The Historical Evaluation of Accounting in China
The Historical Evaluation of Accounting in China
The Historical Evaluation of Accounting in China
Cigdem Solas
Sinan Ayhan
RESUMEN
Muchos estudios recientes han afirmado que China integra en su sistema contable sus reglas
tradicionales, sus intereses culturales y su estilo de vida. La “cultura” sería el punto dominante en su sistema
contable. Hofstede, Gray, Mueller y otros investigadores empíricos de la contabilidad, que enfatizan la influencia
de los efectos culturales en la configuración de los sistemas contables nacionales, sostienen que la Contabilidad
China ha sido dominada por la “Cultura” China.
Este trabajo presenta tres de entre las variables culturales chinas, a saber, Confucianismo, Feng Shui,
Budismo, Yin-Yang, etc., que han marcado los comportamientos y las técnicas contables chinas. En China, el
sistema contable se basó tradicionalmente en las prácticas confucianistas y en la antigua sabiduría; estos
elementos todavía influyen en el sistema actual. En este artículo se estudian las influencias desde una perspectiva
histórica en relación con las variables culturales chinas. Las influencias examinadas se centran en los metódos de
la teneduría de libros, en las prácticas contables, en la información contable, etc.
La evidencia suministrada por la literatura indica que, a pesar de los cambios en los regímenes de
gobierno y en los estilos de gestión empresarial en China, las características principales de las influencias
culturales sobre la contabilidad han sobrevivido. De este modo, la polaridad Yin-Yang todavía equilibra la
contabilidad china. La lógica económica china se ha transformado para adaptarse a las prácticas de mercado,
pero el misticismo chino ha mantenido su lógica en la República Popular China
ABSTRACT
Many recent studies have argued that China integrates its traditional rules, cultural interests and its life
style into its accounting system. “Culture” is the main point for their accounting system. Hofstede, Gray,
Mueller, and some other empiricist accounting researchers who emphasize the influence of cultural effects on
national accounting improvements claim that Chinese Accounting has been dominated by Chinese “Culture”.
This paper presents three Chinese cultural variables (e.g. Confucianism, Feng Shui, Buddhism, Yin-
Yang, etc.) that have shaped Chinese accounting behaviors and techniques. In China, the Chinese accounting
system was traditionally based on Confucian practices and ancient wisdom; these elements still influence the
current system. In this paper, the influences are discussed from a historical perspective with regard to cultural
variables in China. The influences studied focused on bookkeeping methods, accounting practices, accounting
information, etc.
The evidence from the literature indicates that regardless of changes in government regimes, economic
management styles in China the influence of culture on accounting, its basic characteristics have survived. For
instance Yin-Yang polarity has still balanced Chinese accounting; Chinese economic logic metamorphosed to
market-oriented model practices, but Chinese mysticism has maintained its logic on the People’s Republic of
China.
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 147
accounting in China: the effects of culture
___________________________________________________________________________
PALABRAS CLAVE:
Factores ambientales, contabilidad, cultura, China, Confucianismo, Feng Shui, polaridad Yin-Yang,
contabilidad por partida simple y partida doble
KEYWORDS:
Environmental Factors, Accounting, Culture, China, Confucianism, Feng Shui, Yin-Yang Polarity, Single &
Double-Entry bookkeeping methods.
1. Introduction
Environmental influences are the clue to understanding the ranges of national
accounting system. National Accounting is a part of its environment, it is shaped by these
effects and it has a considerable volume in International Accounting.
After the 1960s, in international research, there was a tendency to give a meaning to
categorize different countries accounting behavior, such as deductive or conductive insight’s
criteria. These criteria aim to explain the reasons for accounting differences between national
accounting practices (Zhang, 2005: 14). Determinants of International Accounting are shaped
around international tendencies. During the period of international accounting improvements
around the world, two main tendencies have been seen, one is the deductive approach, and the
other one is the inductive approach. In deductive approach, the development of accounting by
linking the effects to influential environmental factors has been examined. On the other hand,
the representatives of inductive approach have defined accounting by analyzing the factors
and the practices to identify accounting patterns (Zhang, 2005: 14), who made a distinction
between measurement and disclosure practices (Chanchani and Mac Gregor, 1999:2).
Hofstede’s pioneering research in the 1970s distinguished the process by detecting the
structural elements of culture, particularly those that most strongly affect known behavior in
the work situations of organizations and institutions (Gray et al., 2001: 42). Hofstede
mentioned the expressed influence on accounting a long time ago and then he focused on
culture in order to analyze the emergence of accounting climate.
In recent studies, new forms of epistemological analysis in social philosophy are seen
in the paradigm of accounting; but culture has still kept its effectiveness on accounting subject
matter.
Hofstede asserts the processes of cultural dimension and accounting behavior. Gray
developed the link between culture and accounting value; his claim provided a sense of
provability about cultural effect (Zhang, 2005:15). Culture has been the dominant character
among environmental influences. Radebaugh emphasized that culture was presented by the
change of social system. In addition, Radebaugh and Gray discuss the issue of cultural
influence on reporting practice in detail. Through a comparative study, they conclude that
despite the existence of standards, each country’s reporting practice is greatly influenced by
its own particular culture and history (Forzeh and Nting, 2001:10).
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 149
accounting in China: the effects of culture
___________________________________________________________________________
• Individualism versus collectivism which relates to the relationship between the individual
and group with collectivist or loyal values.
• Large versus small power distance which relates to social inequality including
relationships with authority.
• Strong versus weak uncertainty avoidance which relates to ways of dealing with
uncertainty, the control of expression of emotion.
• Masculinity versus femininity which relates to concepts of masculinity and femininity,
and interests in the social implications of having been born as a boy or girl in any
country.
Gray defined culture as the value system shared by major groups of populations.
According to Gray, in a theoretical way, linking accounting and culture within which the
impact of culture on accounting values and accounting change could be assessed (Verma,
2005:11). Gray’s theory is constructed from the societal values which are the origins of the
accounting subculture. The value systems of accountants are derived from cultural or societal
values with specific reference to work-related values. Accounting values, in turn, affect
accounting systems, therefore cultural factors directly influence the development of
accounting and financial reporting systems at a national level (Doupnik and Tsakumis, 2004
pp:1-30). Gray went on to suggest that there should be a close match between cultural areas
and patterns of accounting systems. This is the basis upon which Gray rests his theory of
cultural relevance to accounting (Chanchani and Wilett, 2004 pp: 125-154). Gray extended
Hofstede’s model by hypothesizing the existence of an accounting subsystem which drew its
value system from the primary societal value system (Salter and Nieswander, 1995:382). In
the hypotheses which were interested in culture, it was argued that a combination of
accounting sub-cultural dimension have had considerable influence on accounting. Gray
developed four accounting values which were based on Hofstede’s model (Ding et al.,
2004:10). Gray’s accounting values were represented as follows:
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 150
accounting in China: the effects of culture
___________________________________________________________________________
Gray also proposed hypotheses that linked to accounting values. These hypotheses
were an attempt to link cultural values to accounting values which themselves were linked to
four aspects of accounting practice. Gray’s model was a way of trying to understand the
impact of culture on accounting, and a specific level which operationalise the links between
culture, accounting values and accounting practices. In particular, Gray suggested that
(Verma, 2005:14):
• professionalism would influence the nature of authority for the accounting system
• the degree of uniformity preferred would influence the way in which the accounting
system was applied
• the amount of conservatism preferred would influence the measurement practices
within the system
• the degree of secrecy preferred would influence the extent of disclosure in the
accounting system
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 151
accounting in China: the effects of culture
___________________________________________________________________________
country are as unique as any other cultural traits. Cultural relativism is necessary to
understand the determinants of national differences in international accounting (Belkaoui,
1985:29).
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 152
accounting in China: the effects of culture
___________________________________________________________________________
Figure 1-Matrix of National Culture and Economic Ideology / China: Group-oriented Culture, Group-
oriented Ideology
Culture
| ------------------- | --------------------- |
Western Eastern
Capitalism 1 2
Individual-oriented Group-oriented culture
I Culture Individual-oriented
Individual-oriented ideology
d ideology
e
o USA Japan
l
3 4
o Individual-oriented Group-oriented
g Culture culture
Group-oriented Group-oriented
y ideology ideology
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 153
accounting in China: the effects of culture
___________________________________________________________________________
Zhang, prefer to cite Hofstede’s definition of culture and improve their arguments on cultural
effects. In the course of time, several objections were raised as to Zhang’s statement. First of
all, it was argued for the linguistic relevance with accounting, which Belkaoui proposed, was
argued and later was suspected for its relevance with accounting by Nobes. They seem the
factors must be closer to the accounting environment than culture. Accounting language
originates from a social language; it employs social language to explain its meaning. However
accounting also has its own language within the accounting sphere, which is different from
social language. They also assert that accounting is a kind of language, but this language is
developed more and more universally without culture boundary (Zhang, 2005:50).
Besides Zhang, there are other researchers who also have noticed the cultural
influence on China’s accounting development. For instance, Van Hoepen thought that cultural
influences, as far as they are still of influence on modern Chinese accounting, stem from the
influence of religion, traditional Chinese philosophies and a certain degree of conservatism
related thereto (Zhang, 2005 :50). In addition, Berry who has argued for the primary of
culture emphasized that “Culture reasoning” has directed accounting developments in China
and then concluded the synergistic effect of pluralism in the People’s Republic of China’s
marketplace today could lead to more experimentation in the development of the accounting
function. However, the PRC will be seeking for ideological explanations for the changes now
being introduced so that its view of scientific management will exist in its appropriate cultural
framework (Zhang, 2005:51). Thus it is clearly seen that culture might play an important part
in determining the accounting system of China. The influence of culture is pervasively
conceived to include and direct Chinese accounting theory, accounting system and accounting
institutions.
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 154
accounting in China: the effects of culture
___________________________________________________________________________
al.,1995 :40) apply the Hofstede cultural dimensions to provide an evaluation of societal
values on Chinese Accounting as configured in on Table 1 (Gao and Schachler, 2003 :44).
Chow et al. described the accounting system and processes in China and the current
state of the accounting profession. They suggested that accounting measurement and
disclosure in China, the development of the accounting systems would be constrained by the
influence of China's culture and its accounting sub-culture and also claimed that while
financial reporting would be governed by accounting standards, their development and
enforcement would remain a governmental and legalistic function (Chanchani and
MacGregor, 1999 :2)
• Chinese traditional culture (was rooted in the Confucianism and Buddhist philosophy
and handed down from generation to generation)
• Chinese modern culture (was encrypted and created in the light of socialist structure)
There are six major traditional culture elements that affect the Chinese accounting
system and practices: Theory of Opposing Yi (justice) and Li (profit); Opposition of Trusts and
Contracts; The Dogmatic Attitude; The Conservative Thought; Collectivism; Religion (Zhang,
2005:48). Figure 2 attempts to indicate the influences of traditional culture on Chinese
Accounting system (Gao and Schachler, 2004: 54).
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 155
accounting in China: the effects of culture
___________________________________________________________________________
• The state theory (which decides accounting objectives, functions and organizations);
• The class theory (which lead accounting to political oriented argument over
accounting with class characteristics);
• Marxism (which becomes the basic concept of accounting, the theoretical accounting,
and decides the development of accounting);
• The Cultural Revolution (which strongly discriminated against accounting and
accountants).
The researcher claims that the Chinese accounting system has been built according to
its own traditional and modern cultural frameworks. However, today’s Chinese accounting
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 156
accounting in China: the effects of culture
___________________________________________________________________________
depends not only on its own cultural values, but also to some extent on the cultural exchange
with western cultures (Zhang, 2005:49). Figure 3 attempts to give a general insight about the
factors influencing the evolution of Chinese accounting, during Chinese history (Gao and
Schachler, 2004:54):
Figure 3-Factors of Influencing the Evolution of Chinese Accounting
Cultural Influences
Confucianism
Feng Shui
Yin&Yang
Buddhism
Technological
Influences
Paper Invented
Abacus
Paper Money
Ancient Chinese thoughts are merged with the new strategic paradigm of China. Figure 4 also
presented this emphasis on cultural components which were also taken their roots from
Chinese four major schools of thoughts: Dao Jia (The Way), Bing Jia (Military), Fa Jia
(Law), Ru Jia (Confucius).
Figure 4-Cultural Components of Chinese Strategy
Strategy
Implementation & Control
Environmental
Analysis
Fa Dao
(Law) (Way)
Ru
(Confucius)
Bing
(Military)
Formation of Strategy
2.1.4.2. Confucianism
Traditional Chinese cultural values, as presented by Confucianism, Taoism and
Buddhism, consist of a sense of order, vertical and horizontal relation between obligations to
the group, and a preference for harmony and cooperation. The emphasis is on the status quo.
The philosophical foundations of Chinese culture differ substantially from various
philosophical traditions (Gao and Schachler, 2004:44). Confucian philosophy forms the
essential basis of Chinese culture. According to Confucian doctrine, an individual is perceived
as being a part different overlapping social networks and there are highly defined rights and
obligations attached to the relative position each individual possesses in such networks (Gao
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 158
accounting in China: the effects of culture
___________________________________________________________________________
and Schachler, 2004:45). Confucianism emphasizes the family as the base of a person’s
operation and also as an ethical unit of society. At the top of the Confucian ethical system is
the concept of filial piety which defines the relationship between parents and children
(Velayutham and Perera, 1996:68).
Confucian thought is ‘Wu Lun-five cardinal role’: relations between emperor-subject,
father-son, husbands-wives, elder-younger brothers, friend-friend. Regulating these social
relationships are the five Confucian virtues of Ren (humanity-benevolence): Yi
(righteousness), Li (profit), Zhi (wisdom) and Xin (trustworthiness). These definitive ideals set
the norms governing how individuals act and behave each other in a social hierarchy. It
should be noted that Confucian philosophy is not a utilitarian philosophy: material interests
are directly in conflict with the dictates of virtues of Wu Lun (Gao and Schachler, 2004:45).
At the top of the Confucian ethical system is the concept of filial piety which defines the
relationship between parents and children, as it is seen Mencius thoughts; he said
(Velayutham and Perera, 1996:68):
2.1.4.3. Feng Shui, Confucian and Yin& Yang Based Philosophy and Their General
Effects
The concept of Yin & Yang was derived from the ‘I Ching-Changes’ and five
elements, and came from the influence of the ancient magician (fang-shih). This ancient
magic used the form of divination including six classes: astrology, almanacs, the five
elements (fang), divination plant (shih) and the tortoise shell (kuei); miscellaneous divine
uses, the system of forms (hsing). The combination of these two fundamental systems
provides the explanatory basis for the formation of the cosmological symbols which have a
correlation in the corresponding human world. This is further correlated with the philosophy
of the unity of man and nature which conforms to conflicting philosophical currents, such as,
the Confucian moral values, Taosit way, the numerologist willful heaven, and astrological
order (Gao and Schachler, 2004:46).
The ancient Chinese believed that the cosmos was in perpetual flux, motion and
change. It is called ‘Tai Chi’. Briefly, ‘Tai Chi’ includes the means of change and
transformation. There are three kinds of ‘Chi’: ‘Sheng Chi’, ‘Si Chi’, ‘Sha Chi’. ‘Sheng Chi’
means moving upward; ‘Si Chi’ means dying or waning; and ‘Sha Chi’ means a harmful
energy. The cosmos is organized according to two concepts: known as Yin& Yang. They are
regarded as the two cosmic forces that shaped and managed the life. These two opposing
forces change each other over time. Yin will eventually become Yang, Yang will eventually
become Yin; the system provides the balance concept (Gao and Schachler, 2004:47). Some
researcher argues that mainstream accounting research represents Yang orientation without
balancing of and by the Yin, and that alternative accounting research to the mainstream is a
necessity for establishing a balance between Yin & Yang.
Yin & Yang are interconnected as different, but inseparable sides of the cosmos; e.g.
Yin is like night, Yang is like daytime; night takes the place of daytime and moon takes the
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 159
accounting in China: the effects of culture
___________________________________________________________________________
place of sun. This is similar to the input-output activity in organizations and transformation
of organizational transactions such as balancing profit and loss.
It is thought that this feature has considerably influenced the styles of Chinese
people’s thinking development. In addition Confucianism was very much influenced by the
Yin & Yang relationship and always suggested a ‘middle way’. The ‘middle way’ originated
from the Yin & Yang balance, and it means understanding the inevitability of changes being
prepared to make the necessary adjustments in whole life to maintain harmonious and
balanced stance (Gao and Schachler, 2004:48). For this reason, it is thought that Yin & Yang,
Feng Shui and Confucian Philosophy intend to be occurred conservative comprehensions in
Chinese life style and made them conservative.
Confucian philosophy forms the basis of Chinese cognitive attitudes, which have also
influenced the development of Chinese bookkeeping and accounting practices. Conservatism
emphasizes conformity to the status protection of the larger social order. Conservatism also
attracts the progress. During the evolution of Chinese accounting, slow progress and change
were seen as the main characteristics of Chinese accounting (Gao and Schachler, 2004:48).
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 160
accounting in China: the effects of culture
___________________________________________________________________________
accounting from measuring and disclosing profits and loss (Gao and Schachler, 2004:57).
Before the Tang dynasty’s period, accounting practice varied from state to state and region to
region as the terms of measurement and bookkeeping. As a result of the variation of
bookkeeping and measurement, it was difficult for merchants to use and activate the means of
exchange (e.g. cloth, silk, salt, grain, rice, etc.) and to evaluate the performance of product
trading, which was a kind of barter (Gao and Schachler, 2004:58).
Huge amounts of paper were used in preparing accounts. In order to reduce the high
amounts of pieces of paper used for annual reports, the Tang dynasty’s authorities began to
reform accounting reporting by implementing various new rules and laws. According to those
times governmental standards, a standard form of statement called Changxingzhi, was
capturing a regular implementation with two pieces of paper which contained accounting
information on annual income and expenditure. This was to be used nationwide by local
reporting officials. It marked an important stage in unifying the formation of accounting
statements at the governmental statement (Gao and Schachler, 2004:58). Afterwards the Ming
dynasty and Qing dynasty, both introduced some significant development; which involved the
publication of unified governmental financial reports named Wanli Accounting Report and
Guangxi Accounting Report.
Chinese culture instilled the in Chinese people the notion of obedience; they prefer to
comply with the rules rather than accept innovations. Therefore, it might be thought that
Chinese noblemen following Confucian doctrine kept the middle way notions on the whole
country, and for a long period, this effect caused to be avoided private accounting requirement
by widespread governmental accounting practices.
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 162
accounting in China: the effects of culture
___________________________________________________________________________
the degree to which an economic system; namely the capitalist markets, rational enterprises,
accounting; provides for the needs or values of a specific social group.
Half a century of western expansion in China (1840-1890) forced traditional Chinese
ideology to experience a searching self-examination and re-evaluation in a reintegration of the
country. Reformers were guided by slogans, such as “Chinese culture is spiritual, western
culture is material”. This way of thinking was used to confirm the so-called Self-
Strengthening Movement from 1861 to 1895. Harmony was to remain the essential core of
Chinese ideology in order to conserve a stable and tradition-oriented society in China before
the turn of the twentieth century. Weber claimed that China’s failure to develop a rational
bourgeois capitalism was due to the absence of a ‘particular mentality for the needed
motivation.’ He also distinguished the difference of content between Confucianism and
Puritanism which represent comprehensive but mutually exclusive types of rationalism: it was
the working out of the pervasive differences in mentality that promoted capitalist
development of the west and impeded it in China (Auyeung and Ivory, 2003:19).
The Chinese merchants lacked cultural and ideological independence from the gentry;
imperial consensus that relates to accountancy emerges mundane issue of the choice of
writing materials. Adopting western bookkeeping methods would have required the
replacement of Chinese writing patterns with western ones. Chinese were using calligraphy
instead of orthodox uses. The written characters, which included numerals, were imbued with
the mystical significance and such were all important markers of Chinese culture (Auyeung
and Ivory, 2003:20).
In addition, the inhibiting factor came also from social institutions, close family, clan,
or regional tie about reasons of the stagnation. Relying on kinship or regional tie is not in
itself necessarily detrimental to modernization. Weber’s opinion insists that Chinese
enterprises did not cultivate the spirit of capitalism. Despite the many shortcomings of
traditional accounting, the superiority of the western version, and the modified structural
conditions was clear (Auyeung and Ivory, 2003:20).
system, functioning with incomplete system that was emerged single and double-entry
bookkeeping systems; because it used single entries for cash transactions, but double entries
for credit transactions (Chow et. al., 2007: 925); and has continued with double-entry
bookkeeping system.
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 164
accounting in China: the effects of culture
___________________________________________________________________________
history of China (Zhao, 1987:169). In the Spring and Autumn Period, a gradual and
increasingly violent consolidation into a shrinking number of ever more powerful kingdoms
was witnessed. The terminal phase of competition among the seven remaining the ‘Warring
States’ period (475-221 BC), was effected by economic and political development, such as
iron production, mass conscription, the suppression of feudal features in favor of private
landownership and bureaucratization, and the introduction of coinage (Scheidel, 2005).
Four column bookkeeping method was popular in the age of the Song (AD 960-1279),
Ming (AD 1368-1644) and Qing (AD 1644-1911) dynasties; it became the standard reporting
format both for government and non-government accounting. It was the basis of state
accounting in late imperial China (Chen, 1998). Following innovation in commercial and
trading activities after the Ming Dynasty, the single-entry bookkeeping method was
transformed by the growing complexity of business transactions. The three-feet bookkeeping
method was explored in the middle of the fifteenth century. This recording system was given
the name ‘three-feet’ from its use of double-entry for claims and transfers and also single-
entry for cash transactions. The three-feet method further evolved into the four-feet
bookkeeping in the late fifteenth century, which was the first form of Chinese double-entry
bookkeeping. However, double-entry methods were not widely used in China until the
nineteenth century (Chen, 1998). The development of dragon-gate bookkeeping which was
derived from three-feet bookkeeping was promoted during the late Ming and early Qing
dynasties (Zhao, 1987:169). The main feature of this system was its balancing equation
(Auyeung and Ivory, 2003:9):
The other significant development in the progress of Chinese accounting was the
emergence of four-feet bookkeeping in the eighteenth century. It was a more advanced system
than the previous bookkeeping methods for the account classifications (Auyeung and Ivory,
2003:11). The four-feet bookkeeping recorded all transactions in double-entry form; both cash
and non-cash, in two corresponding accounts in the journals or ledgers. The end products
consisted of two accounting reports (Auyeung and Ivory, 2003:11):
Chinese old accounting methodology were not used to preparing the measurement of profit
for financial reporting purposes. The logic of new trade developments required financial
instructions to ensure payment, take deposits and provide credit, and also required promissory
notes which were not orders for payment, but instruments of credit (Auyeung and Ivory,
2003:12).
China’s early efforts were about modernizing its accounting system. The
modernization program planned to assimilate western bookkeeping methods through
codification in the Commerce Law, newly established education institutions, the publication
of textbooks, and application of its methods in the public and private sectors in order to resist
against the foreign powers in commercial and industrial warfare (Auyeung and Ivory,
2003:12).
Until the introduction of western accounting methods in the second half of the
nineteenth century, Bookkeeping in the Qing dynasty was shaped by these basic modes
(Gardella, 1992:324):
• the majority of small and medium sized commercial institutions and old style
banks used single-entry systems based on the shizhufa, while a minority
employed the sanjiazhang.
• small number of large-scale commercial establishments employed the
longmenzhang or improved version of it.
In the late nineteenth and early twentieth century, many Chinese pawnshops used
seven different types of business ledger; the most important one known as dianzhang was a
monthly pawn ledger, to record track of their goods; also the other types of ledgers existed to
keep share capital, because pawnshops were often partnerships, in-house expenses, individual
accounts, and daily exchange rates. Compared with their peers in other trades, pawnbrokers
had a superior reputation for accounting probity (Gardella, 1992:324).
3.6. China’s Accounting Development from the Beginning of 20th Century and to the
End
The evolution of the accounting profession in China was influenced by the economic,
political, cultural, and social environment (Yee, 2001:16). After the Qing Dynasty was
overthrown by a revolution in 1911, the feudal economic system began to disintegrate.
Foreign investors came to China and business activities with the rise of west. Such
developments attracted foreign certified public accountants China, and in 1918 the Chinese
government issued the Provisional Rules for Accountants. Professional public accountants
first appeared in China in 1918 when the Northern Warlord government issued the
Accountant Provisions, stipulating that anyone who was qualified in accordance with the
provisions could apply to the government for professional certification. After passing
examination organized by government, a qualified accountant would be able to directly run an
accounting firm, and offer accounting services to the clients. This was the beginning of
professional accounting in China (Zhao, 1987:184). Also at this time, it modern styles of
accounting educations were introduced to the university level, and contemporary accounting
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 167
accounting in China: the effects of culture
___________________________________________________________________________
any antagonism? Absolutely not; this great phenomenon seems like a social experiment and it
gives us the secrets of life which is balanced with culture, presence and the wisdom.
Conclusion
The Chinese people have traditionally taken a long-term perspective of life throughout
history. They have emphasized tradition in order to secure a peaceful and reliable
environment and they have secretly resisted changes.
As a result of careful research, many researchers asserted that ’culture’ has been the
dominant factor among environmental influences in evolution of Chinese Accounting. In this
paper, the influences by contextualizing discussed from an historical perspective have been
cultural variables in China. This article has have focused on bookkeeping methods,
accounting practices, accounting information. It is concluded that Chinese cultural influences
have been the dominant factor in shaping Chinese accounting. In essence, Chinese,
accounting has been traditionally based on Feng Shui or Confucian values and practices.
Christopher Nobes claimed that classification variables have to be seen as among the
most powerfully differentiating factors related to measuring national accounting
characteristics. For the Chinese case, it is observed that Hofstede’s cultural model and Gray’s
societal values are the differentiating environmental factors.
The main point of this paper is to demonstrate how cultural variables that have
affected the national accounting environment have had a profound impact for China from the
Dynastic period till modern times. The Feng Shui and Ying&Yang polarity components
which are widely held to among the people of China encompass the development Chinese
accounting .These cultural components have influenced them for different purposes, in terms
of being more conservative, more moralist, more spiritualist etc. In order to indicate the real
state of affairs, this paper has attempted to cover the historical narration of Chinese
bookkeeping methods and techniques.
Political and economical factors have also been analyzed together with cultural factors
in the determination of Chinese accounting characteristics. For example, the Chinese comply
with the rules, because Confucian doctrine said that confidence and certainty are the most
important elements in life. In addition, long-term means success. In that case, culture has been
the dominant character for shaping the accounting environment as can be seen explicitly in
Chinese accounting practice.
REFERENCES
Aarpen, Jeffrey S.- International Accounting and Multinational Enterprises, 2nd Edition, New York,
Lee H. John Wiley & Sons, 1985
Radebaugh.:
Auyeung, Pak K..: “A Comparative Study of Accounting Adaptation: China and Japan During the
Nineteeth Century”, Accounting Historian Journal, December 2002
http://www.findarticles.com/p/articles/mi_qa3657/is_200212/ai_n9155013,
12.06.2006
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 169
accounting in China: the effects of culture
___________________________________________________________________________
Auyeung, Pak K.- “A Weberian Model Applied to The Study of Accounting Stagnation in Late Qing
Ivory, Paul.: China”, Accounting Business & Financial History, Volume 13, No 1, March 2003
Barbu, Elena.: L’existence d’un Référentiel Comtable International Reconnu Réduit-il Vraiment
le Vagabondage Comtable?, Université d’Orleans Laboratoire Orleans de Gestion,
2003, http//www.univ-orleans.fr/DEG/LOG/, 11.06.2006
Belkaoui, Ahmet.: Behavioral Management Accounting, 1sth Edition, London, Quorum Books, 2002
Belkaoui, Ahmet.: International Accounting Issues and Solutions, London, Quorum Books, 1985
Carnegie, Garry “Exploring Comparative International Accountin History”, Accounting, Auditing &
D. -Christopher J. Accountability Journal, Volume 15, No 5, 2002
Napier.:
Chang, K. Hung - “An Empircal Study on the Impact of Culture on Audit-Detected Accounting Errors”,
Kenny Z. Lin- Auditing: A Journal of Practice & Theory, Vol 22, september 2003
Phyllis Lai Lan
Mo.:
Chen, Shimin.: “Rise and Fall of Debit-Credit Bookkeeping in China: History and Analysis”, The
Accounting Historians Journal, Jun 1998, http://www.findarticles.com/p/articles
/mi_qa3657 /is_199806/ai_n8800792, 0.06.2006
Cheng, Jimmy F. A Fundamental Study of How Chinese Thinking Influences Westerners and
M..: Managerial Practices, Hong Kong School of Business Research Project, August 1996
Chiapello, Eve- Searching for The Accounting Features of Capitalism: An Illustration with
Yuan Ding.: Economic Transition Process in China, SASE, Budapest, 2 July 2005
Cild, John.: Management in China During the Age of Reform, Cambridge University Press,
1994
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 170
accounting in China: the effects of culture
___________________________________________________________________________
Choi, Frederick et. International Accounting, Fourth Edition, Pretince Hall Inc., New Jersey, 2002
al..:
Chow, Chee W. et “Management Accounting Practices in the People’s Republic of China”, Handbooks
al..: of Management Accounting Research, ed. by Christopher S. Chapman-Anthony G.
Hopwood-Micheal D. Schields, 1st Edition, Volume 2, 2007
Drenevich, Paul.: “A Comparison of Capitalist System Examining the Roles of Culture, International
Trade, and Global Competion”, Purdue University, 26.2.2004,
http://www.mgmt.purdue.edu/centers/ciber/publications/pdf/2003-006%20Drnevich.
pdf, 18.06.2006
Doupnik, T.S. - “A Critical Review of the Tests of Gray’s Theory of Cultural Relevance and
G.T. Tsakumis.: Suggestions for Future Research”, Journal of Accounting Literature, Volume 23,
2004, pp.1-30 (http://www.findarticles.com/p/articles/mi_qa3706/is_200401/ai_
n13602153)
Egri, Carolyn P. et “Doing Business in the 21st Century with the New Geanartion of Chinese Managers”,
al..: Journal International Business Studies, Volume 30, No. 2, 1999
Funnell, “The Narrative and its Place in the Accounting History: the Rise of the Counter
Warwick.: Narrative”, Accounting, Auditing & Accountibility Journal, Vol 11, No 2, 1998
Gardella, Robert.: “Squaring Accounts: Commercial Bookkeeping Methods and Capitalist Rationalism in
Late Qing and Republican China”, The Journal of Asian Studies, No. 51, May 1992
Gao, Simon S. - The Influence of Confucianism, Feng Shui and Budhism in Chinese Accounting
HandleySchachler, History, Accounting, Business & Financial History,Volume 13, 1 March 2003,
Morrison.: (Çevrimiçi) www.taylor andfrancis.metapress.com/index/0L0UJH89A2LYRMBQ.pdf,
03.06.2006
Gray, Sidney J. et. Global Accounting and Control, New York, John Wiley & Sons., 2001
al..:
Guvemli, Oktay.: Accounting History, Volume IV, Istanbul, Avciol Publishing, , 2001
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 171
accounting in China: the effects of culture
___________________________________________________________________________
Hofstede, Geert.: Culture Organisation, Software of Mind, Intercultural Cooperation and Its
Importance for Survival, Harper and Colins Publisher GB, 1994
Hopwood, A.G. Accounting as a Social Institutional Practice, Cambridge University Press., 1994
and P. Miller.:
Jiang, Chun.: “Optimism Vs ‘Big Bath’ Accounting: A Regulatory Dilemma in Chinese Financial
Reporting Practices”, Social Science Research Network, University of New
England, (http://papers.ssrn.com/ sol3/papers.cfm? abstract_id=922484, 18.07.2007)
Kennedy, Scott.: The Business of Lobbying in China, Massachusetts, Harvard University Press, 2005
Lappen, Alyssa “Back to the Abacus”, The Accounting Sampler, Ed. by Thomas J. Burns-Harvey S.
A..: Hendrickson, Fourth Edition, New York, McGraw-Hill, 1986
Lai, Alice Loui So “Philosophical Issues in Management in the East and in the West: From Confucius’
Yee.: Concept of Face to Foucault’s Self-Esteem”, International Federation of Scholary
Association of Management, 1998, p.2 (Çevrimiçi) www.ifsam.org/1998/DATA
/14.pdf, 11.06.2006
Lam, Willy Wo- China: After Deng Xiaoping, New York, John Wiley & Sons, 1995
Lap.:
Lu, Wei- Max “Origins and Evolution of Chinese Writing Systems and Preliminary Counting
Aiken.: Realitionships”, Accounting History, November 2004 (http://www.find
articles.com/p/articles/mi_qa3933/is_200411/ai_n10297975), 05.06.2006
Mueller, Gerhard.: “Accounting Practices Generally Accepted in the US versus the Generally Accepted
Elsewhere”, International Journal of Accountants Spring, 1968
Narayan, Francis “Financial Management and Governance Issues in the PRC”, Asian Development
B.-Barry Reid.: Bank, RETA5877,2000 http://www.adb.org/Documents/Books/Financial _Mgt
/China/default.asp, 18.06.2006
Nee, Victor et. Politicized Capitalism: Developmental State and The Firm in China, 8 February
al..: 2005, http://www.economyandsociety.org/publications/NeeOpperWong 07JAN05.pdf,
22.06.2006
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 172
accounting in China: the effects of culture
___________________________________________________________________________
Radebaugh, Lee International Accounting and Multinational Enterprises, Fourth Edition John
H.-Sidney J. Wiley & Sons Inc., New York, 1997
Gray.:
Ralston, David A. “The Impact of National Culture and Economic Ideology on Manegerial Work Values:
et al..: A Study of United States, Russia, Japan and China”, Journal of International
Business Studies, Volume 28, Issue 1, 1997, pp.181-185
http://copenhagen.jibs.net/Archive/1997/28_1_97_177.pdf, 10.06.2006
Rask, Kollen J. - “Institutional Change in Transitional Economies: The Case of Accounting in China”,
David K.W. Chu- Comparative Economic Studies, Volume 40, No. 4, Academic Research Library,
Thomas R. Winter 1998
Gottshang.:
Salter, Stephen B. “Cultural Influence on The Development of Accounting Systems Internationally, a Test
-Fredrick of Gray’s (1988) Theory”, Journal of International Business Studies, Second
Niswander.: Quarter, 1995
Solas, Cigdem.: Financial Accounting I, Istanbul, I.I.T.I.A Nihad SayarPublishing, No:357-590, 1981
Vries, P. H. H..: “The Role of Culture and Institutions in Economic History: Can Economics be of any
Help?”, Nederlandsch Economisch Historisch Archief-The 3rd GEHN Conference in
Konstanz, 2004 http://www.neha.nl/publications/2001/2001_02vries.pdf, 07.12.2007
Yee, Helen.: “The Concept of Profession : A Historical Perspective Based on The Accounting
Profession in China”, Deakin University-Acconting History International
Conference, 2001
Weber, Max: The Religion of China, Confucianism and Taoism, The Free Press, 1951
Wu, Shwu Hsing Comparing the Value-Relevance of Accounting Information in China: Standards
et. al..: and Factor Effects, December 2005 http://www.business.uiuc.edu/accountancy
/research/vkzcenter/conferences/france/papers/ Wu_Koo _Kao.pdf, 18.06.2006
Zhao,You Liang.: “A Brief History of Accounting and Auditing in China”, in E.Y. Lou, S.N. Wang and
A.J.H. Enthoven (eds), Accounting and Auditing in PRC: A eview of its Practices,
Systems, Education and Developments, August 1987
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007
Cigdem Solas y Sinan Ayhan: The historical evolution of 173
accounting in China: the effects of culture
___________________________________________________________________________
Zurndorfer, “Imperialism, Globalization, and Public Finance: The Case of Late Qing China”,
Harriet T..: London School of Economics, Working Paper No. 06/04, August 2004, p.6
http://www.lse.ac.uk/collections/economicHistory/GEHN/GEHNPDF/Wo
rkingPaper06HZ.pdf, 25.06.2006
_________________________
Cigdem Solas es catedrático de la Istanbul Commerce University. Su e-mail es: [email protected]
Sinan Ayhan pertenece a la empresa Ali Selvi Audit Firm. Su e-mail es: [email protected]
Cidgem Solas is Professor at the Istanbul Commerce University. His e-mail is: [email protected]
Sinan Ayhan belongs to the firm Ali Selvi Audit Firm. His e-mail is: [email protected]
___________________________________________________________________________
DE COMPUTIS Revista Española de Historia de la Contabilidad
Spanish Journal of Accounting History
No. 7 Diciembre 2007