By Phin Upham
Accounting, from its earliest days, was always the practice of assessing a transaction. It grew over time to represent a more holistic view of a company, with accountants providing statements that helped assess the strength of a company or an investment. Individual accountants manage wealth that affects their client’s livelihoods. The practice of money crunching did not invent itself over night, it adapted with each new change brought on by the economy and related technologies.
Early Accounting
Original accountants kept ledgers that recorded barters that took place, and their role was primarily legal. An account of the barter helped track what both parties agreed to do, as well as specified times. This was rudimentary, and failed to take into account the true value of goods, but without a standard and widely accepted form of currency it was the norm for some time in human history.
Double-Entry Bookkeeping
Monks in Italy created a system whereby storeowners recorded both the credits and debits associated with a transaction to help balance out the books. This system was highly regarded when it debuted, mostly because it simplified what had previously been a line-by-line affair and made it easier to view the health and finances of a company. This system is still in use today, but expanded to include much more data as the railroad came to America. Access to parts of the country in a matter of days, not weeks or months, meant that investors could realistically inspect an investment and learn about its inner workings.
That put accountants in the role of diagnostician. They became responsible for producing reports that documented the financial health of a company, including all transactions and potential losses.
About the Author: Phin Upham is an investor at a family office/ hedgefund, where he focuses on special situation illiquid investing. Before this position, Phin Upham was working at Morgan Stanley in the Media and Telecom group. You may contact Phin on his Phin Upham website or LinkedIn page.