The tally stick was usually of Hazelwood, about 8-9 inches long. These sticks were notched to indicate economic transactions. According to Robert, "an incision the width of a man's palm represented a thousand pounds; a hundred pounds a thumb's-width cut; twenty pounds the width of a little finger; a pound the thickness of a grain of ripe barley; a shilling just a notch; a penny a simple cut with no wood removed; and a half-penny a punched hole."
A tally was often split in half under what was known as the proffer system, with each party in a transaction retaining one half (called a stock and foil, respectively). Stenton tells us that tallies were used for recording receipts, notes payable, tax anticipation warrants, and even postdated checks and bills of exchange.
As English seafarers and adventurers blazed the trails which led to the colonial and industrial eras (1800-1930 AD), they transformed Great Britain into the world's foremost industrial power. The impetus for accounting thus moved to the "sceptred isle," climaxing in professional status and recognition. It was during this period that the corporate form of business organization emerged with all of its ramifications.
The Industrial Revolution spurred the development of cost accounting, and the profession of public accounting (auditing) was born and nurtured. A crucial event in the evolution of accounting as a profession was the South Sea Bubble case.
The South Sea Bubble
The South Sea Company, formed in 1728, would be viewed today as a glamorous conglomerate-a Ling-Temco-Vought (L.T.V.) or Investors Overseas Services (I.O.S.). While a principal function of the South Sea Company was to develop foreign trade, its activities ranged far and wide, even to assuming the national debt of Great Britain. The South Sea Company provoked unprecedented interest among investors, causing a national hysteria on the scale of the California gold rush of 1849. Smollet, in his History of England, observes that: "The nation was so intoxicated with the spirit of adventure, that people became a prey to the grossest delusion."
Royalty, nobles, poets, and pedestrians alike were trapped by the Sirens of the South Sea and their imitators. Among the investors in South Sea stock were such notables as Queen Anne, Alexander Pope, John Gay, and Mathew Prior.
In addition to driving the price of its stock up through sensational news reports, the South Sea Company engaged in a series of unprofitable as well as illegal practices (including the bribing of members of parliament). Finally the bubble burst, its stock falling in one month from 900 to 190 pounds. An angry public demanded an inquiry into the Company's financial affairs. The task fell to an accountant, Mr. Charles Snell, who studied in the same school as Charles Lamb.
In the course of the investigation, the Company's books were found to have "false and ficitious Entries . . . Entries with Blanks . . . Entries with Rasures and Alterations . . . Leaves torn out . . . Books destroyed, taken away, or secreted." Snell's work led to the Companies Acts which still govern financial reporting in the United Kingdom, and to the audit of public companies by independent accountants. From the debacle of the South Sea Bubble emerged the practice of public accounting.
The Accounting Imperative
This casual walk through history speaks to the imperative of accounting as a social institution. Wherever man meets with man in the economic arena a reference is needed by which to measure and keep score. To anyone who has watched the meticulous care with which Australian aborigines divide their game, the rules which guide investors on the New York Stock Exchange take on added meaning. Which is to say that all known societies have information sets and economic guidelines which serve to moderate behavior.
Accounting is a necessary part of economic man. This was as true in antiquity as it is today. The sophistication of accounting will change in response to the complexity of the social and economic systems it serves, but some level of accounting appears essential to every social order.
Consider some of the decisions which we face as individuals. How much income will I receive in a given period? What expenses will I incur? Are these amounts larger or smaller than in some other period? If income exceeds expenses, what do I do with the surplus? If income is insufficient to meet expenses, how do I make ends meet? What were the sources and amounts of income for the year-and to whom and in what amounts were payments made? Am I wealthier or poorer at the end of the year? What record-keeping or data-processing system is necessary to meet personal and legal requirements for information? What laws are pertinent to these accounting and reporting procedures?
As individuals, we resolve these questions through primitive records and reports. But enlarge the number and scope of this type of question manyfold, multiply the number of decision makers who interact with a single accounting system, and you can begin to understand both the purpose and complexity of accounting in more advanced settings. The processing of information at this level must be systematized and managed by experts.
The Information Revolution
We have noted that all known societies have information systems and rules which serve to moderate economic behavior. The complexity of these information systems is geared to the demography and sheer number of persons who interact within a given system.
Complexity is accentuated when systems interact with other systems and nations with other nations. As information systems became larger and more complex, the need for better machinery to process information gave rise to the computer and other modern tools.
The accelerative thrust of knowledge and the information systems it spawns have been discussed widely. Toffler observes that in 1500 Western Europe was producing books at the rate of 1000 per year. In 1960, 1000 titles were published every day! Similar statistics apply to the United States and other countries, leading Siekevitz to note that what has been learned in the last three decades dwarfs tfcie previous cumulative knowledge of mankind.
The computer burst on the scene in 1950, bringing about what Burt Nanus refers to as the fourth information revolution: The invention of the computer brought on the fourth information revolution by making possible improvements by orders of magnitude in our ability to relate and manipulate numbers, logical concepts and complex activities, thereby accelerating technological and social change.
In terms of this scale the three preceding revolutions were in order: the invention of language, printing, and mass media (periodicals, radio, and television). The fifth revolution will result from on-line mass information systems. Giant data banks will give public, private, and individual users instant access to massive complexes of data, thereby expanding exponentially the flow of information throughout the world.
The rapidly growing body of knowledge in accounting, including computer technology, has been portrayed vividly by Dr. Leo Herbert. The computer is not only facilitating such traditional functions as payroll, cost accounting, and general bookkeeping, but increasingly is being used for analytic purposes such as forecasting, cost-benefit analysis, and a wide variety of operations research applications.
The computer tide has spawned a variety of new and exotic occupations such as systems analysis, programming, computer operations, computer servicing, keypunch operations, and so forth. A number of these occupations have been projected by the U.S. Department of Labor as being among the most rapidly growing fields of employment.
