Accounting books for companies

When we talk about accounting books for businesses, we’re referring to the books or systems where formal records of a business’s, company’s, or entity’s financial transactions are kept. Accounting books include journals, general ledgers, and financial statements that help record income, expenses, assets, and liabilities, allowing the financial health of a company or organization to be monitored.

Evolution

The accounting book had its beginnings around 5,000 BC since then, it has evolved significantly over time, adapting to changes in business practices, regulations, and evolving technology.

Antique

Initially, accounting books consisted of journals and ledgers, with transactions recorded manually. The first accounting books were made of clay and papyrus tablets, which recorded goods exchanged through barter systems and were used to aid in the financial management of temples in ancient Mesopotamia and ancient Egypt.

Roman empire

With the economic revolution brought about by the rise of the Roman Empire, accounting books underwent a significant change, as financial records became more structured and scrolls were used to facilitate their management. This type of Roman financial record-keeping system allowed for more detailed documentation and monitoring of taxes, trade, and government spending.

Middle Ages

Accounting books were an indispensable tool for managing trade and financial transactions during the Middle Ages, as merchants and businesses kept handwritten books to record transactions, debts, and credits, which were then recorded by scribes and accountants of the time.

At the end of the Middle Ages, the double-entry accounting system was introduced, which represented a significant evolution in both accounting and ledgers, making the ledger a more precise tool, as this system guarantees that each transaction will be recorded in two accounts (debits and credits).

Industrial revolution

The Industrial Revolution marked a turning point in human history, as well as in accounting, as it laid the foundations for modern financial management. As businesses grew and expanded, financial management became increasingly complex, resulting in the evolution of accounting books, which became more sophisticated to allow for more accurate and structured recording of financial information.

At this point, “professional accountants” emerged to manage corporate finances, leading to the standardization of financial statements and the implementation of audits to ensure the accuracy and transparency of financial records (recorded in companies’ accounting books), making accounting books an increasingly important and essential financial tool.

Beginning of the 19th century

Accounting books have become an essential financial tool for businesses, governments, and financial institutions, as they help maintain sound financial management through the transparency and accuracy of financial records.

Due to the increasing use of financial reporting at the corporate level, accounting principles and regulations have been developed to ensure consistency, such as GAAP (Generally Accepted Accounting Principles) established by governments and financial institutions.

For this reason, corporate accounting books were managed by professional accountants, who specialized in calculations and kept records of transactions manually and with meticulous organization. This tool was essential for optimizing efficiency, ensuring tax compliance, and ensuring more precise financial transparency for companies.

Digital Age

Accounting books began their most significant transformation in the mid-19th century, as even though much of the financial and accounting records were kept manually, companies began implementing centralized computers for payroll and financial calculations, laying the foundation for accounting and ledgers in the digital age.

By the end of the 19th century, businesses adopted the use of digital accounting systems (accounting software), replacing manual accounting and ledgers. Such software integrates with other business systems and functions, allowing for greater efficiency and accuracy in financial records. In this way, accounting books went from being manual books to digital financial systems, generating a great impact and evolution in accounting and financial management.

Present and future

The digital age brought about a drastic shift in business accounting records, moving from traditional paper-based ledgers (with manual records and calculations) to digital ledgers or financial systems with automatic records and calculations. However, technology continues to advance, and with it, markets, e-commerce, and financial management continue to evolve. Therefore, business accounting records also continue to adapt to these new changes.

Currently, business accounting books are characterized by being more efficient, secure, transparent and accessible financial systems, since they keep their financial records within cloud platforms, which allows companies to have access to their accounting information in real time, as well as the automation of records and other financial operations with a higher level of security.

Additionally, more and more companies are adopting AI- and blockchain-based ledgers, which provide businesses with automated financial data analysis, helping them make strategic financial decisions and ensuring greater transparency, and preventing fraud and data manipulation.

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First financial transactions

It is known that financial transactions were already taking place in the temples and palaces of ancient Mesopotamia and Egypt as early as 2000 BC. The first banks or financial institutions in history emerged in these places, as they stored precious metals or grains and were able to provide loans for goods to the farmers and merchants of the time.

Expansion of empires and societies

The cities and societies expanded, markets began to expand, and economic transactions became more complex. It was then that the ancient Romans and Greeks began to implement a “sophisticated financial network”, which not only kept accounting records but also provided currency exchange services (in the currencies of the time), deposits, formal loan contracts, and more.

First steps of the banking system

Due to the evolution and expansion of societies (Roman and Greek), and trade between cities, the need arose for a new way to store wealth safely and efficiently, as well as to offer more complex financial services. These needs gave rise to the first banking system, which allowed these societies to manage their wealth more efficiently, conduct more secure transactions, and boost economic growth in the region.

First modern banking system

In 1964, the Bank of England was established, a financial institution charged with implementing the first modern banking system. It created the national banking system, whose primary purpose was to finance the British government. In this way, the Bank of England revolutionized modern banking, not only through the creation of the banking system but also by issuing standardized banknotes and managing public debt, giving rise to central banks (which exist in almost every country today).

The banking system (implemented by the Bank of England) provided a more efficient means of conducting transactions by issuing banknotes and not relying solely on coins, as well as taking charge of managing public debt to help the government (through financing wars and public spending), which made the bank a central authority in charge of managing monetary circulation and economic stability in England, as well as allowing the stimulation of economic activity thanks to the implementation of loans that used the remaining funds (from deposits that only kept a fraction in reserve).

Who currently makes up the banking system?

The banking system is currently composed of companies and financial institutions that form a network of services and operate under various regulations, allowing users to manage their own financial resources (saving, conducting financial transactions, making investments, and obtaining loans). It is important to note that the banking system currently comprises central banks, commercial banks, investment banks, credit companies, and other financial institutions, which together help drive regional and global economic growth.

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Oldest bank in the world

As we saw in our previous article, although accounting books were already in use as early as 2000 BC, it was in the temples and palaces of Mesopotamia where the first economic societies began to operate. The first bankers were priests who managed grain, livestock, and precious metal deposits for third parties.

The world’s first bank was the Banca Monte dei Paschi di Siena, which was founded in 1472 in Siena, Italy, by the Magistracy of the Republic of Siena. It is important to note that it still operates with active financial operations today (making it the oldest bank in the world). However, this bank was initially established under the original name of “Monte Pio” as a “Monte di pietà”, a charitable institution designed to provide financial assistance to the needy and combat usury, with the aim of providing loans to the neediest.

Reformation of 1624

In 1624, the Monte Pio institution underwent a significant transformation due to a reform instituted by Grand Duke Ferdinand II de’ Medici. This reform restructured the bank and granted a state guarantee on depositors’ funds. These guarantees came from the income from the state-owned agricultural lands of the Maremma region, known as the “Paschi”, hence the name Banca Monte dei Paschi.

From that moment on, Banca Monte dei Paschi consolidated its position as a financial institution. The reform of 1624 strengthened its financial stability and made it an important part of the region’s financial operations and economic growth, thus becoming a more structured and advanced banking institution.

Restructuring of 1833

The Monte dei Paschi Bank underwent a major restructuring in 1833, which initiated the financial operations of a savings bank. This restructuring represented a major step towards the modernization of the institution, as it demonstrated its ability to expand its operations in financial services, since until then it had only offered traditional loans.

Thanks to this restructuring, the institution was able to play a more important role, helping the economic development of the region, especially in agriculture and public welfare, as well as establishing a solid foundation that allowed it to achieve continuous growth and become one of the most influential financial institutions in Italy.

Corporation of 1995

The institution underwent another significant transformation in 1995, changing from a public limited company to a joint-stock company, which led to its name change from Banca Monte dei Paschi to Banca Monte dei Paschi di Siena.

This transformation meant the creation of a financial corporation consolidated under a modern banking structure, which allowed it to operate with greater flexibility in the financial markets.

Fondazione Monte dei Paschi di Siena

To continue the bank’s charitable functions and due to the creation of the corporation in 1995, the Fondazione Monte dei Paschi di Siena Foundation was created, with Banca Monte dei Paschi di Siena as its largest shareholder, thus separating the banking operations of both entities. It is important to note that the foundation continues to operate today, supporting the economic, social, and cultural development of the Italian region of Siena.

Listed on the “Borsa Italiana” in 1999

Thanks to its transformation into a public limited company, Banca Monte dei Paschi di Siena was able to consolidate its position in the Italian banking sector. The creation of the corporation in 1995 was an important step in Banca Monte dei Paschi di Siena’s modernization and laid a solid foundation for the bank’s next major step: its listing on the Borsa Italiana (Italian Stock Exchange) in 1999. Listing on the stock exchange allowed the bank to expand its financial operations and attract new investors.

Financial crisis 2013

The bank faced a serious financial crisis in 2013. This problem began when the corporation acquired Banca Antonveneta at a higher-than-quoted price (inflated price) in 2007, which weakened its balance sheet that year.

It was then that, in 2013, the bank became embroiled in a scandal involving risky derivatives contracts, which intensified the crisis as significant losses stemming from these contracts were revealed. To stabilize its finances, Banca Monte dei Paschi di Siena received a €3.9 billion government bailout in the form of state aid to prevent collapse.

However, due to the necessary financial restructuring and efforts to comply with regulatory requirements, the institution continued to face financial difficulties, which is why it required a new intervention in 2017, but this time by the European Commission, which, seeking to achieve the stabilization of the bank, approved a preventive recapitalization of 8.1 billion euros.

Financial recovery

Following the recapitalization offered by the European Commission in 2017, Banca Monte dei Paschi di Siena has undergone several major transformations. It is estimated that between 2017 and 2022, in order to maintain financial recovery, clean up its balance sheet, and stabilize operations, the institution received more than 10 billion euros.

Privatization

We must remember that, since the government support in 2013, Banca Monte dei Paschi di Siena has a 64% state control, however, in 2023 the Italian government announced the sale of 20% of its stake, which meant a reduction to 44%, which allowed the entry of more private investors, promoting the partial privatization of the institution.

News from the Monte dei Paschi di Siena Bank

During 2024, Banca Monte dei Paschi di Siena enjoyed several favorable factors. For example, it was able to begin operations with greater freedom as the European Central Bank lifted its restrictions on profit distribution. Furthermore, the Italian government moved forward with selling more shares, reducing its control to 11.7% thanks to the participation of Banco BPM and other private investors. This has allowed Banca Monte dei Paschi di Siena to consolidate its position in the Italian banking sector.

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