The first scientifically-based accounting system appeared towards the end of the 15th century1 with the specific purpose of recording the exchanges and trading balances between land and property owners.
However, during the course of the past two centuries accountancy has progressively turned into a formal and legally binding practice for businesses: on the one hand, because the Public Administration required the information provided by the so called Financial Statements in order to exercise fiscal control over corporations; and, on the other hand, because it provides a more complete system of information for managers to base their business decisions and for administrators and other interested parties to better understand the state of the business.
Overtime, with both scientific and technological development and with the transformation of business organizations, accounting has taken on an indisputable importance, to the point of becoming “the everyday language of business” and of being considered the primary source of information about a company.
The accounting system is constantly evolving: it adapts to new situations and offers increasingly broad and accurate information, driven by the integration of principles and rules coming from various private and public regulatory institutions, as a means of becoming of maximum usefulness to people inside and outside the company who are interested in the state of the business.
General Accounting, the application of which is mandatory in all companies, is known as Financial Accounting, because it provides data on the real asset value of the company, as well as on the origin of funds to finance the company.
Moreover, Financial Accounting is designed to keep the market informed about the company’s assets and records its dealings with the outside world, which is why it can be considered as an External Accounting System.
A substantial part of the data that Financial Accounting records is related to the world outside the company: sales and clients, purchases and suppliers, financing and financial institutions, relations with public bodies such as the Tax Authorities and the Social Security System, relations with shareholders, bondholders and all types of debtors and creditors; all of whom are considered as “external” parties to the company, but to whom access to accounting information must be guaranteed.
Furthermore, the legal basis of a company’s transactions operates through external documents: invoices, bil
