|Unit 2. Evolution of accounting

GETTING STARTED

Share information and your opinions with your partner on the following questions:

● Is accounting a 20^th century invention?

● What time do you think can the origin of accounting be traced back to? Why did accounting become necessary?

● What legal forms of business do you know? In what historical succession to your mind did they evolve?

USEFUL VOCABULARY

Make sure you know the following words and word combinations.

merchant n date back v syn go back, trace (back) quote prices legally enforceable sole proprietorship merchandising company supplier n transaction n record business transactions integrity n be/hold accountable (for) venture n, v scribe n predecessor n allocate v partnership n partnership agreement business entity concept going concern concept periodicity concept double-entry system monetary unit concept emerge v evolve v liable (for, to) limited liability liabilities n pl assets n pl external reporting income taxation fiscal year stock market crash the Securities and Exchange Commission

купец восходить, датироваться, относиться назначать цены могущий быть осуществленным по закону индивидуальное частное предприятие, единоличное владение предприятие розничной торговли поставщик сделка, транзакция, бухгалтерская операция, проводка записывать/регистрировать коммерческие (хозяйственные) операции честность нести ответственность (за) рискованное предприятие; рисковать; осмелиться писец, переписчик предшественник ассигновать, распределять товарищество договор/соглашение о сотрудничестве принцип автономности, концепция хозяйственной (учетной) единицы принцип непрерывности (непрерывно продолжающейся деятельности предприятия) принцип периодичности система двойной записи принцип денежной единицы появляться развивать(ся) ответственный за, подлежащий (чему-л.) ограниченная ответственность обязательства, пассивы средства, фонды, капитал, активы внешняя отчетность обложение подоходным налогом финансовый год крах на фондовой бирже Комиссия по ценным бумагам и биржевым операциям

READING

1. You are going to read an excerpt from the American textbook for accountancy students describing the history of accounting alongside with business evolution. Read it through, part by part, and take notes of its contents filling in the most essential information into the table below. While reading, pay attention to subheadings and highlighted terms. The first period has been done for you as an example.

	Time	Place	Developments in Economy and Business	Developments in Accounting
1	2285-2242 BC	Babylonia	A sole proprietorship, a merchandising company	Scribes recording transactions on clay tablets
2
3
4
5
6

To understand the evolution of accounting, we will travel back in time, making six stops, to consider important business and accounting eras. These six eras illustrate the changes that have occurred in business and accounting.

Early Business Development

The first leg (этап, часть пути) of our journey takes us to the first dynasty of Babylonia (2285-2242 BC), a rich farming area located between the Tigris and Euphrates rivers in what is now the country of Iraq. Babylonia is ruled by the Code of Hammurabi, which requires that a merchant selling goods must give the buyer a sealed memorandum quoting prices, or the trade is not legally enforceable. However, there is one problem – most of the citizens of Babylonia are illiterate.

Assume you are a merchant in Babylonia. How will you conduct business? You are operating as a sole proprietorship, that is, a business owned by one person, and your personal belongings are at risk if your business fails. You also are operating as a merchandising company, that is, a company that obtains and distributes goods to consumers, so you must find a supplier of and a buyer for your goods. Since the chances are very good that all of you are illiterate, how will you record your business transactions?

First, you must find a scribe who is probably sitting outside the city gates. Next, you explain to him your agreed-upon transaction and he records it in a small mound of clay (глина). Then, since neither you nor your buyer can read or write, you affix your signatures to the agreement by impressing your signature amulet on the clay document. This holds both parties accountable for the transaction.

The clay record is allowed to dry in the sun, or, if the transaction must be carried out quickly, the records can be kiln-dried (высушивать в печи). Obviously, the scribe's integrity is crucial. This scribe is the predecessor to the 20^th century accountant.