Read The History of Accounting: The Age of Record Keeping. Develop a bulleted list of 5-7 accounting practices you found interesting based on your review of this accounting age and briefly describe how these practices might relate to today's accounting practices.
A Brief History of Accounting: The Age of Recordkeeping Thomas G. Seiler Franklin University Accounting is concerned with the recording and reporting of transactions for goods and/or services. This reporting has been evident from the time of the ancient civilizations of Mesopotamia, Egypt, China, Hawaii, and the Inca Empire to the modern accounting practices of today. Professor Federigo Melis (1950) categorized accounting history into four categories which were later labeled by Raymond de Roover. These labeled categories included the age of recordkeeping, the birth of the double entry system, the age of stagnation, and the age of scientific accounting (Roover, 1955, p. 409). This paper will review the accounting practices during the age of recordkeeping. Financial Reporting in the Age of Recordkeeping Historical evidence indicated that accounting practices date back to ancient times approximating 10,000 years ago. This is the earliest period in which artifacts detailing accounting practices currently exist. Accounting may go back to even earlier times, but historians and archeologists have not discovered and/or analyzed artifacts indicating any earlier accounting practices. The records of accounting practices are the primary sources of documentation that historians analyze in presenting their findings. The records of accounting practices for the ancient Egyptian and the Mesopotamian regions are perhaps the oldest known artifacts. These artifacts consist of calamos reeds, clay tokens, and clay tablets. Ancient Mesopotamian Accounting Practices The Mesopotamians left evidence of records of financial information dating back approximately 10,000 years ago. The Mesopotamians used a form of writing which employed the use of symbols. These symbols took the form of clay tokens (small pieces of clay with markings) which later evolved into clay tablets. 2 Mattessich (1998) provided a review of literature from Schmandt-Besserat (1977, 1979, 1983, and 1992) and Nissen et al. (1993) regarding the use of clay tokens as devices for the recording of accounting transactions in ancient Mesopotamia. Clay tokens were small clay pieces which came in various sizes and shapes. The tokens, found by historians, were found in the shape of \"various simple geometric shapes such as spheres, rhombuses, discs, and tetrahedrons\" (Mattessich, 1998, p. 2). The author argued that the various sizes and shapes of clay tokens represent early \"accounting symbols\" as they did not indicate numbers or quantities but rather a combination of quantities and commodities. Clay tokens were utilized during the period between 8,000 and 3,000 B.C. (Mattessich, 1998, p. 3). The use of clay tokens was seen by Mattessich as a form of reporting of financial information. Mattessich's review of literature indicated that clay tokens were placed in a leather pouch and later in clay containers known as \"bullae\" (Mattessich, 1998, p.3). The tokens inside the pouch or container had a corresponding total amount impressed on the outside of the pouch or container. Clay tokens were replaced by clay tablets around 3,000 B.C. in Mesopotamia. Clay tablets were brought about by the introduction and use of a proto-cuneiform writing system consisting of symbols representing words and descriptions which were referred to as \"archaic bookkeeping\" (Mattessich, 1998, p.4). This writing form is similar to the hieroglyphic writing style utilized by the ancient Egyptians during the same time period. Garbutt (1984), in his literature review, indicated that these clay tablets were more sophisticated than their predecessor clay tokens in that they documented information such as lists. These lists indicated products, worker's names, wages paid, contracts for the sale 3 of land, promissory notes, receipt and delivery of goods, taxes, rents, and ledgers showing amounts earned and paid out (Garbutt, 1984). The types of documents listed above indicate a sophisticated society with developed rules, laws, and accounting practices. The Mesopotamians were evidently a much more sophisticated society than one might imagine. The Mesopotamians had a well developed business and finance sector. Garbutt (1984) indicated that the temples in Mesopotamia acted as a financial institution. As a financial institution, it provided a place for the exchange of goods and services including the loaning of money and goods to individuals and business entities. The temple charged interest on loans and would regulate interest rates by under-cutting rates charged by separate wealthy individuals who loaned money to others. The temple would undercut these wealthy individuals thereby reducing the interest rates they could charge (Garbutt, 1984). Further evidence of this advanced capitalistic society is indicated by Stevelinck's (1985) review of literature from Gardascia (1980). Gardascia detailed in his writings the rise of Murashu as bankers. These individuals traded in various commodities including agricultural products, animals, finished goods such as beer and bricks, textiles, raw materials and silver. These Murashu were accorded the rank of nobility for their expertise in understanding and recording transactions (Stevelinck, 1985). Additionally, there are records indicating that Mesopotamians employed more advanced financial recording techniques. Mattessich provided that clay tablets were found indicating the recording of various planning or budgeting techniques that are similar to those used today. These techniques included the use of budgeting labor for the 4 milling of flours comparing budgeted versus actual labor incurred. Records indicated that an individual named Kushim utilized a concept of labor known as \"female labor days\" in the budgeting of wages or rations to pay the workers (Mattessich, 1985, p.10). Wages at that time were paid in the form of level bowls of barley to the workers. Kushim was an administrator responsible for the storage and production of beer. Financial records in the form of clay tablets indicated that his duties included the distribution of barley to several officials with the summation on the reverse side of the tablet as a total. This total indicated a discharge of Kushim's liability to the official. Other Mesopotamian transactions were evidenced by a clay tablet for a herd of cows. The clay tablet detailed how much milk, cheese, and offspring could be produced over a period of several years from the start-up of a few animals (Mattessich, 1985). Ancient Egyptian Accounting Practices The ancient Egyptians understood the importance of recording and reporting of financial information. In fact, one can reasonably argue that accounting was an established profession in ancient Egypt. An example of an accounting professional was detailed by Stevelinck in1985 who reviewed literature provided by a Frenchman named Mounir Megally. Megally wrote about an individual named My, who was a manager of a granary in the ancient Egyptian region of Tjeniuna during the period of the New Kingdom approximately 3,000 years ago (Stevelinck, 1985, p. 1). As a manager of the granary, My recorded accounting transactions on calamos reeds. A calamos reed is similar to today's paper. My recorded financial transactions using hieroglyphics which is a writing form employing the use of symbols for words and phrases. 5 The transactions on these reeds provide records of various accounting practices. For instance, Megally indicated that the specifics of My's transactions recorded on the reeds included dates, measured amounts of grains, and individuals or entities who either received or provided the grain to him. Megally indicated that amounts owed to him or the granary where referred to as \"in his hand\" and amounts of grain stored were referred to as \"lists\" (Stevelinck, 1985, p.8). Stevelinck also reviewed Posenar-Kriger's (1976) literature which indicated that amounts owed to others were also prevalent in ancient Egypt as evidenced by the use of vouchers (Stevelinck, 1985). Other accounting practices during this period in ancient Egypt included the daily recording of transactions, details of the total costs of projects, and various records with columns. Posenar-Kriger (1976) indicated that practices included the recordings of daily transactions detailed plans for receipt of goods. Records utilizing numerous columns were also prevalent in Egypt as indicated by Posenar-Kriger. He noted that one such record \"had 87 columns\" (Stevelinck, 1985, p.13). The other financial information records included the use of personnel records, receipts from suppliers to temples, lists of food distributed, and records of stored or maintained livestock, fabrics, cereals, and meat transfers for offerings to the gods. Financial reporting was just as important in ancient Egypt as it is today. It was so important that it was common for books to be closed and reviews performed on the records of the granary. The conduct of reviews indicated that My was probably a manager and reported to a higher official who wanted an accounting of the transactions recorded by My. 6 Accounting Practices of Cultures Located Around the Pacific Ocean Other regions that developed techniques for the reporting of financial information included the ancient cultures of the Chinese, Pre-Peruvian Inca, and Hawaiian cultures. Jacobson (1983) indicated that these cultures used knotted strings or quipu which were devices used by ancient Incas, Chinese, and Hawaiians dating back thousands of years when writing was not yet invented. The quipu is a Peruvian term for knotted strings even though the Chinese may have used it prior to the people of the Pre-Peruvian Inca Empire (Jacobson, 1983). Not much is known about the knotted strings. Jacobson's review of du Pouget's (1881) article indicated that the Chinese may have used the knotted string as a recording device as long ago as 3,300 B.C. (Jacobson 1983, p.58). The Hawaiians, per literature from Daws (1970), probably used the knotted strings since their arrival on the Hawaiian Islands around 800 B.C. Daws also indicated that the Incas may have used the knotted string as early as 1,200 B.C (Jacobson, 1983, p. 54). The knotted strings were a sophisticated record of transactions which indicated lists of items stored, taxes owed, or listing of possessions. Literature by Tyerman and Bennett (1832) indicated that the strings consisted of elaborate \"knots, lupes and tufts, of different shapes, sizes and colors.\" These strings may have been several hundred feet in length. The various knots indicated recipient chiefs, districts, amounts, types of payment, etc. (Jacobson, 1983, p.56). The Hawaiians used the strings for the collection of taxes to the chiefs based on possessions or size of family. The Incas used the knotted strings for the recording of stored items, amounts owed to the chiefs, and amounts owed to others (Jacobson, 1983). 7 Yeakel (1983) provided that the Incas who recorded and maintained the knotted strings or quipu were referred to as quipucamayocs (Yeakel, 1983, p. 39). These individuals were highly trained through either a university-type education program or through apprenticeship. In addition, there were various levels and titles afforded these trained individuals depending on their specific job function and level of knowledge or expertise. Also, an ancient type of calculator was used by some of the quipucamayocs when they were required to make fast and or complicated calculations (Yeakel, 1983). 8 References Garbutt, D. 1984. The significance of ancient Mesopotamia in accounting history. Accounting Historians Journal. 11(1), 83-101. Jacobson, J.R. 1983. Use of knotted string accounting records in old Hawaii and ancient China. Accounting Historians Journal. 10(2), 53-61. Mattessich, R. 1998. Recent insights into Mesopotamian accounting of the 3rd Millennium BC-successor to token accounting. Accounting Historians Journal. 259(1), 1-27. Roover, R. D. 1955. New perspectives on the history of accounting. The Accounting Review. 30(3), 405-420. Stevelinck, E. 1985. Accounting in ancient times. The Accounting Historians Journal. 12(1), 1-16. Yeakel, J.A. 1983. The accountant-historian of the Incas. Accounting Historians Journal. 10(2), 39-51. 9
