The Hindu Business Line : Accounting's key role in human history is of creating institutionalised memory

IN CHAPTER XX, titled `Of the tradesman's keeping his books, and casting up his shop', of The Complete English Tradesman, Daniel Defoe writes about a tradesman who could not write, but could still manage `with so many ingenious knacks of his own'.

For example: "He made notches upon sticks for all the middling sums, and scored with chalk for lesser things. He had drawers for every particular customer's name, which his memory supplied, for he knew every particular drawer, though he had a great many, as well as if their faces had been painted upon them; he had innumerable figures to signify what he would have written, if he could; and his shelves and boxes always put me in mind of the Egyptian hieroglyphics, and nobody understood them, or any thing of them, but himself."

What did he do when somebody came to settle the accounts?

"He would go to a drawer directly, among such a number as was amazing; in that drawer was nothing but little pieces of split sticks, like laths, with chalk-marks on them, all as unintelligible as the signs of the zodiac are to an old school-mistress that teaches the horn-book and primer, or as Arabic or Greek is to a ploughman. Every stick had notches on one side for single pounds, on the other side for tens of pounds, and so higher; and the length and breadth also had its signification, and the colour too; for they were painted in some places with one colour, and in some places with another; by which he knew what goods had been delivered for the money."

How did he total up the numbers? His way of casting up was very remarkable, remarks Defoe, because the tradesman knew nothing of figures.

What was his method? "He kept six spoons in a place on purpose, near his counter, which he took out when he had occasion to cast up any sum, and, laying the spoons in a row before him, he counted upon them thus: One, two, three, and another, one odd spoon, and another | | | | | |."

Well, that was six, though not in the same way as we draw tally marks; and to count further, the tradesman would begin again, as we do in the decimal system. "By this method, and running them up very quick, he would count any number under thirty-six, which was six spoons of six spoons, and then, by the strength of his head, he could number as many more as he pleased, multiplying them always by sixes, but never higher."

Defoe points out that there is an absolute necessity for a tradesman to be very diligent and exact in keeping his books, even if it meant taking pains for the purpose. You can catch up with more on www.gutenberg.org, which has 16,000 free electronic books!

Accountants' role in human evolution

"The earliest known use of formal records is in ancient Sumeria (the southern portion of Mesopotamia, an area in present-day Iraq) circa 8,000 BC," write Sudipta Basu and Gregory Waymire (Emory University) in An Evolutionary Defense of Bookkeeping, posted on www.ssrn.com.

The research paper aims to study the crucial evolutionary role played by transactional records that form the foundation of modern accounting. "Hard transactional records institutionalise memory of past voluntary exchanges, which when combined with norms of honesty embodied in law and inherent social proclivities, plays an important role in encouraging trust, sustaining cooperation, and facilitating exchange," notes the abstract.

The authors' basic thesis, therefore, is that formal record-keeping, law, and other institutions (such as weights and measures and money) "co-evolve as cultural adaptations to secure the gains from large-scale cooperation in human societies where complex exchange occurs between strangers across time."

The intro cites an 80-year-old paper by Henry Hatfield, An Historical Defense of Bookkeeping, where he lamented "the `well-nigh universal' contempt heaped upon the bookkeeper', and highlighted "bookkeeping's importance based on its historical pedigree and pragmatic value".

Basu and Waymire are sad that even academic accountants ignore their `intellectual ancestry' and speak of ledgers and journals as `mechanical details'. As a result, `bookkeeping' is not found in the index of some textbooks, or only briefly defined in glossaries. They also cite instances of bookkeeping being discussed, but only "to unfavourably contrast the bookkeeper's repetitive clerical role with the accountant's analytical function."

This state of affairs results in part from not recognising the profound influence that accounting's basic record-keeping function has exerted on the evolution of homo sapiens, they write, and that should warm the hardcore accountant's soft heart.

How does digging up the past help defend the much-maligned bookkeeper? "An evolutionary perspective makes transparent how accounting's `hard' transactional records represent a major cultural adaptation that has consequences extending beyond what could have been imagined by history's first record keepers," write the authors.

Records have played `a central evidentiary role in legal dispute resolution,' one learns, be it about `obligations stemming from past exchange' or identification of `past cheaters for purposes of avoiding future interactions with such persons'. Recording has thus played "a key role in the transition from a nomadic hunter-gatherer economy to a settled agricultural economy that required a complex division of labour with exchange across time," aver the authors delving into 10,000-year-old history from ancient Mesopotamia.

Three features of Sumerian record-keeping

The research paper focuses on three features of the Sumerian record-keeping practices that your auditor may not be aware of.

"First and foremost, the Sumerian records were for the purpose of recording exchange; there was no initial intent to use these records to produce summary financial measures like income.

"Second, formal record-keeping by the Sumerians coincided with the emergence of new urban centres, forms of exchange, laws, and measurement technologies.

"Third, Sumerian record-keeping evolved over several thousand years from simple record-keeping techniques to more complex ones that facilitated multilateral exchange across time."

It may shock many, but the authors point out that Luca Paciolo did not invent double entry bookkeeping. "Rather he authored the first printed text that summarised the double-entry system that had evolved over a couple of centuries. His text was important primarily because it permitted knowledge about double entry to be handed down to subsequent generations." So too, it is quite possible that the Sumerian token system may not be the first instance of formal record-keeping, though it is the earliest known.

"It is plausible that accounting records were kept even before a specialised record-keeping medium (baked clay) was developed, but that such records have not survived. For example, notches on bones and stones dating back 35,000-75,000 years ago could also have functioned as economic records (Ifrah 2001, ch. 4)." Perhaps, that's what Defoe's character still practised!

The paper traces the evolution of records through bullae (hollow clay balls), pictographs and Cuneiform writing, and reproduces pictures, including a few sourced from www.nb.no, the site of the National Library of Norway.

Beer brewing and bookkeeping

Well, if you're like me, I'm sure you would've already `entered' the library. And, once there, don't miss `The Schøyen Collection' comprising precious manuscripts and artefacts from around the whole world spanning over 5000 years. "It is the largest private manuscript collection formed in the 20th century," informs the site.

"The first 4 major river valley civilisations of the world are all represented with their earliest evidence of writing: Protohieroglyphs from Egypt 3500-3100 BC; Pictographic script from Sumer, c. 3300-3200 BC; Indus Valley script c. 25th c. BC, and Chinese characters on jars, c. 2000 BC, and on oracle bones, c. 13th c. BC."

If you're awestruck, there's more: "Older than these are the art, singing and symbols of Australia's Aborigines, going back 40,000-50,000 years. Old cylcons and churingas of the Aborigines are represented in the collection... . Over 90 per cent of the MSS are unpublished at present."

Heading 24.16 is `Wine and beer', from where the research paper of Basu and Waymire has cited what's coded as MS 1717, and so I scroll through the source on the library's site. It is titled "Beer production, 134,813 litres of barley to be delivered over 3 years (37 months) to the government official Kushin responsible for the brewery at the Inanna Temple in Uruk".

And the accompanying commentary is educative: "The present tablet is a masterpiece of pictographic calligraphy. It has just been discovered that 2 hitherto undeciphered pictograms, one like a brick building with a chimney, and the other an ear of barley drawn within a jar or container, illustrates the actual brewing process. Read from right to left we have first the barley delivered, then the brick-building that might be the brewery itself (also with other meanings), and the barley within a jar is the beer. It thus is the earliest representation in history of an industrial process."

Next in the list is MS 1952/39, which is "record of beer distributed from the official stores on the 12th and 13th days of a month, mentioning best beer and ordinary beer, for the Temple, for the store and for the house of Lu-Dingirra." Spare this weekend for a stroll through the enticing digital collection.

Returning to the paper on hand, you'd be happy that Basu and Waymire identify opportunities for further research boundaries, such as exploring the relationship between accounting and anthropology, to study the cultural antecedents of formal record-keeping; linguistics, to explore how accounting functions as the "language of business"; law, to understand mandates such as Sarbanes-Oxley, and "the role of accounting records in bankruptcy, and the strong relationship between legal reasoning and accounting that has long existed". Plus, human cognition, innovation diffusion, and accounting education.

In conclusion, the authors reiterate that accounting has played a central role in the history of mankind by serving the function of institutionalised memory. "We believe that our discipline would be well served by renewed emphasis on the foundations of accounting in both our research and teaching," they appeal.

But I have my doubts on that. What is more likely, I fear, a few centuries later, is that accountants may find a place in the library collections, under the head...

AccountSpeak@TheHindu.co.in

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