Academic journal article The Accounting Historians Journal

Historical Instances of Innovative Accounting Practices in the Chinese Dynasties and Beyond

Academic journal article The Accounting Historians Journal

Historical Instances of Innovative Accounting Practices in the Chinese Dynasties and Beyond

Article excerpt

Abstract: The purpose of this paper is to explore special features of the diffusion of ideas and, subsequently, of innovative practices in Chinese accounting and then to examine early instances of the introduction of auditing. Three general periods of accounting innovation are identified which coincide with the establishment of certain dynasties. Some conclusions are then drawn about the main reasons underlying accounting changes occurred during this long period of time. Also examined are relationships between the long-term evolutionary conditions for the growth of Chinese accounting. Possible phases of development in the present of generally accepted practices of financial accounting and reporting are traced to opportunities for innovation which have arisen in the past.

Chinese accounting and auditing has had a long history. Historical records indicate approximately 6,000 years ago the people of China were numerically literate. Calculations, memoranda and records (notched on wood) have shown aspects of the embryonic stage of Chinese accounting [Feng, 1933]. During its ancient period of development, Chinese accounting reached a peak of sophistication in the Western Zhou Dynasty (1100-771 B.C.) [Fu, 1971]. At that time, accounting practice became more advanced than elsewhere in the world.

During the long centuries of feudal society after the Western Zhou Dynasty, accounting in China experienced only a slow development. However, there were some advances. For example, there was use of the Bi-Bu system--an auditing system developed in the Tang Dynasty (618-907 A.D.)--and also invention of the elaborate government accounting system of the Song Dynasty (960-1279 A.D.) [Guo, 1988]. These instances can be regarded as significant achievements in Chinese accounting and denote contributions that the Chinese have made to the world. Chinese accounting development, as a part of the overall history of accounting development, is significant. It deserves close attention by theorists, historians, researchers and, particularly, practitioners of the accounting discipline. The last mentioned group can benefit greatly through a knowledge of the evolution of practices over long periods of time [Hopwood, 1987] and the relation of such a history to both developments in other disciplines and to present trends in accounting practice.


Chinese accounting formally originated in the Western Zhou Dynasty.(1) According to the Rites of Zhou(2) "the controller general, who administers the country in accordance with certain laws and principles, must pay heed to accounting" [Zhou, 1966]. This reference could be the earliest known mention of accounting in Chinese literature. The Western Zhou was the third dynasty of China and it was much more fully developed as a civilization than the earlier dynasties of Xia (2000-1500 B.C.) and Shang (1500-1100 B.C.). The Western Zhou achievements are highly regarded by historians [Hsu and Linduff, 1985] and the feudal economic institutions established then were to remain influential.(3) Achievements of the Western Zhou Dynasty included the following developments.

(a) Agriculture

Agriculture implements were improved and people started to use simple irrigation systems. Also, land fertilization was introduced at this time. The role of fishing and hunting in the society decreased as the role of agriculture was increased.

(b) Handicraft and technology

Production of china, jewelry and bronzeware grew quickly. The use of iron, which was of revolutionary importance to the development of human society, also appeared during the Western Zhou Dynasty.

(c) The economic society and commerce

There was a systematic hierarchy of fief and subfief holders. Each lord's land was divided into (1) his personal land and (2) that which was parcelled out as sub-fiefs. The whole system was organized as a complex family, each lord owing allegiance, tribute and service to the King, being the family's head. …

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