Walking through the streets of ancient Mesopotamia, you would be justified in expecting few familiarities. And yet, if you were to stumble across an accounting document (you know how to read cuneiform, right?) you’d find the foundations of processes still used today.
Accounting is almost as old as commerce itself—both are thought to date back around 10,000 years. While the technology surrounding the profession has evolved, there are a surprising number of systems that endure to this day. These processes and inventions are immersed in a colorful, fascinating history that can shed light on how accounting become what we know it as today.
1. Double entry accounting
Let’s take a step back in time, shall we? Journey back to the year 800 CE—a time when the sun was still thought to revolve around the Earth and anything close to modern medicine was about one thousand years away from being a pipe dream.
A different world, to be sure. And yet a member of the modern profession of accounting could find common ground with a man by the name of Muhammad ibn Musa al-Khwarizmi—the Iranian scholar credited with first introducing the concept of double-entry bookkeeping.
Admittedly, early modern accounting adaptations of the double entry system were gradual. Early accounting records indicate that this process did not take off in earnest until around the year 1490 when it was popularized by Luca Pacioli.
Remarkably, in the intervening years since double-entry bookkeeping first hit the scene—and you’ll note there have been many—little has changed in the process. This system, formulated and popularized by two scholars from the distant past continue to supply accounting processes with accuracy and fraud prevention. It just happens on a computer now.
2. Taxation
Taxes. As inevitable as death, or unnecessary sequels to Disney films. The earliest records of taxation stretch deep into the history of accounting, originating in Egypt somewhere around the time of 3000 B.C.
At that time, punishment for non-compliance could include public canings, or even being burnt alive. Makes the IRS auditing systems feel almost kitten-like by comparison, no?
Naturally, the process of taxation has varied significantly, both across time and cultures. Members of the modern accounting profession are, of course, all too aware that variance continues to be the case, with financial transactions being taxed differently depending on where you find yourself in the world.
However, the familiar features of taxation that exist nearly everywhere—sales tax, property tax, income tax, etc—all evolved slowly over time, often as a response to what was going on in the world.
For example, the earliest known taxes, collected in ancient Egypt, were extracted from the individuals’ grain supply as Egypt lacked physical currency at the time. The tax yields were to be used in trade and redistribution by the Pharoh.
Ancient Rome gave us the sales tax (by way of Julius Caesar) and the income tax (through his successor, Emperor Augustus)—both of which were applied at rates similar to those still seen today in certain parts of the world.
Another thing just as old as taxes? Tax evasion and protestation.
About 800 years before the Boston Tea Party, Lady Godiva cemented her name into the historical cannon by riding a horse naked through the streets of Coventry in protest of the local tax policy—ironically established by her own husband. She wasn’t burned alive, though one can assume she risked a mean rash for her efforts.
3. Deferred revenue
Deferred revenue has existed as a concept since long before ASC 606 made it such a headache to record.
Early accounting records suggest deferred revenue was used to pay for products that—in keeping with the lingo of the time—were still “on the tree.”
In other words, people bought things that didn’t exist yet to make large, auction-style purchases for things like wine or oil more practical and manageable. Primitive accounting methods or not, the process itself is reminiscent of modern account practices relating to deferred revenue business transactions.
4. Detailed record keeping
In ancient Rome, only ten percent of the population could read or write. And yet, sparse numbers or not, detailed financial information was documented in accounting records dating back centuries ago.
Ancient Rome is far from alone when it comes to leaving behind a wealth of accounting and finance-related documents. When people learned how to record information outside of their own heads, one of the first things they did with this superpower was keep track of their money.
Indeed, most of what we know about the accounting systems of yesteryears owes to the detailed record-keeping intrinsically linked to the occupation of accounting since its inception.
Few know that the Rosetta Stone, for all its historical value, was made to appeal a tax code. Written in stone. In three different languages. That’s dedication of Lady Godiva-like proportions.
The earliest known bookkeeping records come from ancient Mesopotamia. There, scribes would create ledgers with reed styluses, sharpened to a point at the end to be pressed into a wax or clay tablet. The process was arduous by today’s standard, requiring a significant amount of time and effort to make modest notations.
However, thanks to this process, we have clear evidence of how accounting has evolved, dating back several millennia ago. Pretty good considering most modern accountants only hold on to their records for seven years.
And yet, while we may have more technically proficient accountants relative to those working in the distant past, records are clear: many of the processes and principles used today were first recorded on wax tablets in ancient Mesopotamia.
There, the development of documented accounting systems allowed Mesopotamians to take advantage of newly emerged technologies: the wheel and sail. To that end, early financial documentation didn’t just preceed what accountants still do today. It laid the groundwork for trade, travel, and import/exports.
The continuity of accounting
It’s almost unsurprising that accounting, in its plain objectivity has remained much the same since its inception thousands of years ago. Processes change and concepts evolve, but the foundations remain the same.
Modern accountants are doing similar work to their ancient counterparts. They just do it on computers instead of tablets and, for the most part, without the occasional splashes of violence and nudity.
Much came from these early accounting inventions. Not just the systems used today but also trade, tax, and other financial concepts that shape the way modern business is done. Accountants have and continue to supply the infrastructure through which the world operates.
Quick FAQs about Ancient Accounting Practices
Q: What are some ancient accounting practices still in use today?
Ancient practices such as double-entry bookkeeping, taxation systems, deferred revenue, and detailed financial record-keeping are still in use today. These methods have been adapted and refined over centuries to fit modern financial systems but retain their foundational principles.
Q: Who introduced the concept of double-entry bookkeeping?
Double-entry bookkeeping was first introduced by the Iranian scholar Muhammad ibn Musa al-Khwarizmi around 800 CE. It was later popularized by Luca Pacioli in the late 15th century.
Q: How did ancient civilizations record financial transactions?
Ancient civilizations, such as those in Mesopotamia, used reed styluses to press into wax or clay tablets to record financial transactions. This method provided a durable way to keep detailed records, some of which have survived to this day.
Q: What was the earliest form of taxation?
The earliest records of taxation date back to ancient Egypt around 3000 B.C. Taxes were often collected in the form of agricultural products, livestock, or labor, as physical currency was not yet in use.
Q: How did ancient Rome influence modern taxation systems?
Ancient Rome contributed significantly to modern taxation systems by introducing concepts like sales tax and income tax. Julius Caesar and Emperor Augustus played pivotal roles in establishing these taxes, which are still seen in various forms today.
Q: What is deferred revenue, and how was it practiced in ancient times?
Deferred revenue is when payment is received for products or services not yet delivered. In ancient times, this concept was used for large auction-style purchases of items like wine or oil, making financial transactions more practical and manageable.
Q: Why is detailed financial record-keeping important in accounting?
Detailed financial record-keeping is crucial for tracking transactions, ensuring accuracy, and preventing fraud. This practice dates back to ancient civilizations and remains a fundamental aspect of modern accounting.
Q: How did ancient Mesopotamian accounting practices impact trade and commerce?
The development of documented accounting systems in ancient Mesopotamia facilitated trade, travel, and import/export activities. These early practices laid the groundwork for modern financial systems and global commerce.
Q: What role did the Rosetta Stone play in accounting history?
The Rosetta Stone, famous for its linguistic significance, was also an appeal of a tax code written in three languages. This highlights the importance of taxation and record-keeping in ancient civilizations.
Q: Are modern accountants using the same principles as ancient accountants?
Yes, modern accountants still use many of the principles established by ancient accountants. While technology has advanced, the foundational concepts of accuracy, documentation, and fraud prevention remain unchanged.
