Accounting Deserves More Respect

Does accounting deserve more respect?

Historians have long suggested that there is a relationship between accounting advances and economic development. Economic historian Werner Sombart, for example, theorized back in the Thirties that the invention of double-entry bookkeeping wasn't an innovation that arose during the Renaissance, but the innovation that actually enabled it to take off. However, professors Gregory Waymire and Sudipta Basu argue that accounting may have made an even more profound contribution to human civilization.

The two have developed a theory that accounting, far from being something that is a kind of side effect of a complex society, actually grew up with it. They believe it might even be said to have enabled the evolution of economically complex societies in the first place. Everyone talks about accounting as the language of business, but the professors contend that it really does represent a specialized kind of language – one which humanity would not have gotten very far without. As Basu says, "you couldn't have firms and markets and governments if you didn't have accounting."

So Enron's cutting-edge accounting tactics were actually pushing society forward? Okay, okay, maybe manipulative isn't really cutting-edge… next you'll problemably say that pro forma earnings statements aren't cutting edge either…

  • If you’ve got one foot in the business world and one foot in software, you’ll recognize double-entry accounting as a form of error correction scheme.

    Back in the days when everything had to be calculated by hand, I imagine accounting was a very error-prone process. And any repetitive, error-prone calculating process quickly becomes useless without some way to discover and correct the errors.

    Before double-entry, any attempt to keep track of profits and assets through multiple transactions quickly became useless because of the accumulated weight of calculation errors. Double-entry was the innovation which made accounting accurate enough to be useful.

    It isn’t a stretch to say that double-entry enabled much larger and better-organized enterprises to exist, because it allowed the magnates of the time to understand whether their various schemes were profitable.

    It might be a stretch to say that it caused the rennaissance, but the influx of new wealth at the time certainly didn’t hurt.

  • I think it’s safe to say that during any period of substantial alteration when it comes to the storage and accumulation of wealth or any capital, accounting will see correlative changes.

    I think accounting deserves more respect. Its value is obvious to someone with any monitary or business experience (almost everyone), which is saying a lot. But at the same time I think it’s moderately silly to think that it enabled the Renaissance to take off. Double entry was a technological innovation, as such, like any major technology at the time it amplified but inherently couldn’t be a major root cause (since what led to double entry had a root cause: capitalism, aka the system of politics that demands a highly accurate accounting of wealth accumulation given its propensity to generate such). Without capitalism, double entry would barely have a reason to exist; without double entry, capitalism would be a lot less effecient – they need eachother, but one naturally predates the other.

  • I totally agree with what Basu says. Almost all advances in economic markets, governments are inevitably a result of accounting. The better the accounting practices followed, better is the state of the economy.

  • Accounting is very much necessary. It has definitely contributed to the advancements of society and economics; no doubt about that. However, it’s use can be compared to that of a gun. A gun can be used to save an innocent person’s live by killing the bad person and can be used to kill the innocent person. In the same way, accounting is used by the big companies to exploit the laymen. It is not the fault of accounting.

  • Consider this .. the ancient Sumerians developed cuneiform (writing) for the primary purpose of keeping track who owed what to who .. a bushel of wheat for a ox, and so on .. if it wasn’t for the love/need to hold people “accountable”, society in the Middle East would not have evolved at the pace it did

  • Businesses need a methodical method of tracking income and expense. Without it business success cannot be measured and problems cannot be pre-empted. Business is about numbers. Accounting forms the foundation.

  • Accounting is really very important not only for businesses but many other fields. We can not suppose a sustainable growth in any business without its accounting.