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Apr 24, 2024

Beyond Bazaars and Beads: How India Became an Accounting Powerhouse

Ankit Virani



While spreadsheets and calculators might seem like the cornerstones of modern business, the practice of keeping financial records has a surprisingly long and rich history in India, stretching back thousands of years.

In the world of commerce, keeping track of income and expenses is essential. This systematic recording and analysis of financial information is what we call accounting. It plays a vital role in ensuring a business runs smoothly, by providing transparency, enabling informed decisions, and fostering economic growth.

Let's backflip to the fascinating history of accounting in India, and see how this ancient practice evolved into the sophisticated system used today.

The Early Days (1500 BCE - 3rd Century BCE)

Our journey through the history of Indian accounting begins in the distant past, during the Vedic Age (1500 BCE - 500 BCE). This era witnessed the flourishing of the Indus Valley Civilization, known for its well-developed trade networks.

While direct evidence of accounting practices remains elusive, the Rigveda, a collection of ancient hymns, offers some intriguing clues. Within its verses, we find terms like "Kraya" (sale), "Vanij" (merchant), and "Sulka" (price). These references to commerce suggest a need for some form of record-keeping to track transactions and manage finances.

Fast forward a few centuries, and we encounter a landmark text: the Arthashastra, authored by the legendary Chanakya (also known as Kautilya) during the Mauryan Empire (3rd century BCE). Considered a foundational work on statecraft, economics, and military strategy, the Arthashastra delves surprisingly deep into the realm of accounting for a sovereign state.

This treatise prescribes meticulous record-keeping for the king's treasury, outlining how to manage revenue collection, expenditure, and storehouse inventories. The Arthashastra specifies the appointment of officials responsible for maintaining accounts and conducting regular audits - a testament to the importance placed on financial transparency and accountability even in those ancient times.

The Arthashastra provides a fascinating glimpse into the early development of accounting practices in India. While it doesn't delve into the specifics of double-entry bookkeeping, it establishes the need for systematic record-keeping to manage the financial affairs of a kingdom.

Temples and the Rise of Record-Keeping (3rd Century BCE - Onwards)

Move beyond the image of serene sanctuaries, for temples in ancient India served not just as spiritual centers but also as bustling economic hubs. These institutions often managed vast tracts of land, received generous donations from devotees, and oversaw a range of activities – from agriculture and trade to education and social welfare. Effectively managing such diverse resources demanded a sophisticated system of record-keeping.

Imagine the complexities involved! Temple authorities needed to meticulously track income from land yields, offerings from devotees, and business ventures. Expenses related to construction, maintenance, rituals, and staff salaries had to be recorded and monitored. Inventory management was equally crucial, as temples might hold precious metals, jewels, artworks, and vast stores of food and supplies.


This intricate financial ecosystem necessitated the development of robust accounting practices. Temple administrators likely employed scribes to maintain detailed records of income, expenditure, and inventories.

While the exact format remains unclear, some scholars believe these records might have resembled the "Bahi-khata" system, a precursor to double-entry bookkeeping. Bahi-khata involved maintaining separate accounts for various income and expense categories, potentially laying the groundwork for the more sophisticated system that would emerge later.

The debate regarding the origin of double-entry bookkeeping is a fascinating one. While Luca Pacioli's work in 1494 Europe is often credited, the existence of Bahi-khata suggests a parallel development in India.

Whether a direct connection exists remains a topic of ongoing research. Regardless, the meticulous record-keeping practices employed by temple administrators undeniably contributed to the evolution of accounting in India.

The Debate: The Double-Entry System (Uncertain Origins)

Double-entry bookkeeping, considered a cornerstone of modern accounting, is a system where every financial transaction is recorded twice – once in a debit account and once in a credit account. This ensures that the total value of debits always equals the total value of credits, creating a self-balancing system and fostering accuracy.

Imagine a giant financial seesaw – debits go on one side, credits on the other, and for the seesaw to remain balanced, the weights must be equal. This system allows for easier detection of errors and provides a clear picture of a business's financial health.

Now, here's where the plot thickens! The origin of the double-entry system remains a topic of debate among accounting historians. The traditional narrative credits Luca Pacioli, a 15th-century Italian mathematician, with publishing the first comprehensive description of the system in his book "Summa de arithmetica, geometria, proportioni et proportionalità" (1494). Pacioli's work undoubtedly played a pivotal role in popularizing double-entry bookkeeping across Europe.

However, some scholars propose a fascinating counterpoint. They point towards evidence suggesting the existence of a similar system in India, known as "Bahi-khata," potentially predating Pacioli's work. Bahi-khata involved maintaining separate accounts for different categories of income and expenditure, with some suggesting it might have even incorporated elements of double entry.

The theory proposes that Indian merchants, known for their extensive trade networks, may have carried this practice along trade routes, eventually influencing European accounting methods.

The debate continues, with ongoing research exploring historical records and trade routes for further clues. Whether Bahi-khata directly evolved into double-entry bookkeeping or represents a separate but parallel development remains to be conclusively proven.

What's important to acknowledge is that regardless of its exact origin, the presence of Bahi-khata highlights the sophistication of accounting practices in India centuries before Pacioli's work. The emphasis on meticulous record-keeping, whether in temples or merchant houses, laid the foundation for the robust accounting system that India utilizes today.

Colonial Era and Modernization (18th Century Onwards)

With the arrival of the British East India Company in the 18th century, the landscape of Indian accounting began to shift. British colonial rule introduced Western accounting practices, emphasizing standardization and regulation. While traditional methods like Bahi-khata continued to be used in some sectors, a gradual shift towards a more formal system took place.

The establishment of regulatory bodies like the Institute of Chartered Accountants of India (ICAI) in the 1940s further solidified this trend. The ICAI played a crucial role in professionalizing the accounting field, setting standards for qualifications and ethical conduct. Indian accountants began incorporating internationally recognized accounting principles into their practices, ensuring greater transparency and facilitating global trade.


This period witnessed a move away from manual record-keeping towards more sophisticated methods. The adoption of typewriters, calculators, and eventually computers, streamlined accounting processes and improved efficiency. Accounting education also underwent significant changes, with universities introducing specialized accounting programs to meet the demands of the modern business world.

However, the influence of British rule wasn't without its challenges. Some argue that the imposition of Western accounting standards overshadowed and potentially undervalued the rich heritage of indigenous practices like Bahi-khata. Today, India strives to find a balance, leveraging international best practices while acknowledging the strengths of its unique accounting traditions.

Present Day and Finding

Today, India boasts a robust accounting system that reflects its unique history and global aspirations. Accounting practices adhere to a blend of International Financial Reporting Standards (IFRS) – a globally accepted set of accounting principles – and domestic regulations tailored to the Indian economy. This ensures transparency and facilitates seamless integration with international financial markets.

The role of accounting goes far beyond mere record-keeping. It provides a clear picture of a business's financial health, enabling informed decision-making, attracting investors, and fostering trust. Accurate and transparent financial reporting is vital for economic growth, as it strengthens investor confidence and promotes a stable business environment.

Looking back, India's journey with accounting is nothing short of remarkable. From the meticulous record-keeping of ancient temples to the sophisticated practices of today, the story reflects a deep-rooted understanding of the importance of financial management.

The debate surrounding Bahi-khata highlights the ingenuity and early development of accounting practices in India. While the colonial era brought a shift towards Western standards, India has successfully carved its own path, integrating global best practices with its rich accounting heritage.

As we move forward, automation is rapidly transforming the accounting landscape. Cloud-based accounting software, machine learning, and data analytics are streamlining processes and generating valuable insights. Indian accounting professionals are embracing these advancements to remain competitive and cater to the needs of a dynamic business environment.

A Glimpse into the Future


India's accounting future is bright, fueled by technology. Expect AI to automate routine tasks, freeing accountants for strategic analysis. Blockchain promises secure record-keeping and reduced fraud. Cloud-based solutions will offer real-time data access and collaboration, while data analytics empowers accountants to generate valuable business insights.

By embracing these advancements, Indian accounting will not only thrive but propel businesses forward on the global stage.

In conclusion, India's history of accounting is a testament to the enduring importance of financial management. From its ancient roots to its modern evolution, the story underscores the vital role accounting plays in ensuring financial health, transparency, and economic growth.

As India continues to shape its economic future, its rich accounting heritage will undoubtedly remain a cornerstone of its success.

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