History of Accounting; Worldwide and Nigeria

Back to: FINANCIAL ACCOUNTING SS1

Hi Champ!

Welcome to class. Today we would be learning about the history of accounting worldwide and in Nigeria.

History of Accounting; worldwide and Nigeria

At the end of the lesson, you should be able to;

• Narrate the emergence of Accounting worldwide and Nigeria specifically
• Enumerate the beneficiaries of Accounting information
• Identify the needs of both internal and external users.

History of Accounting worldwide. 

There is no accurate record as to when accounting started but available information suggests that record keeping is as old as man.

The history of accounting can be traced to ancient Mesopotamia, and is closely related to developments in writing, counting and money and early auditing systems by the ancient Egyptians and Babylonians.  By the time of the Roman Empire, the government had access to detailed financial information

In India Chanakya wrote a manuscript similar to a financial management book, during the period of the Mauryan Empire. His book “Arthashasthra” contains few detailed aspects of maintaining books of accounts for a Sovereign State.

The Italian Luca Pacioli, recognized as The Father of accounting and bookkeeping was the first person to publish a work on double-entry bookkeeping, and introduced the field in Italy.

The modern profession of the chartered accountant originated in Scotland in the nineteenth century. Accountants often belonged to the same associations as solicitors, who often offered accounting services to their clients. Early modern accounting had similarities to today’s forensic accounting. Accounting began to transition into an organized profession in the nineteenth century,[9] with local professional bodies in England merging to form the Institute of Chartered Accountants in England and Wales.

 

History of accounting in Nigeria

The history of accounting in Nigeria is as old as man. 

Specifically, the earliest formal record of business transactions came with the granting of a royal charter to the Royal Niger Company in 1886.

The common system used; the double entry system of modern book-keeping was developed in 1494 by an Italian named Luca Pacioli.

In Nigeria, the accounting profession is majorly regulated by the Institute of Chartered Accountants of Nigeria (ICAN), established on the 1st September 1965 by the Act of Parliament Number 15of 1965 while the Association of National Accountants of Nigeria was established on 31st July 1979, as the second professional accounting body in Nigeria.

ICAN regulates the noble profession by ensuring members acquire and maintain sound professional knowledge and ethical standard. The practice of accounting under this institute is based on basic accounting standards which include:

(i)                 International Accounting Standard (IAS)

(ii)               Statement of Accounting Standard (SAS)

 

Users of accounting information/financial statements

The following interested users of financial information should be noted as well as the reasons/purpose for which they would require or utilise the relevant information.

•      Owners of the Business

1. To determine the profitability of the business
2. To assess the competence of the managers of the business
3. To assist them in making important business/investment decisions

 

•        Shareholders of a Company

1. To determine the profitability of the business
2. To assess the ability of the company to pay their expected dividends
3. To project the future growth of the company

 

• Loan Creditors (i.e. lenders to the business)

1. To assess the ability of the business to repay loans
2. To assess the ability of the business to repay the interest as and when due
3. To assess the possibility/probability of the borrowing company defaulting in repayments
4. To know whether adequate assets are available as security
5. To determine the level of credit to grant

 

• Trade Creditors/Suppliers

They are those that supply goods to the business on credit

1. To assess the creditworthiness of the business
2. To assess the ability of the business to pay back its debts
3. To determine their level of exposure to the business.

•      Competitors

1. To fix their own prices relative to the prices of similar products produced by the business
2. To determine their position in the market i.e. market share as to sales, profits, number of employees etc.

 

•       Customers

1. To know if the business is a guaranteed/secured source of supply
2. To assess the financial position of the business

•   Employees of the Business

1. To know the profitability of the business
2. To know the extent of job security and the prospects of their future careers
3. To negotiate for better conditions of service and improved wages/salaries

•      Tax Authorities

In Nigeria, tax authorities include Lagos State Board of Internal Revenue (LSBIR) or Federal Board of Inland Revenue (FBIR).

1. To determine the amount of tax to be paid by the business

 

•       The Government

1. To compute statistics about businesses operating in the country
2. To enhance the formulation of government policies e.g. on industrialization
3. To regulate the activities of business by government agencies e.g. CBN, NDIC, SEC, CAC, NSE etc.

 

•      The Public

1. For employment and economic considerations
2. To know whether to invest in the enterprise.

 

In our next class, we will be talking about the Advantages and Limitations of Accounting . We hope you enjoyed the class.

Should you any further question, feel free to ask in the comment section below and trust us to respond as soon as possible.

 

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