.

Now we come to the accounting firm of today, a major office of a Big Six firm. Here are hundreds of CPAs, dozens of other professionals in diverse fields like management information systems, and computers on every desk. When the CPAs do field work their personal computers go with them. The audit relies on statistical sampling, electronic spreadsheets, data bases and accounting standards on CD-ROM. There is little resemblance to auditing at the turn of the century. Accounting and auditing are as much a part of the computer age as NASA and the Space Shuttle.

Take a glimse of 21st century accounting with the virtual reality information system. The financial records of any firm are on line in real time. Voice activation allow the auditor to review inventory purchases and sales as the transactions occur. Payables and receivables can be verified directly on the information superhighway. The user can access any level of aggregation of information for any financial statement item. Flashing red flags indicate any items out of the ordinary.

Step out--into the accounting exhibition hall. The adventure is just beginning. Visit the 21st century accounting visualization "cave". See the auditing display, a video on the accounting timeline, find out who was the first accountant, pick up a brochure on the educational requirements of the typical university five year program in accounting, take a computer quiz on accounting throughout the ages. Enjoy the tour.