 Namaste. In today's session, we will discuss about evolution or history of accounting. In the last session, we have understood various concepts and principles of accounting which have been standardized as accounting standard. Today, let us look at how the accounting evolved. Now, do you know any Hindu or Indian festival which is associated with accounting or bookkeeping? Are you able to recognize or remember any of festivals which you would be celebrating? But it has a very strong relationship with accounting. Anybody is able to guess? I will give you a hint. It is something to do with the concept of accounting period. In the last session, we have discussed accounting period concept. It means that infinite periods are divided into a specific one year period. When we close the books, we reopen new books and we prepare PNL and balance sheet at the end of the period that is the accounting period concept. Now, do you know or do you remember any festival which is associated with that period? Now, governments and merchants have been using the accounting for keeping records since almost time immemorial and India had a very long tradition of preparing Chopris. Chopris refer to the books of accounts and every year the old Chopris were closed and new set of Chopris were opened. I think many of you have judged it or remembered it correctly. That is called as Lakshmi Puja and that is very important reason why Diwali is celebrated. Now Lakshmi Puja is a auspicious day on which the old books are closed, new books or Chopris are worshipped and then they are opened on the next day. Now, you can here understand how the concept of accounting period is very firmly rooted in Indian tradition. This is a traditional photo how the Chopris used to be worshipped and then the new Chopris will be started during Diwali. This is a photograph of some records of how the accounting was made in the old period. We also see mention of several financial instruments particularly hoondies which are mentioned in many of the Indian scriptures and they were used extensively for transfer of money. Here there are some photographs of some of the hoondies. Many of you would have heard about Kautilya Arthashastra. Kautilya Arthashastra has well documented rules about accounting. Chanakya or Vishnugupta or Kautilya he was a statesman, economist and also a spiritual guru. His period is around 4th century BC and Kautilya prescribed the accounting theory that included bookkeeping, preparation of financial statements, auditing, fraud, risk management and so on. He considered accounting to be integral part of economics and various kingdoms in India used his work until the 15th century before the advent of colonial rule. He recognized the importance of accounting in economic enterprises and he realized that proper measurement of economic performance is extremely essential for efficient allocation of resources. Now, he has specified broad scope of accounting and considered the explanation and prediction at its proper objective. Now the accounting rules are given for recording and classifying economic data. Also it was emphasized the critical role of audit which needs to be independent and should be carried out in a periodic manner. There were two important offices Treasurer and Comptroller General. They were deliberately separated to ensure that there is audit independence. So accounting, the accountability was increased, specialization was brought in and the scope of conflict was reduced considerably because of separation of these two offices. Clarity, consistency and completeness of rules is key to such enforcement. These measures were necessary but not sufficient to eliminate fraudulent accounting. Now, according to Kautilya Arthashastra, maintenance of accounts, now the financial year was fixed and a full process for closure of accounts and audit of the same was also mentioned. It covers the method of consolidation of accounts of various departments because under government you have got so many departments and to get a complete picture for the kingdom or for the state it is necessary to consolidate them properly. Now accountants were required to furnish the completed accounts to the head office. Now Kautilya says that receipts may be for the current period, for the last period and accidental. So the receipts have been classified and the differentiation has been made between cash receipts, debtors, currents and accrued in current and accrued income, income from other sources, windfall gains and recovery of bad debts and so on. He has recognized the concept of risk and suggested that different rate of interest for loans be charged. Foreign trade loan attracted the highest rate of interest because the returns are uncertain. So to take care of risk, risk premium can be charged on such types of loans. Now the expenditure on classification, the expenditure classification was also done similar to classification of receipts. So differentiation of capital expenditure and revenue expenditure was made and expenditure is of two kinds, daily expenditure and profitable expenditure. The expenditure between income and the difference between income and expense was termed as a net balance. He insisted on making long-term investments especially in construction that would generate profit over a period. It has also entailed keeping track of the work in progress. Now the role and responsibility for accountant has been quite well defined in a hierarchical organization structure of senior to junior accountants existed in the kingdom's treasury function. The accountants maintained the books of accounts on annual basis according to prescribed standards and the same were furnished for audit at the end of the year. Kautily suggested good salaries be paid to accountants as well as auditor as higher income would keep them ethical. Because if they are not given good salary, there are more chances that they commit the fraud. I think most of you who are looking forward to be accountant should be very happy to know that salary of accountants were at a very high level, accountants as well as auditors as per Kautily's principles. Now one very important and fascinating part was segregation of two offices, treasury and audit. This is necessary for avoiding the conflict of interest between finance function and audit function. Kautily has categorically stated that the head of finance and the head of audit should independently and separately report to the king. He considered recognize the possibility of collision between the two. In India the government has now current government has controller general of audit and ministry of finance. These are two separate functions. However, in the corporate world many times these functions may not be that much separate because audit executives may still report to CFO rather than directly to CEO. But it is necessary theoretically to have complete separation and have independent position for auditors so that they can directly report to CEO or to the board. Kautily has significantly emphasized building of ethical culture because whatever rules you may unless there is a morality within it is likely that people will find out ways and means to somehow do various types of frauds. Now Kautily believed that character reflected personal values of individuals and ethical value learning must commence right from childhood even as an adult ethical conduct was as important as professional skill because skill alone is not at all enough to ensure that frauds do not happen or improper conduct does not happen. He proposed measures to build ethical climate in the kingdom however he was practical and recognized the potential of corruption. In accounting he talked about mistaking financial statements due to abuse of power and fraudulent reporting. He devised a system of reward and punishment to ensure compliance of rules and regulation. Now verification of verification and auditing of accounts. Now a concept of continuous monitoring, periodical auditing, verification of vouching existed even in ancient times. Checks were done daily and periodically, five nights, paksas, months, four months and year. These were the periods when the periodical checks were done. Now the attributes used in the present day for verifying income and payment vouchers were also used in those times. Interestingly, each department had spaces to had spies to provide information and report wrongdoing to the seniors. So what is happening at a lower level was to be directly reported to seniors through spies. There was a full process for discovering fraudulent transactions and punishing the accountants for mistaking financial statements. This is about the ancient India where the accounting was really well developed. Now as far as the western countries are developed, western countries are concerned the accounting developed much later. So in 1445, we have Luca Pacioli who is considered as a father of modern accounting because he published the first modern textbook of accounting. He is from Italy. Now governments and merchants has been using the system of transactions recording for a very long time. However the system became a standard for merchants especially in Europe only after Pacioli structured and organized it in his book, getting it. So now the question which may arise is in the ancient India is it possible that we have such a detailed system of accounting as you can see in Arthashastra because system of accounting should be supported by that much level of developed commerce. So we do see that business, trade, commerce and industry all were highly developed in ancient India. There was a very high BOP surplus that is balance of payment surplus which can be cross checked by the movement of gold because a lot of gold used to be transferred to India. There are records available about that movement and there are also records available about navigation because trade was happening through sea routes that is also available. Now Indian business in the ancient time the examination reveals that business people on the Indian subcontinent use the corporate form from a very ancient time and that corporate form used to be known as Shreini. Now the records are available around 800 BC and from there more or less continuously it was used until the advent of Islamic invasion in 1080. Now this provides the evidence for the use of corporate form for a very long time much before the Roman proto-corporations. In fact, the use of Shreini in ancient India was widespread including virtually every kind of business, political and municipal activity. Moreover, when we examine how these entities were structured, governed and regulated we find that they bear many similarities to modern day corporations. This has there has been a detailed book by professor Vikramaditya Khanna on economic history of the corporate form in India. So we have taken these slides from that. We also have some other records particularly about world economic history. So Pal by Rok was a great post war economic historian. He has specifically documented the history of industry and also the urban history where a lot has been stated about the share of India because India was a highly industrialized country before the arrival of British. And a more detailed record is available from the work of Angus medicine. So Angus medicine was in charge of one very important project about world economic history which was instituted by OECD development center studies. Now the economic history as has been brought in is really very interesting. If we look at the share of world GDP in the work of Angus medicine it is documented here from 00 to 1998 the same has been reproduced here in the slide. So you can see here that India had a very high share in 00 it was as high as 32.9 percent up to year 1000 also it was 28.9 percent of the global GDP and as much as 1700 it was as high as 24 percent. So you can easily see that India and China where the dominant economies in the world other countries like Western Europe and US has have arrived much later. So the point I am trying to make is considering that a very high share of GDP for India there is every possibility that we had a good system of accounting. So the accounting system which is documented by Coutil and other authors do have support from other various others corroborative record. So with this we will stop here you can see the details about this on internet. So I have given you the source as well. Now here you can also see it in the form of a graph and with this we will stop. Namaste. Thank you.