The Flag Resolution of June 14, 1777, stated: “Resolved: that the flag of the United States be made of thirteen stripes, alternate red and white; that the union be thirteen stars, white in a blue field, representing a new Constellation.”
You will notice that this does not state whether the red or white stripes should be at the top and bottom, or how many points the stars should have. It wasn’t until June 24, 1912, that the proportions of the flag were established, and it was specified that the stars were to be in horizontal rows with a single point of each star pointing upward.
If you go here, you’ll find a wonderful collection of 18th century flag images. You may notice that none look like the ubiquitous “Betsy Ross” flag.
Which brings us to Betsy Ross. It wasn’t until shortly before the Centennial that the story about Betsy Ross making the first American flag for General George Washington surfaced. In 1870, Ross's grandson claimed that his grandmother had "made with her hands the first flag" of the United States. He said he first obtained this information from his aunt Clarissa Wilson in 1857, twenty years after Betsy Ross's death.
There are colonial currencies that show a Stars and Stripes in the Betsy Ross pattern, but there are no actual flags. In fact, most people are shocked to learn that I have never seen or heard of an American flag with the Betsy Ross pattern of stars that was, with any degree of certainty, made before the 1890’s. And if the original was in this form, with so many 13-star flags existing from the 19th century, it stands to reason that the pattern would have been reproduced. The design is now believed by most scholars to be a creation of Betsy Ross’s grandchildren in the 1870-90 period. Ross’s nephew is first known to have statements about the design in Philadelphia in 1876, revealing the story of the making of the first flag and Betsy’s involvement. But most flag scholars today feel the story was a grand hoax, fabricated by Ross’s nephew, for his own interests. In the late 1890’s through the first decade of the 20th century, Betsy’s granddaughter and great granddaughter made flags in the East Wing of Independence Hall in Philadelphia, selling them to tourists and proliferating the same story. The Betsy Ross house was opened to the public and carried on the belief concerning her use of the circular design. In short, the story stuck and has subsequently appeared in more books than one can count.
There is no documentation to show that the Betsy Ross flag was ever carried in any battle. We don’t have proof that she designed it. We do know, however, that Betsy Ross was a seamstress, and that she sewed (among other things) flags.
So who did design the first American flag? We’re not sure, but:
Francis Hopkinson became a consultant to the second Congressional Committee created to design a Great Seal of the United States because of his heraldic expertise. Congress had created the first of three such committees on July 4, 1776, because a seal was needed to denote America's sovereignty. An acceptable design was presented to Congress in 1782.
The obverse of his designs were the first to incorporate elements from the Stars and Stripes. For example, in the obverse of both of his proposals, a cloud suspended above the shield encircled 13 six-pointed stars.
At the end of May in 1780, Hopkinson submitted an interesting letter to the Continental Admiralty Board (author's note: unlike today's Congress, which consists of a House of Representatives and Senate, the Continental Congress consisted of a legislative "branch" and administrative boards.).
His letter stated that he had designed the United States flag, continental currency, a seal for the Admiralty and Treasury boards, and a Great Seal for the United States, among other things. Hopkinson referred to these designs as "Labours of Fancy." He further stated that although he made these designs free of charge, he would appreciate receiving a "Quarter cask of the public wine" from the government as a token of gratitude.
According to “Our Flag”" published in 1989 by the House of Representatives, the colors red, white, and blue did not have meanings for The Stars and Stripes when it was adopted in 1777. However, the colors in the Great Seal did have specific meanings.
Hopkinson never got his wine. In their report to Congress, the Treasury Board stated that Hopkinson was not the only person consulted on those designs that were incidental to the board and that in their opinion, civil servants such as Hopkinson already received adequate salaries and hence should not expect further compensation from Congress for such work.
The idea of an annual day specifically celebrating the Flag is believed to have first originated in 1885. You can find out the details here. It was not until August 3rd, 1949, that President Truman signed an Act of Congress designating June 14th of each year as National Flag Day.