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  Accounting is the record of a firm\'s assets, liabilities and transactions, which reveals (and on occasion disguises) the company\'s financial state. Historic cost accounting, in which stocks, assets and liabilities are valued at their original cost, was unquestioningly used until the 1970s when rapid inflation made this unrealistic. A switch to current cost accounting was opted for by some, but due to the disinflation of 1981-85, historic cost accounting gained new respect.

Today\'s accounting methods are the result of technical progress of a profoundly important type. The commercial revolution could not begin until some form of rational money accounting had developed. Historically, accounting began as books of business opened on the market table, sometimes no more than notebooks of transaction. Calculations were made largely in Roman numerals, sums were often wrong, long division was considered something of a mystery, and the use of the zero was not clearly understood. By the 12th century, Venetians were using sophisticated accounting devices. The merchants in the rest of Europe, by comparison, were little better than schoolboys in their accounting ignorance. It took time for a recognition of the need for book-keeping to spread: not until the 17th century was double entry a standard practice. Only when money was rationally accounted for could large-scale business operations run successfully. TF



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