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What Is a Counting House?

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  • Written By: Ray Hawk
  • Edited By: E. E. Hubbard
  • Last Modified Date: 24 September 2016
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A counting house is the physical location a business uses to perform its accounting functions and can also be referred to as a compting house, as compt is an archaic form of the verb that means to count. Not all businesses have their own accounting operations, as it sometimes proves more cost effective to have a professional accounting service perform this function. Accounting is a core function of any modern business, however, and must be completed to government standards to comply with tax regulations and avoid auditing and government intervention in private business affairs.

Accounting practices can be traced back to prehistoric times, and accounting can be considered the world's oldest profession. Keeping track of goods and services, even the most basic of such commodities as food, clothing, and shelter, can be considered a form of accounting. Literally the term means "to count," and, around the year 1300 AD, was defined as a reckoning for money given or received.

The formation of counting house practices really began to spread in early civilization, however, when trade became widespread. This required that exchangeable monetary systems be established so that equitable valuation of goods and services could take place. Historians place the origin of accounting records and counting house practices with the Babylonian Empire of 4,500 BC.

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The Code of Hammurabi, written in 2,250 BC in Egypt, is the first extant version of laws in human history that takes accounting principles into practice when meting out judgment for various violations of the law. The modern version of accounting that involves a strict process of balancing credits and debits is known to have originated in the counting house institutions that arose in Venice, Italy, during the Italian Renaissance of the late 1400s AD. At the time, Venice was a business center for all of Europe, and trading from many distant regions was handled by merchants and accountants there.

The Italian establishment of the form for modern accounting principles originated in a treatise by the Italian Fra Luca Pacioli in 1494 AD, a mathematician and teacher in commerce practices who was a friend of Leonardo da Vinci. The Summa de Arithmetica Geometria, Proportioni et Proportionalita, or The Collected Knowledge of Arithmetic, Geometry, Proportion and Proportionality, was a book like many Renaissance texts of the time that attempted to cover a broad range of science and mathematics. The Summa, however, also had a key section devoted to the double entry method of accounting.

Pacioli's accounting description included the use of formal journals and ledgers and set the stage for the strict precedent in counting house practices that the books were not balanced until debits and credits were equaled out. Counting house practices of the modern era, in fact, greatly resemble those of 13th century Italy, as Pacioli's descriptions of Venice merchant accounting included such details as entries for receivables, liabilities, capital goods, income, and expenses. Modern-day balance sheet and income statements are also based on examples in the Summa, and Pacioli set the stage for the fiscal year practice to close account statements as well. His book was one of the first ever printed and widely distributed, being translated into German, Russian, Dutch, and English, and making him a celebrity of the time that resulted in history labeling him as "The Father of Accounting."

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