As in other spheres, India was a pioneer in the field of accounting too. As Prof. Max Mueller observed

“Whatever sphere of the human mind you may select for your study , whether be it language, or religion, or mythology , or philosophy, whether be it laws or customs , primitive art or primitive science, everywhere you have to go to India, whether you like it or not , because some of the most valuable & most instructive materials are treasured up in India, & in India only.”

Sufficient evidence exists to conclude that art and practice of accounting existed even in Vedic times. There are references to kraya (sale), Vanij (merchant), sulka (price) in Rigveda. Kautilya’s Arthashastra contains details on business of keeping up accounts in the office of accountants .It provides details of matters which should be recorded, registers to be maintained, system of examination of accounts and even details of punishments for default.

During this era (which lasted until 500 B.C.), Sumeria was a theocracy whose rulers held most land and animals in trust for their gods, giving impetus to their record-keeping efforts. Moreover, the legal codes that evolved penalized the failure to memorialize transactions. The Code of Hammurabi, for example, required that an agent selling goods for a merchant give the merchant a price quotation under seal or face invalidation of a questioned agreement.

The Mesopotamian equivalent of today's accountant was the scribe. His duties included writing up the transaction and ensuring that the agreements complied with the detailed code requirements for commercial transactions. A typical transaction involved :

• The parties willing to transact sought  the scribe at the gates to the city.
• They would describe their agreement to the scribe, who use  a small quantity of specially prepared clay to record the transaction.
• The moist clay was molded into a size and shape adequate to contain the terms of the agreement.
• Using a wooden stylus, the scribe recorded the names of the contracting parties, the goods and money exchanged and any other promises made.
• The parties then "signed" their names to the tablet by impressing their respective seals.
• Men carried their signatures around their necks in the form of stone amulets engraved with the wearer's mark,
• The scribe would dry the tablet in the sun or in a kiln for important transactions which needed a more permanent record.
• Sometimes a thick clay layer was fashioned and wrapped around the tablet like an envelope.
• For extra security, the whole transaction would be rewritten on this outer "crust," in effect making a carbon copy of the original. Attempted alterations of the envelope could be detected by comparing it with its contents, and the original could not be altered without cracking off and destroying the outer shell.