Accounting conceptual framework

Question

Describe the background to the development of the Accounting conceptual framework.. HELP! AM LOST

Answer 1

The particulars of transaction and financial relationships between different parties have been written up in the form of financial records since the dawn of civilization, examples being Babylonian clay tablets and records from the Roman and Greek civilizations.

Our present system of accounting has its origins in Renaissance Italy. By the 12th century the bustle and extent of the wide-ranging trading activities engaged in by the Italian city-states had created the need for an effective system of financial recording which could accurately determine the results of large volumes of transactions involving several parties. Consequently, the double-entry system of bookkeeping, the basis of our modern accounting system, was developed.

During the renaissance, this system of accounting became known throughout Europe; by the 16th century it was standard practice in England, Germany and Holland. The first published description of the double-entry system appeared in Venice in 1494. Written by Luca Paciolo, it was entitled Summa de Arithmetica Geometria et Proportionalita.

The 18th century saw the emergence of another factor that exerted considerable influence on the development of accounting, namely the Industrial Revolution.

There was a tremendous increase in the nature and scope of manufacturing enterprises, trading activities had become far more complicated and extensive and therefore effective methods of planning and control were essential. These needs led to the emergence, out of cost accounting, of management accounting, the specific function of which is to provide whatever financial information may be required by the management of the enterprise for the purpose of planning and control.

The influence of electronic data processing (EDP) on accounting has been of paramount importance in the second half of the 20th century. It should be borne in mind, however, that EDP is purely a technology that has produced a dramatic increase in the speed at which large volumes of data can be processed. Although it has influenced the utilization of accounting information, it nevertheless has had no effect upon the theory. The computer has made accounting information more effective chiefly in that it is now more complete, easier to understand and more readily available.

These days there are a large number of accounting software packages that are available to individuals, small and medium size enterprises and large corporations. The type of enterprise and internal operating systems will determine the type and size of accounting package that is used. In order for the enterprise to make investment decisions, a proper accounting structure must be in place. Accounting packages are just a tool to interpret the 'language' of the financial world - an instrument for transmitting information. Users of financial information expect accurate and comprehensive information that cannot be provided by general spoken or written language, so accounting was developed to satisfy this specialized need. By virtue of its nature, accounting information is historical. Historical trends do, however, serve as valuable guidelines for future projections.