The History of Accounting (Part 3)

The History of Accounting: The Age of Stagnation

Stagnation. Its not a very pretty word. The word itself carries the meaning of stillness, no progress and eventual decay. The age of stagnation however, was not a period of stillness and decay, on the other hand it was a period which marked the beginning of European exploration of the rest of the world, the boom in the spice trades and the establishment of new trade routes worldwide. This period also marked the beginning of the Industrial Revolution in Europe which drove the demand for raw materials from all across the globe.

Why then do experts call it the ‘Age of Stagnation’?. Simply put, it is because while business was growing and doing great, accounting as a subject did not change much. Accountants were still recording the journals and ledgers and balancing them through trial balances all the while making sure that their business’ debits and credits were balance.

So the stagnation here was in the academic development of the accounting profession. Few new ideas were introduced and very little was done towards improving the quality of accounting records kept, basically, everyone was too busy making money to care about accounting development, and this included the accountants themselves who were getting fat and rich from all the money coming their way.

It is an interesting situation where because of the immense wealth generated by the accounting profession, they grew comfortable and complacent and did not really bother themselves with thinking of new ways to improve the standard of accounting.

Towards the end of the age of stagnation began what we know of in popular modern history as ‘the Age of Imperialism’, where European powers went out to colonise the world. This then marks the turning point in history for accountancy where businesses, being more global in nature as a result of Imperialism, turn to more sophisticated accounting practices to record their ever-growing wealth.

Next: To the Present Day!