A brief history of double entry book-keeping #5

Posted by Christie Malry on March 14, 2010 at 9:50 pm

Medieval buildingThe fifth episode of this fascinating series focused on mid 14th century England. England at this time was under the scourge of the black death. And, indeed, the plague led to one of the first accounting frauds.

Evan Jones, University of Bristol, explains. Landowners at the time were upset by the lack of labour. So the Statute of Labourers Act was passed, which set the maximum rate people could be paid. However the rate simply wasn't enough, so employers have to hide pay in the accounts. So that they don't get caught, they grouped people together, gave benefits in kind, etc. This emphasises that written accounts can't always be trusted.

Michael Jones (also University of Bristol) then explained where the title "Chancellor of the Exchequer" comes from. Nobles had to account for the money they should have raised so they could pay up to the government. On the 'exchequer' board there were stones, these were moved about/removed as the negotiations continued.

Accounting at the time was concerned with social obligations, and there were few written records. In this feudal society, you were not trying to determine profit, but instead account for your obligations to others.

They then explained the concept of the tally stick. This kept track of how much was owed to the Exchequer by making scratches on a stick. When the marks had been made, the stick was split lengthwise, so there were two copies, which were virtually incapable of being forged. In time, tally sticks would start circulating as a sort of currency. Evan Jones explained that this early form of credit helped lubricate the wheels of commerce by allowing assets to be allocated more effectively.

Once feudalism broke down, money started moving sideways as well as just up. This made reliability very important - could you trust someone to be good on his debts? So long as you settled your debts on time you were fine. If didn't, you might find credit hard, and business could go bust.

James Bolton (Queen Mary, University of London) picks up the story. Unfortunately we do not have very many accounting records from this time - lots of them don't seem to have survived. This means we don't know whether our accounting was ahead/behind others. However, one set of accounts that have been found, of a John Smith, record a meticulous truth that the owner would probably have preferred not to be recorded. His accounts are very detailed and show that he recorded export figures higher than the customs accounts. This means he was smuggling! But smuggling prosecutions at the time were rare; they would have had to catch him with the goods, so he was pretty safe.

And that's all for episode 5. More history next week!