BSAD 424: Assignment #1 201103536 The development of financial reporting is closely related to the evolution of the modern business corporation. For accounting to become what it is today, individuals and organizations had to have the need for accounting information, as well as the tools to come up with this information. As society evolved, accounting information had to be responsive to its changing environment and the needs of its users. Although it had been developed over a long period of time, the first complete explanation of the double entry bookkeeping system was recorded in 1494 by Luca Paciolo, which included income and expense accounts. Prior to this period, financial recording was primarily used for recording cash and accounts receivable and payable. This theory, of debiting one account and crediting another for each transaction, spread throughout Europe (Scott, 2). After the concept of a joint stock company was introduced in early eighteenth century England, people outside of organizations now had a need for companies’ accounting information. This development required accounting to change from recording to reporting, as their accounting records were no longer only used for internal control. As people began buying and selling stocks on the open market, shareholders needed truthful information from management on the performance of companies (Scott, 2). In 1844, the Joint Stock Companies Act stated that companies had to have their financial statements audited, but this ended up only being done on a voluntary basis. What contributed to the Great Depression in 1934 was the incorrect appraisal of assets. After the depression occurred, the Securities and Exchange Commission began and was given the power to come up with accounting standards by the Securities Act. The aim was to protect investors from incorrect financial information (Scott, 3). Scott, William R. "1." Financial Accounting Theory. 6th ed. N.p.: Pearson Canada Inc., 2012. 1-3. Print.