Accounting Toward the 21st Century: Where are we Now? How Did we Get Here?

Accounting at any point in time and place can represent the level of civilization then and there. As civilization began around villages and developed into empires, scribes invented record keeping systems and kept running inventories of wealth, trade, and tribute payments. Accountants invented writing using abstract record keeping as temple (and later imperial) wealth and complexity expanded.

Beginning in the 19^th century the rise of the accounting profession benefited business and investors, especially big business, banks, and other institutional investors. Accounting expertise added both knowledge and credibility to complex financial transactions.

The first mammoth monopoly was Standard Oil, organized as a holding company in 1870. The first billion-dollar corporation was U. S. Steel, formed in 1902. Henry Ford’s moving assembly line turned the automobile industry into a gigantic industry. Autos are useful to analyze the dominance of American big business in the first half of the 20^th century and many of the problems in the second half. These include several accounting topics—both successes and stubborn problems.

The current world of business and accounting is based on the computer and the Information Revolution, which has been ongoing for nearly 50 years and is exploding into the 21^st century. The computer proved to be a perfect fit to business. Computers efficiently crunch the repetitive transactions of accounts receivable and payable, inventories, and payrolls.

Capital markets are complex, global, operate 24 hours a days, and rely on accounting information. The role of accounting expands as technology advances. Soon, virtually any information can be transmitted instantaneously across the globe. Who will be up to the challenge? The visionaries will most likely succeed, those with 20^th century blinders likely to drop by the wayside.

To understand accounting today and predict tomorrow, one must know the history of accounting. That accounting history parallels the rise and development of civilization. Accounting has been surprisingly inter-connected with technology.

Comprehension

I. Answer the questions

1. What is the Industrial Revolution responsible for?

1. What creates access to new markets?
2. Why does the advent of corporation place additional requirements on the accounting system?
3. Is an accounting firm a merchandiser, manufacturer or service firm?

5. Why were the Sixteenth Amendment and the stock market crash important to the development of accounting?

6. What is GAAP and why is it important?

7. What is the difference between a stock and a bond? Which is better for the investor? Why?

8. What is the difference between return on investment and return of investment?

9. Does the economy affect service companies, merchandisers, and

manufacturers differently? Why or why not?

II. Substitute the words by the definition.

1. They produce products from raw materials for sale.

2. They are legally separate and distinct from its owners.

3. They constantly evolve in order to respond to the requirements of management.

4. They are markets for buying and selling stocks.

5. They don’t manufacture anything, they perform different services.

III. Talking points

1. There are three primary ownership structures discussed in this unit. List the advantages and disadvantages of each. If you were a business owner, which ownership structure would you choose? Why?

2. Describe companies from your hometown that have the following ownership structures:

(1) sole proprietorship,

(2) partnership,

(3) corporation.

3. List as many well-known companies as you can think of that have the following ownership structures:

(1) sole proprietorship,

(2) partnership,

(3) corporation.

Unit III

Date: 2015-01-02; view: 746