Ancient Accounting Systems

What Were the Ancient Accounting Systems?

Accounting methods emerged thousands of years ago—perhaps more than 10,000 years ago—in what we now regard as the Middle East region. Sumerians in Mesopotamia, Babylonians, and the ancient Egyptians recognized the need for counting and measuring the results of labor and effort. As these ancient societies built more complex civilizations, the need to conduct simple arithmetic, writing, and trade emerged. These ingredients eventually led to the formations of currency, capital, private property arrangements as well as systems for commerce and public management.

As a result, various accounting techniques were used to keep track of agricultural products and land use, maritime, and land-based trade, animals, and labor. Taxation, public works projects, military initiatives, and conquest eventually necessitated recordkeeping as a way for rulers and their advisors to maintain social order.

Understanding the Origins of Ancient Accounting

Jericho, a city located to the west of the Jordan River, is estimated to be at least 11,000 years old and is one of the world's oldest continuously inhabited cities. It is believed that the ancient society that was situated there used a barter system until about 7,500 B.C. when simple tokens and clay balls (with various shapes) came to represent inventory figures for agricultural goods including wheat, sheep and cattle. The use of tokens eventually expanded, and tokens and envelopes helped to formulate an ancient version of what may have been a balance sheet. These tokens and envelopes helped to identify specific parties with a claim to specific inventory. Tokens also gradually came to represent completed trade transactions.

Thousands of years later, in Sumerian cities, early bookkeepers accounted for currency, precious metals, and goods by marking clay tablets with the end of sticks. These tablets were dried and hardened in order to form records.

From Abacus to Papyrus

Two methods first emerged that served various civilizations around the globe centuries later. The abacus first appeared about 5,000 years ago in Sumeria and was eventually used by several ancient societies. Prior to the advent of a modern numerical system, ancient users of the early form of the abacus were able to slide beads across a frame, which aided in both counting and simple calculations such as addition and subtraction.

Secondly, the papyrus gained popularity—at first in ancient Egypt. This paper-like material made from the reed-like papyrus plant may have appeared as early as 4,000 B.C. Papyrus was used for record-keeping and administration, such as tax receipts and court documentation, although literature, religious texts and music were also recorded. Rulers used accounting methods to account for their wealth as well as tribute payments from other kingdoms.

Egypt used pictures, words, and numbers to keep tabs on agricultural production so that it could feed its ever-increasing population. The accounting system was also used to keep track of ceremonies and religious events, monument and public works projects, as well as labor control. Contemporary accounting uses notions of trust, accuracy, and ethics as the underpinnings of a successful career. Egyptian rulers were much more inclined to use fear and pain as the basis for accurate recordkeeping. Irregularities found by Egyptian royal auditors resulted in a fine, mutilation, or death. (We can infer scribes and bookkeepers were especially motivated during their ancient training sessions, today's version of college midterm exams.) 

The Bronze Age, Iron Age, and the Far East

The Bronze Age and Iron Age ushered in a new era in which various civilizations in different regions developed advanced metalworking. These developments can be found throughout the Gulf Coast, Europe, Asia, America, sub-Saharan Africa, and the Indian subcontinent. Accounting and recordkeeping continued to evolve and include various societies using more complex tokens with markings and linings to differentiate inventory, transactions, and affected parties. Some of these tokens eventually gave way to advanced tablets, whose markings and signs provided tallies, recorded inventory counts, transactions, and distinguished inventory items—the underpinnings of a modern economic system.

The Code of Hammurabi to the Roman Empire

As the papyrus helped scribes to document their king's wealth and tribute payments, as well as other economic measures, various societies' evolution into a more complex geopolitical entity created codes, monetary traditions, and economic governing systems. The Code of Hammurabi was created around 1760 B.C. in Babylon. Among its purposes, the Code of Hammurabi standardized weights and measures, and provided guidance on commercial transactions and payments.

The emergence of accounting in ancient Greece supported the country's financial and banking system. The Greeks' adoption of the Phoenician writing system, as well as the invention of a Greek alphabet, helped to facilitate Greek recordkeeping. Similarly, recordkeeping helped to track the progress of engineering marvels that survive to this day. Additionally, accounting helped to underpin the Romans' finance and legal system. Combined with the use of currency, which came into use in 300 B.C., Rome's advanced commerce system helped to propel its geopolitical power far beyond any prospective challenger.

Special Considerations

With these early civilizations, the degree to which a kingdom could accumulate crop surpluses, enable commerce transactions, make useful tools, secure tribute payments, defend its borders, and effectively administer taxation, and public works, all contributed to a civilization's success. Even as they succeeded (or failed) at increasing their various resources and positioning within the ancient world, an effective management of the social order still necessitated a smooth functioning of the administration side of things. Without such tallying, how would a ruler's advisor know how much labor and materials to allocate to a monumental building project without an idea of how the project was progressing?

Accurate and timely recordkeeping—even thousands of years ago—aided in making critical decisions. Not accounting for a couple of dozen cattle (by misplacing a token or two) may not mean much in today's terms, but back then, it could have meant starvation for an entire village. In today's accounting systems, the methods of calculation are more complex, but the need for accuracy still applies.