John R. Bullis: Tally sticks were just early internal controls

Internal controls are a process to provide reasonable assurance on the efficiency and effectiveness of business operations as well as giving reliability of financial reporting and compliance with various laws. All publicly traded companies have internal control requirements since 2002 when the Sarbanes-Oxley Act was passed by Congress.

The beginning of double-entry bookkeeping is thought to originated by Luca Pacioli in about 1494. But tally sticks are the earliest form of writing dating back more than 30,000 years ago, according to an article by Nicholas Apostolou and D. Larry Crumbley. A tally stick is a stick where notches keep a count or score by cutting on the stick (or bone).

Tally sticks were used before most folks could read or write. They were used to keep track of quantities and money. Usually the sticks were notched with a knife. In some cases, the size of the notch indicated different amounts of money.

Internal control was done by splitting the tally stick lengthwise so half of the notches were on each piece. A transaction was recorded, and each party kept half of the tally stick. When the two pieces were fitted together, it was clear to see if the notches lined up, if they would “tally.” That was a way to prove the transaction was correct and hadn’t been changed or altered.

By splitting the stick in half lengthwise, no one could add more notches to the stick. When the two pieces were put together, it would be clear if additional notches had been added. If money had been advanced, the lender received a stick that was longer than the stick the borrower received. That seems to be where the saying “getting the short end of the stick” comes from.

Tally sticks were an internal control for many centuries. The sticks were even used to record the employee output, like how many bushels were produced each day by each employee.

The authors say court records are evidence of tally sticks being used in the 17th and 18th centuries in Sweden and Finland as a means of verification and acknowledgement of a debt. Tally sticks were used to keep records and sometimes even circulated as a form of money. In England, about 1826, tally sticks were abolished and stored in the Houses of Parliament.

The world keeps changing. You have seen many changes in your lifetime. Now computers are helpful to see if transactions are recorded correctly and the internal controls are used to verify that.

Did you hear? “Common sense in an uncommon degree is what the world calls wisdom,” by author unknown.

John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.