Historians consider 14th-century Italian merchants to have developed the practice of double-entry bookkeeping, which is used by modern accounting. The method was invented when investors looked for a way of recording the financial data of ventures that lasted for months or even years (for example, the commissioning of a merchant fleet), and in which many investors had shares.
According to the Italian system the balance sheet consisted of two sections, one listing assets and the results of sales, purchases, investments in assets, while the other recording names and shared of shareholders and other liabilities incurred. If the venture were successful, the owners could receive their portion of the profit. Although the earliest double-entry books appeared in 1340 in Genoa, the first published book on bookkeeping was written in 1494 by a Franciscan monk Luca Pacioli. This work summarized the main accounting works were published during the 16th century in Italian, German, Dutch, French and English, these works including early formulations of the concepts of assets, liabilities, and income.
The Industrial Revolution and the development of trade required more complex financing system and further improvement of accounting techniques that had to be adequate to handle mechanization, factory-manufacturing operations, and the mass production of goods and services. The profession of accountant existed by the 18th century, and by the late 19th century the regulations controlling the accountant’s activities were developed both in Europe and America. In the mid-19th century with the establishment of large public corporations owned by absentee stockholders and administered by professional managers, the public demand for accurate financial reports and for government regulations greatly increased. The rise of the multinational corporations also resulted in increased accounting responsibilities, for it required exchange of foreign currency, keeping reports under different legal conditions, the adjustment of ownership and income reports in order government controls. Since the mid-20th century bookkeeping as an essential part of all accounting systems has been carried out by machines. The introduction of computers broadened the scope of bookkeeping and the term “data processing” now often associates with bookkeeping.